ITEM 1. BUSINESS
Telecommunications Income Fund IX, L.P., an Iowa limited partnership (the "Partnership"), was organized on April 2, 1991. The general partner is Berthel Fisher & Company Leasing, Inc. (the "General Partner"), an Iowa corporation that has been in operation since 1988. The Partnership's business and the executive offices of the General Partner are located at 100 Second Street S.E., Cedar Rapids, Iowa 52401. Substantially all of the voting stock of the General Partner is owned by Berthel Fisher & Company ("Berthel Fisher").
The Partnership began offering Units to the public on October 31, 1991 and continued to offer Units to the public through April 30, 1993.
The Partnership will operate until December 31, 1999 unless dissolved sooner due to the occurrence of any of the following events: (i) the vote by limited partners owning a majority of the Partnership in accordance with the Partnership Agreement; (ii) the withdrawal, bankruptcy, or dissolution and liquidation or other cessation to exist as a legal entity of the general partner (unless any successor general partner elected in accordance with the provisions of the Partnership Agreement elects to continue the business of the Partnership); (iii) the final distribution of all liquidating distributions among the limited partners pursuant to the Partnership Agreement; or (iv) the sale or disposition of all or substantially all of the assets of the Partnership without the subsequent reinvestment in equipment.
The business of the Partnership is the acquisition and leasing of equipment, primarily telecommunications equipment such as pay telephones and call processing equipment. The Partnership began its primary business activities on November 29, 1991.
The principle objective of the Partnership is to obtain the maximum available economic return from its investment in equipment leases to unaffiliated third parties with a view toward: (i) generating cash flow from operations, with the intent to make distributions during the Operating Phase (the period which ends when the General Partner elects to begin the liquidation of the Partnership assets); (ii) reinvesting (during the Operating Phase) any undistributed cash flow from operations in additional equipment to be leased to increase the Partnership's assets; (iii) obtaining the residual values of equipment upon sale; (iv) obtaining value from sales of the Partnership's lease portfolio upon entering the Liquidating Phase (the period during which the General Partner will liquidate the Partnership assets); and (v) providing cash distributions to the partners during the liquidating phase.
The Partnership acquires telecommunications equipment (primarily pay telephones and call processing equipment) that is leased to third parties generally under full payout leases. The Partnership has also acquired other types of equipment that is subject to full payout leases. Full payout leases are leases that are expected to generate gross rental payments sufficient to recover the purchase price of the subject equipment and any overhead and acquisition costs. During 1997, the Partnership acquired equipment with a cost of $4,628,479 that was leased to its customers.
Equipment acquired by the Partnership is installed in various locations by the lessees. When the lessee installs the equipment in a location, a site location agreement gives the lessee the right to have the equipment at this site for a specified period of time. These site location agreements generally have a three to five year term. The Partnership, in addition to its ownership of the equipment, takes an assignment of
ITEM 1. BUSINESS (CONTINUED)
and a first security interest in these site location agreements. Therefore, if a lessee defaulted, the Partnership would have the ability to re-sell or re-lease the equipment in place. This "in place" value is generally much higher than the residual value of the equipment. The telecommunications equipment generates revenue primarily through long distance phone calls. The Partnership's lessee generally receives long distance revenue from a contracted third party billing company. The Partnership also takes an assignment of this revenue.
The General Partner acquires and approves leases on behalf of the Partnership. The General Partner established guidelines to use in approving lessees. Generally, before any lease is approved, there is a review of the potential lessees' financial statements, credit references are checked, and outside business and/or individual credit reports are obtained.
The equipment purchased by the Partnership consists of advanced technology pay telephones and call processing systems to be used in hotels, hospitals, colleges, universities, and correctional institutions. The Partnership has also purchased and leased hotel satellite television equipment.
The Partnership's telecommunication equipment leases are concentrated in the pay telephone and hotel industries representing approximately 60% and 9% of the Partnership's direct finance lease portfolio at December 31, 1997, respectively. During the year ended December 31, 1997, one customer, North American Communications Group, Inc., accounted for 10% of the Partnership's income from direct financing leases. See Item 7 with respect to the status of the North American Communications Group, Inc. leases.
The leasing industry is very competitive and the Partnership has fewer assets than some of its major competitors.
A significant portion of the Partnership's business is with customers who are in the telecommunications industry. The telecommunications industry, particularly the pay telephone and long distance facets of the industry, is heavily regulated by the Federal Communications Commission and by various state public utility commissions. Regulation is not directed at the ownership or leasing of telecommunications equipment, but is focused primarily on the business of the Partnership's customers that operate in the telecommunications industry. Regulation affects rates that can be charged and the relationship of the regional Bell operating companies to the rest of the pay telephone industry. The majority of the customers of the Partnership are currently operating within the range of rates proposed by the FCC. Some customers are below the proposed range and will be able to increase their rates. Those customers whose rates exceed the highest rates permitted by the FCC will reduce their rates, but management does not expect such reductions to affect those customers' ability to make lease payments. Management does not expect regulation to have any significant negative impact upon the business of the Partnership.
ITEM 2.
ITEM 2. PROPERTIES
The Partnership does not own or lease any real estate. The Partnership's materially important properties consist entirely of equipment under lease. The carrying value of such equipment is represented by the Partnership's investment in direct financing leases, net of an allowance for possible losses, and operating leases that was $10,197,960 at December 31, 1997. This was comprised primarily of telecommunications equipment, as described in Item 1.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
A foreclosure proceeding was filed on February 20, 1998 in the Iowa District Court for Linn County located in Cedar Rapids, Iowa against North American Communications Group, Inc. CWC Communications, Inc., North American Communications Corporation (Missouri) d/b/a North American Communications of Georgia, Inc., North American Communications of Mississippi, North American Communications Group, Inc., d/b/a North American Communications of Louisiana, Inc., Troy P. Campbell, Sr. And Archie W. Welch, Jr. for foreclosure of the leased assets. The Partnership included in the foreclosure suit a claim for damages against the guarantors of the leases North American Communications Group, Inc., Troy P. Campbell, Sr. and Archie W. Welch, Jr. in the amount of $2,254,521. See Item 7 for additional information regarding the status of the North American Communications Group, Inc. leases.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNIT HOLDERS
No matters were submitted to a vote of limited partners, through the solicitation of proxies or otherwise during the year covered by this report.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:
The Registrants' Units are not publicly traded. There is no market for the Registrant's Units and it is unlikely that any will develop. The General Partner will resist the development of a public market for the Units.
Number of Partners Title of Class at March 13, 1998 ----------------------------------------------------------
Limited Partner 1,176 General Partner 1
Distributions of $2,035,780, $2,039,573, $2,040,208, $2,040,210, and $1,839,448 were made to investors in 1997, 1996, 1995, 1994 and 1993, respectively. This represented distributions per unit of $30.00 for each of those years.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The above selected financial data should be read in connection with the financial statements and related notes appearing elsewhere in this report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Lease income declined in 1997 versus 1996 and 1995 due to the Partnership's decreased net investment in direct financing leases. As the Partnership ages and continues to make distributions to the limited partners, available funds for reinvestment in equipment have decreased and thus, the decrease in the lease portfolio and associated lease income. Also as further discussed later in Item 7, a lessee of the Partnership, Value-Added Communications, Inc. ("VAC"), filed Chapter 11 bankruptcy in 1995. This lessee's bankruptcy filing did not materially affect the lease income of the Partnership in 1995 since the Partnership continued to receive full lease payments with the exception of one monthly payment. However, the income recorded in 1996 for VAC was $35 compared to $343,516 in 1995. The Partnership continues to originate leases with the excess cash flow generated by its operations and will do so until the Partnership's liquidation phase begins. Lease income is expected to continue to gradually decline until the Partnership's liquidation phase begins when new leases will cease being written and its existing leases will fully mature or will be sold and distributions will be made to the Partners. Listed below are the equipment acquisitions by year for investment in leases:
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
At the end of a lease term, the Partnership attempts to sell the equipment under lease to the lessee for an amount at least equal to the residual value booked. Additionally, from time to time, the Partnership will receive a request from a lessee for an early pay-off and the amount quoted by the General Partner will always be at least equal to the Partnership's net investment and typically will exceed the net investment as evidenced by the net gains recognized by the Partnership on lease terminations.
Certain lessees have requested early termination of their lease contracts with the Partnership. As the payphone industry matures, the capital structure of these lessees has reached a level whereby they are able to secure financing from other sources. When this occurs, the Partnership will normally quote a buyout to the lessee which will consist of the entire gross contract balance remaining plus the residual value of the assets. If this is not acceptable to the lessee, the Partnership will discount the remaining gross contract payments at a rate of two percent above prime plus the residual value of the assets. Under either alternative, the Partnership will recognize a gain on the early termination. In addition to some lessees improving capital structure, some lessees have been acquired by other entities whose capital structure is such that they also desire to refinance the equipment which was under lease to the Partnership. As such, the Partnership's gain on lease terminations can and will vary from year to year based on the number of requests received to terminate leases as well as the size of the contract being terminated. The Partnership uses the cash generated from these early terminations to purchase equipment for investments in direct financing leases with other lessees.
Management fees are paid to the General Partner and represent 5% of the lease rental payments received. Rental payments declined in 1996 due to the Partnership's decreased net investment in direct financing leases. Rental payments received in the three years ended December 31, 1996, 1995, and 1994 are as follows:
The General Partner receives a monthly reimbursement for administrative services provided to the Partnership which has remained relatively stable in each of the three years ended December 31, 1997, 1996 and 1995.
The decrease in interest expense in 1997 is a result of the Partnership borrowing less funds to acquire equipment for investment in direct financing leases. The Partnership has a line of credit agreement with a bank which bears interest at a variable rate of 9.5%, 10.13% and 9.5% at December 31, 1997, 1996 and 1995, respectively. On September 11, 1995, the line of credit agreement was amended to extend the maturity date to November 30, 1997 and reduce the interest rate from 2.25% over prime to 1.0% over prime (minimum interest charge of $7,500 per month). In addition, certain loan covenants were changed. The agreement was further amended during 1997 to extend the maturity date to April 30, 1998 and reduce the line of credit available to the lessor of $2 million (previously $6.25 million), or 32% of the Partnership's Qualified Accounts, as defined in the agreement. The minimum interest charge was also reduced to $3,000 per month. The agreement is cancellable by the lender after giving a 90-day notice and is collateralized by substantially all assets of the Partnership. The line of credit is guaranteed by the General Partner and certain affiliates of the General Partner. Management believes amounts available under the line of credit are adequate for the foreseeable future.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Partnership also had an installment loan agreement which bore interest at 8.91% and was due in monthly installments through November 1998 with a subjective acceleration clause. The agreement was collateralized by certain direct financing leases and a second interest in all other Partnership assets. The agreement was also guaranteed by the General Partner. Covenants under the agreement required the Partnership, among other things, to be profitable, not exceed a 40% debt to original equity raised ratio, and not sell a material portion of its assets. This note was paid in full at December 31, 1997.
Professional fees included payments for independent auditing services, tax return preparation, and other accounting assistance. In addition, legal fees were incurred for various regulatory filing requirements of the Partnership during 1995, 1996 and 1997. The Partnership incurred $60,160 of legal expense in 1996 associated with the bankruptcy proceedings of two lessees.
Two lessees, Value Added Communications (VAC) and Telecable/Continental, experienced cash flow problems in 1994 resulting in past due lease payments. The past due lease payments from Telecable/Continental were converted to notes receivable during 1994. These notes carried an interest rate of 15% and terms ranging from three months to one year. At December 31, 1994, a reserve of $270,000 was recorded to cover the possibility of future losses for leases in default and other leases.
On October 10, 1995, VAC filed a petition seeking protection under Chapter 11 of the Bankruptcy Act. The Partnership's net investment in its leases with this customer was $1,676,442 at December 31, 1995 representing approximately 9% of the Partnership's net investment in direct financing leases. The bankruptcy court's Order Approving Emergency Sale indicated that of the Partnership's total net investment in direct financing leases with VAC, $1,053,919 of leases would be purchased from the Partnership by other unrelated third parties. The remaining net investment balance of $622,523, comprised of one lease, was expected to continue to be repaid according to the terms of the original lease. The revenues generated by the assets under such remaining lease were considered adequate to repay the lease according to the original terms.
At June 30, 1996, the net investment was reduced to approximately $474,000. This reduction was due to lease payments received pursuant to a court order which expired in March 1996, and to sales to unrelated third parties of the leases and equipment under lease, which resulted in a loss of approximately $57,000. The remaining $474,000 investment in VAC leases was secured by a $100,000 certificate of deposit and a guaranty to the Partnership by the site owner where certain equipment formerly under lease was located. Management estimated it would recover approximately $350,000 and therefore, a provision for possible losses of $124,000 was recorded in the second quarter. During the third quarter of 1996, the Partnership received $100,000 from the certificate of deposit and a note receivable with a net present value of $201,034 as final settlement of its claims in the bankruptcy of VAC. An additional $48,966 was therefore charged to the provision for possible losses with respect to VAC in the third quarter.
On May 6, 1996, a lessee of the Partnership, United Tele-Systems of Virginia, Inc. ("UTS") filed a Voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code. This bankruptcy petition was dismissed on May 22, 1996 and, in connection therewith, the Partnership exercised its right to manage the assets leased to UTS. The net investment in the leases at the time the assets were repossessed was approximately $200,000. The Partnership, the General Partner , an affiliated partnership and UTS were also named in a lawsuit, filed by another creditor of UTS. The creditor was claiming $360,000 in compensatory damages and $350,000 in punitive damages. Based on offers to purchase the pay telephone equipment and
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
an expected settlement offer related to the lawsuit, the Partnership expected to incur a loss upon the sale or re-lease of this equipment. Management charged $135,000 to the provision for possible lease losses for the expected loss in 1996 and reclassified its net investment in the equipment, net of the specific allowance, to equipment under operating leases pending the equipment's ultimate sale or re-lease. These assets were sold during 1997 to another customer with no additional loss to the Partnership and the lawsuit was settled pending the outcome of an audit which is in process. Management believes any loss as a result of the audit is adequately covered by the Partnership's general allowance.
During 1996, management provided a specific reserve of $284,000 related to a lease with a customer and due to the uncertainty regarding the amount and timing of future payments reclassified its net investment in the lease at December 31, 1996 of $1,273,643, net of the specific allowance, to equipment under operating leases. At December 31, 1997, the net investment in this equipment was $1,037,197. The equipment under this lease is being depreciated under the straight-line method over its estimated remaining life. Depreciation expense in 1997 amounted to $236,446. Under the operating lease, the customer was to pay the Partnership an amount based on the percent of the customer's monthly net cash proceeds from operating the pay phone route. The Partnership received $104,477 in 1997 from the customer under this arrangement. The customer has not made a payment since July 1997. Management is currently seeking to sell this equipment, but as of December 31, 1997, has not found a buyer. Management estimates the fair market value of the equipment to be its carrying value at December 31, 1997.
In May 1995, the Partnership exercised its right to manage the assets leased to Telecable/Continental due to nonpayment of lease receivables. At the time the Partnership assumed management of these assets, its net investment in the leases approximated $1,400,000 and the Partnership subsequently purchased approximately $100,000 of additional equipment. During 1996, $814,000 of this net investment was leased to an unrelated party under a direct financing lease, which was paid off in December 1996. The remaining net equipment cost, which had been depreciated to $514,487 and related to hotel satellite television equipment, is expected by management to be recovered through the sale of the equipment. Such net equipment cost has been adjusted for an impairment loss of $350,000 in 1996 and $113,487 in 1997, to reflect management's estimated fair market value of the equipment. This equipment was held for sale by the Partnership throughout 1997.
Due to cash flow problems experienced during 1997 by a lessee of the Partnership, North American Communications Group, Inc. ("NACG"), the Partnership, in an attempt to protect the assets leased to NACG, advanced funds to various entities to whom NACG owed money, subject to either the terms of the leases or to promissory notes which were executed by NACG. The Partnership assisted in arranging a management agreement between NACG and another entity to provide services to customers of NACG associated with the Partnership's leases. In spite of the funds advanced by the Partnership and the management contract, the cash flow of NACG continued to deteriorate. During the past several months, the General Partner actively solicited bids from parties to purchase the assets associated with the Partnership leases to NACG. Based on the value of similar assets and contract sites, management believed the equipment leased to NACG had substantial value. However, the offers received were not deemed adequate by the General Partner.
Following a refusal by NACG to voluntarily execute a Deed in Lieu of Foreclosure, the General Partner decided to institute a foreclose action against NACG and its affiliates. Finally, the General Partner
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
determined it was no longer economically feasible to continue to advance funds on behalf of NACG, discontinued doing so and informed all site operators of that decision. As a result, the Partnership has decided to provide for a specific loss reserve of $1,596,739 at December 31, 1997 which is equal to the carrying value of the assets on the Partnership's books. The Partnership will continue to attempt to sell and/or re-lease these assets and any amounts received through such efforts will be credited as a recovery of previous charges.
The allowance for possible lease losses is based upon a continuing review of past lease loss experience, current economic conditions and the underlying lease asset value of the portfolio. At the end of each quarter a review of the allowance account is conducted. At a minimum it is the Partnership's desire to maintain a loss reserve equal to 1.5 percent of the Partnership's investment in leases and notes, exclusive of any specific reserves. The Partnership currently has a loss reserve (exclusive of specific reserves) of $298,246 or 2.6% of the lease and note portfolio. Management has determined to increase its general allowance due to the loss history of the Partnership.
The Partnership has been unable to collect all of the property taxes it has paid on behalf of customers leasing equipment from the Partnership. As a result, a charge of $101,547 has been made to reflect what management believes to be uncollectible. There remains approximately $81,138 of property tax receivable on the Partnership's books as of December 31, 1997. The Partnership continues to pursue the collection of charged-off tax receivables. Any amounts collected will serve as a recovery against amounts previously written off.
Management has established specific and general loss allowances at December 31, 1997, as follows:
Specific losses or expected losses charged to the provision for loss allowances are as follows:
As of December 31, 1997 there were fourteen customers with payments which were over 90 days past due. When payments on a customer's account is past due more than 90 days, the Partnership discontinues recognizing income on those customer's contracts. The Partnership's net investment in these contracts at December 31, 1997 was $2,214,791. The contract balance remaining on these contracts was $2,419,316. Included in this group is NACG (see the discussion above). Management is monitoring these contracts and at the present time has determined the Partnership's investment in these contracts is sufficiently collateralized with the exception of NACG. Management
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
will continue to monitor these contracts and take the necessary steps to protect the Partnership's investment.
Another customer, has 21 contracts with amounts past due over 60 days. The contract balance remaining on these contracts was $1,726,921 at December 31, 1997. The Partnership's net investment in these contracts at December 31, 1997 was $1,646,967. The value of the equipment associated with this lease exceeds the Partnership's remaining net investment in the equipment. In addition, the lessee is actively seeking a buyer for the equipment. As such, due to the value of the assets and the potential buyout of this lease, management has decided not to provide a provision for possible losses for these contracts. There are no assurances that the sale will materialize, and other events may occur that may deteriorate the current value of these assets. Management is monitoring these contracts and will take whatever steps are necessary to protect the Partnership's investment in these contracts.
Other expense consists primarily of banking, data processing fees and postage expense. The data processing costs represent costs incurred for the maintenance of financial records and investor data.
Through December 31, 1997, there have been distributions totaling $10,706,053. As of December 31, 1997 the Partnership had $458,893 of cash on hand.
The General Partner is engaged directly for its own account in the business of acquiring and leasing equipment. The General Partner serves as the general partner of Telecommunications Income Fund X, L.P. ("TIF X") and Telecommunications Income Fund XI, L.P. ("TIF XI"), publicly owned limited partnerships that are engaged in the equipment leasing business. Also, an affiliate of the General Partner serves as a general partner of a privately offered active limited partnership. As of December 31, 1997, the net proceeds of the private program and TIF X have been invested in specific equipment. At December 31, 1997, investor proceeds from TIF XI were not available for investment by TIF XI. The activities of the General Partner, in regards to its other leasing activities, has had no impact on the Partnership to date in management's opinion.
The equipment that the Partnership leases is maintained by the lessee, and it is the lessee's responsibility to keep the equipment upgraded with any improvements that may be developed. The Partnership generally establishes the equipment's residual as 10% of the equipment's original cost. This residual value is generally expected to be realized by the sale of the equipment at the expiration of the original lease term. The General Partner monitors the maintenance and upgrades to the equipment and expects the Partnership to realize residual values of at least 10%.
The General Partner is not aware of any regulatory issues that may have a substantial negative impact within the telecommunications industry in which the Partnership conducts a significant amount of its business. There are, and will continue to be, regulatory issues within the telecommunications industry that the General Partner will monitor.
The equipment leases acquired by the Partnership have been financed to yield rates of return between 15% and 20%. The lease terms vary from 36 months to 60 months. The rate charged on a particular lease depends on a variety of factors, of which two of the more significant are the size of the transaction and the financial strength of the lessee.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Inflation affects the cost of equipment purchased and the residual values realized when leases terminate and equipment is sold. The impact of inflation is mitigated to the extent that any increases in lease related expenses can be passed on to new lessees as new leases are originated.
The Partnership recognizes that the arrival of the Year 2000 poses a unique challenge to the ability of all systems to recognize the date change from December 31, 1999 to January 1, 2000 and, like other companies, has assessed and is repairing its computer applications and business processes to provide for their continued functionality. An assessment of the readiness of external entities which it interfaces with, such as vendors, counterparties, customers, payment systems, and others, is ongoing. The Partnership does not expect the cost to address the Year 2000 issue will be material.
The Partnership has determined that the software it utilizes in its operations is compatible with the Year 2000. The Partnership has not yet determined whether the Year 2000 issue has been addressed by its customers. If the Partnership's customers have not addressed this issue, it could lead to non-payment of amounts owed to the Partnership. The Partnership intends to contact all of its customers regarding this issue by the middle of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Under terms of the Partnership agreement, the Partnership is required to establish working capital reserves of no less than 1% ($170,018 at December 31, 1997) of the gross proceeds from issuance of Units to satisfy general liquidity requirements, operating costs of equipment, and the maintenance and refurbishment of equipment. At December 31, 1997, actual cash on hand was $458,893.
The Partnership has a line of credit agreement with a bank which bears interest at a variable rate of 9.5%, 10.13% and 9.5% at December 31, 1997, 1996 and 1995, respectively. On September 11, 1995, the line of credit agreement was amended to extend the maturity date to November 30, 1997 and reduce the interest rate from 2.25% over prime to 1.0% over prime (minimum interest charge of $7,500 per month). In addition, certain loan covenants were changed. The agreement was further amended during 1997 to extend the maturity date to April 30, 1998 and reduce the line of credit available to the lessor of $2 million (previously $6.25 million), or 32% of the Partnership's Qualified Accounts, as defined in the agreement. The minimum interest charge was also reduced to $3,000 per month. The agreement is cancellable by the lender after giving a 90-day notice and is collateralized by substantially all assets of the Partnership. The line of credit is guaranteed by the General Partner and certain affiliates of the General Partner. Management believes amounts available under the line of credit are adequate for the foreseeable future. Management is currently working with the present lender and expects to renew the existing line of credit.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Cash flow from operating activities has been less than the distributions to Partners for the past three years.
At any time after October 30, 1996, but no later than April 30, 1998, the Partnership will cease reinvestment in equipment and leases and will begin the orderly liquidation of Partnership assets. The Partnership must dissolve on December 31, 1999, or earlier, upon the occurrence of certain events. To date, the General Partner has made preliminary inquiries of certain parties with respect to a method of liquidation of all or a portion of the Partnership's assets. No agreements, however, have been entered into and the General Partner will continue to pursue the best possible liquidation scenario on behalf of the Partnership.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and related information as of and for the years ended December 31, 1997, December 31, 1996 and December 31, 1995 are included in Item 8:
Report of Independent Auditors' Balance Sheets Statements of Operations Statements of Changes in Partners' Equity Statements of Cash Flows Notes to Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Partners Telecommunications Income Fund IX, L.P.
We have audited the accompanying balance sheets of Telecommunications Income Fund IX, L.P. as of December 31, 1997 and 1996, and the related statements of operations, changes in partners' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Telecommunications Income Fund IX, L.P. at December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Cedar Rapids, Iowa March 5, 1998
TELECOMMUNICATIONS INCOME FUND IX, L.P.
BALANCE SHEETS DECEMBER 31, 1997 AND 1996 - --------------------------------------------------------------------------------
See notes to financial statements.
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
See notes to financial statements.
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
See notes to financial statements.
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
(Continued)
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (CONCLUDED) - --------------------------------------------------------------------------------
See notes to financial statements.
TELECOMMUNICATIONS INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS- Telecommunications Income Fund IX, L.P. (the "Partnership") was formed on April 2, 1991 under the Iowa Limited Partnership Act. The general partner of the Partnership is Berthel Fisher & Company Leasing, Inc. (the "General Partner"), an Iowa corporation. During its offering period, which ended April 30, 1993, the Partnership sold 68,007 units of partnership interests at a price per unit of $250.
The Partnership's operations are conducted throughout the United States. The Partnership primarily acquires telecommunications equipment for lease to third parties. The lease agreements with individual customers are generally in excess of $500,000 and certain agreements exceed 10% of the Partnership's direct finance lease portfolio (see Note 2). At any time after October 30, 1996, but no later than April 30, 1998, the Partnership will cease reinvestment in equipment and leases and will begin the orderly liquidation of Partnership assets. The Partnership must dissolve on December 31, 1999, or earlier, upon the occurrence of certain events (see Note 6).
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 revenues and expenses during the reporting period. Actual results could differ significantly from those estimated. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for possible loan and lease losses and the estimated unguaranteed residual values of the Partnership's leased equipment.
Most of the Partnership's leases and notes receivable are with customers that are in the entrepreneurial stage and, therefore, are highly leveraged and require financing in place of or to supplement financing from banks. Although the Partnership attempts to mitigate its credit risk through the use of a variety of commercial credit reporting agencies when processing the applications of its customers, failure of the Partnership's customers to make scheduled payments under their equipment leases and notes receivable could have a material near-term impact on the allowance for possible loan and lease losses.
Realization of residual values depends on many factors, several of which are not within the Partnership's control, including general market conditions at the time of the original contract's expiration, whether there has been unusual wear and tear on, or use of, the equipment, the cost of comparable new equipment, the extent, if any, to which the equipment has become technologically or economically obsolete during the contract term and the effects of any additional or amended government regulations. These factors, among others, could have a material near-term impact on the estimated unguaranteed residual values.
CERTAIN RISK CONCENTRATIONS - The Partnership's telecommunication equipment leases are concentrated in the pay telephone and hotel industries representing approximately 60% and 9%, and 78% and 7% of the Partnership's direct finance lease portfolio at December 31, 1997 and 1996, respectively.
RELATED PARTY TRANSACTIONS - In fulfilling its role as general partner, Berthel Fisher & Company Leasing, Inc. enters into transactions with the Partnership in the normal course of business. Further, the Partnership also enters into transactions with affiliates of Berthel Fisher & Company Leasing, Inc. These transactions are set forth in the notes that follow. Management is of the opinion that these transactions are in accordance with the terms of the Agreement of Limited Partnership.
CASH AND CASH EQUIVALENTS - The Partnership considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
AVAILABLE-FOR-SALE SECURITY - The Partnership has an investment in a marketable equity security classified as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported as a separate component of partners' equity. At December 31, 1997, the security had a cost of $80,414 and an estimated fair value of $65,389, resulting in an unrealized loss of $15,025. Fair value is determined using published market prices.
NET INVESTMENT IN DIRECT FINANCING LEASES - The Partnership's primary activity consists of leasing telecommunications equipment under direct financing leases generally over a period of three to five years. At the time of closing a direct financing lease, the Partnership records the gross lease contract receivable, the estimated unguaranteed residual value and unearned lease income. The unearned lease income represents the excess of the gross lease receivable plus the estimated unguaranteed residual value over the cost of the equipment leased. In addition, the Partnership capitalizes all initial direct costs associated with originating the direct financing lease. The unearned income and initial direct costs are amortized to income over the lease term so as to produce a constant periodic rate-of-return on the net investment in the lease. Lessees are responsible for all taxes, insurance and maintenance costs.
The realization of the estimated unguaranteed residual value of leased equipment depends on the value of the leased equipment at the end of the lease term and is not a part of the contractual agreement with the lessee. Estimated residual values are based on estimates of amounts historically realized by the Partnership for similar equipment and are periodically reviewed by management for possible impairment.
Direct financing leases are accounted for as operating leases for income tax purposes.
NOTES RECEIVABLE - Notes receivable are carried at the principal balance outstanding. Interest income on notes receivable is accrued based on the principal amount outstanding.
ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES - The Partnership performs credit evaluations prior to approval of a loan and lease. Subsequently, the creditworthiness of the customer and the value of the underlying assets are monitored on an ongoing basis. Under its lease agreements, the Partnership retains legal ownership of the leased asset. The Partnership maintains an allowance for possible loan and lease losses which could arise should customers become unable to discharge their obligations under the loan and lease agreements. The allowance for possible loan and lease losses is maintained at a level deemed appropriate by management to provide for known and inherent risks in the loan and lease portfolio. The allowance is based upon a continuing review of past loss experience, current economic conditions, delinquent loans and leases, an estimate of potential loss exposure on significant customers in adverse situations, and the underlying asset value. The consideration of such future potential losses also includes an evaluation for other than temporary declines in value of the underlying assets. Loans and leases which are deemed uncollectible are charged off and deducted from the allowance. The provision for possible loan and lease losses and recoveries are added to the allowance.
EQUIPMENT - Equipment leased under operating leases is stated at cost less accumulated depreciation. The equipment is depreciated using the straight-line method over the estimated useful lives of the assets (five years) to the estimated residual value of the equipment at the end of the lease term. Estimated residual values are based on estimates of amounts historically realized by the Partnership for similar equipment and are periodically reviewed by management for possible impairment.
Equipment held for sale is stated at lower of cost or estimated fair market value.
INTANGIBLES - Intangibles consist of organization costs incurred with the formation of the Partnership and financing costs incurred in connection with borrowing agreements. Deferred organization expenses are being amortized over a five-year period. Deferred financing costs are being amortized over the life of the related debt, which is approximately three years.
TAX STATUS - Under present income tax laws, the Partnership is not liable for income taxes, as each partner recognizes a proportionate share of the Partnership income or loss in their income tax return. Accordingly, no provision for income taxes is made in the financial statements of the Partnership.
NET INCOME (LOSS) PER PARTNERSHIP UNIT - Net income (loss) per partnership unit is based on the weighted average number of units outstanding (including both general and limited partners' units).
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in the financial statements. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The Partnership is in the process of determining its preferred format. The adoption of SFAS No. 130 will have no impact on the Partnership's results of operations, financial position or cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS No. 131 is effective for financial statements for fiscal years beginning after December 15,1997. Financial statement disclosures for prior periods are required to be restated. The Partnership is in the process of evaluating the disclosure requirements. The adoption of SFAS No. 131 will have no impact on the Partnership's consolidated results of operations, financial position or cash flows.
2. NET INVESTMENT IN DIRECT FINANCING LEASES AND NOTES RECEIVABLE
The Partnership's net investment in direct financing leases and notes receivable consists of the following at December 31, 1997 and 1996:
At December 31, 1997, future minimum payments to be received under the direct financing leases and the estimated unguaranteed residuals to be realized at the expiration of the direct financing leases are as follows:
The Partnership, General Partner and certain affiliates of the General Partner purchase directly and indirectly a substantial portion of telecommunications equipment under lease from Intellicall, Inc., a publicly-held company. The General Partner's parent and certain limited partners are investors in a limited partnership which owns approximately 7% of the outstanding common stock of Intellicall, Inc. In addition, a principal stockholder of the General Partner's parent is also an investor in this limited partnership.
Additionally, the Partnership leases equipment to certain companies for which the General Partner or its affiliates have an ownership interest in, provide financing to, or provide investment advisory services for such companies. The Partnership's net investment in direct financing leases with these companies approximated $4,189,197 and $447,000 at December 31, 1997 and 1996, respectively.
Four customers each account for 10% or more of the amount of income from direct financing leases for the years ended December 31, 1997, 1996 and 1995, as follows:
1997 1996 1995
Customer A 9 % 10 % 13 % Customer B - - 12 Customer C - 12 17 Customer D 10 10 4
3. ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES
The changes in the allowance for possible loan and lease losses for the years ended December 31, 1997, 1996 and 1995 are as follows:
The allowance for possible loan and lease losses consisted of specific allowances of $1,623,810, $22,000 and $0 for certain leases and general unallocated allowances of $298,246, $222,814, and $364,156 at December 31, 1997, 1996 and 1995, respectively.
On October 10, 1995, a lessee of the Partnership, Value-Added Communications, Inc. ("VAC") filed a petition seeking protection under Chapter 11 of the Bankruptcy Act. The Partnership's net investment in its leases with this customer was $1,676,442 at December 31, 1995 representing approximately 9% of the Partnership's net investment in direct financing leases. The bankruptcy court's Order Approving Emergency Sale indicated that of the Partnership's total net investment in direct financing leases with VAC, $1,053,919 of leases would be purchased from the Partnership by other unrelated third parties at no loss to the Partnership. The remaining net investment balance of $622,523, comprised of one lease, was expected to continue to be repaid according to the terms of the original lease. The revenues generated by the assets under such remaining lease were considered adequate to repay the lease according to the original terms.
During 1996, pursuant to the court order, $1,202,442 of leases were sold to unrelated third parties which resulted in a loss of approximately $57,000 and was charged to the allowance for possible loan and lease losses. The remaining $474,000 investment in VAC leases was collateralized by a $100,000 certificate of deposit and a guaranty to the Partnership by the site owner where certain equipment formerly under lease was located. During the third quarter of 1996, the Partnership received $100,000 from the certificate of deposit and a note receivable with a net present value of $201,034 as final settlement of its claims in the bankruptcy of VAC. Therefore, $172,966 was charged to the provision for possible loan and lease losses with respect to VAC.
On May 6, 1996, a lessee of the Partnership, United Tele-Systems of Virginia, Inc. ("UTS") filed a Voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code. The bankruptcy petition was dismissed on May 22, 1996 and, in connection therewith, the Partnership exercised its right to manage the assets leased to UTS. The net investment in the leases at the time the assets were repossessed was approximately $200,000. The Partnership, the General Partner, an affiliated partnership and UTS were named in a lawsuit, filed by another creditor of UTS. The creditor was claiming $360,000 in compensatory damages and $350,000 in punitive damages. Based on offers to purchase the pay telephone equipment and an expected settlement offer related to the lawsuit, the Partnership expected to incur a loss upon the sale or re-lease of this equipment. Management charged $135,000 to the provision for possible loan and lease losses for the expected loss in 1996 and reclassified its net investment in the equipment, net of the specific allowance, to equipment under operating leases pending the equipment's ultimate sale or re-lease. These assets were sold during 1997 to another customer with no additional loss to the Partnership. Also, the lawsuit was settled pending the outcome of an audit which is in process. Management believes any loss as a result of the audit is adequately covered by the Partnership's general allowance.
During 1996, management provided a specific reserve of $284,000 related to a lease with a customer and due to the uncertainty regarding the amount and timing of future payments reclassified its net investment in the lease at December 31, 1996 of $1,273,643, net of the specific allowance, to equipment under operating leases. At December 31, 1997, the net investment in this equipment was $1,037,197. The equipment under this lease is being depreciated under the straight-line method over its estimated remaining life. Depreciation expense in 1997 amounted to $236,446. Under the operating lease, the customer is to pay the Partnership an amount based on a percent of the customer's monthly net cash proceeds from operating the pay phone route. The Partnership received $104,477 in 1997 from the customer under this arrangement. Management is currently seeking to sell this equipment, but as of December 31, 1997, has not found a buyer. Management estimates the fair market value of the equipment to be its carrying value at December 31, 1997.
Due to cash flow problems experienced during 1997 by a lessee of the Partnership, North American Communications Group, Inc. ("NACG"), the Partnership, in an attempt to protect the assets leased to NACG, advanced funds to various entities to whom NACG owed money related to the operation of such leased assets. In addition, the Partnership assisted in arranging a management agreement between NACG and another entity to attempt to improve NACG's cash flow generated by the leased assets. In spite of the funds advanced by the Partnership and the management agreement, the cash flow of NACG continued to deteriorate. During the past several months, the General Partner actively solicited bids from parties to purchase the assets associated with the Partnership leases to NACG. Based on the value of similar assets and contract sites, management believed the equipment leased to NACG had substantial value. However, the offers received were not adequate to cover additional funds which were required to be advanced to keep the equipment sites operating. The General Partner, therefore, determined it was no longer economically feasible to continue to advance funds on behalf of NACG, discontinued doing so and informed all site operators of that decision. As a result, the Partnership decided to provide for a specific allowance of $1,596,739 at December 31, 1997 which is equal to the carrying value of the leases and advances associated with NACG.
The Partnership and an affiliated partnership, Telecommunications Income Fund X, have initiated a foreclosure action against NACG and the guarantors under the leases and advances seeking the sale of the assets and a judgment against NACG and the guarantors for any deficiency. Amounts received, if any, will be credited to the allowance for possible loan and lease losses.
4. EQUIPMENT HELD FOR SALE
In May 1995, the Partnership exercised its right to manage the assets leased to Telecable/Continental due to nonpayment of lease receivables. At the time the Partnership assumed management of these assets, its net investment in the leases approximated $1,400,000 and the Partnership subsequently purchased approximately $100,000 of additional equipment. During 1996, $814,000 of this net investment was leased to an unrelated party under a direct financing lease, which was paid off in December 1996. The remaining net equipment cost, which had been depreciated to $514,487 and relates to hotel satellite television equipment, is expected by management to be recovered through the sale of the equipment. Such net equipment cost has been adjusted for an impairment loss of $350,000 in 1996 and $113,487 in 1997, to reflect management's estimated fair market value of the equipment. This equipment was held for sale by the Partnership throughout 1997.
5. BORROWING AGREEMENTS
The Partnership has a line-of-credit agreement with a bank which bears interest at a variable rate of 9.5%, 10.13% and 9.5% at December 31, 1997, 1996 and 1995, respectively. On September 11, 1995, the line-of-credit agreement was amended to extend the maturity date to November 30, 1997 and reduce the interest rate from 2.25% over prime to 1.0% over prime (minimum interest charge of $7,500 per month). In addition, certain loan covenants were changed. The agreement was further amended during 1997 to extend the maturity date to April 30, 1998 and reduce the line-of-credit available to the lesser of $2 million (previously $6.25 million), or 32% of the Partnership's Qualified Accounts, as defined in the agreement. The minimum interest charge was also reduced to $3,000 per month. The agreement is cancellable by the lender after giving a 90-day notice and is collateralized by substantially all assets of the Partnership. The line-of-credit is guaranteed by the General Partner and certain affiliates of the General Partner. Management is currently working with the existing lender to renew the line-of-credit. Management believes amounts available under the line of credit are adequate for the foreseeable future.
The Partnership also had an installment loan agreement which bore interest at 8.91% and was due in monthly installments through November 1998 with a subjective acceleration clause. The agreement was collateralized by certain direct financing leases and a second interest in all other Partnership assets. The agreement was also guaranteed by the General Partner. Covenants under the agreement required the Partnership, among other things, to be profitable, not exceed a 40% debt to original equity raised ratio, and not sell a material portion of its assets. This note was paid in full at December 31, 1997.
6. LIMITED PARTNERSHIP AGREEMENT
The Partnership was formed pursuant to an Agreement of Limited Partnership dated as of April 2, 1991 and amended August 12, 1991 (the "Agreement"). The Agreement outlines capital contributions to be made by the partners and the allocation of cash distributions, net income and net loss to the partners. Capital contributions by the partners to the Partnership consist of the $10,000 contributed by the General Partner and the amounts contributed by limited partners for the purchase of their units.
Net income or net loss allocated to the limited partners will be apportioned among them based on the number of limited partnership units held and on the number of months within the respective year that such units were held. Any share of Partnership net loss will first be allocated to the limited partners to the extent of their positive capital account balances. Any share of additional net loss will be allocated to the General Partner. Any Partnership net income will first be allocated to partners with negative capital accounts in proportion to, and to the extent of, such negative capital accounts. Except as provided below, any additional net income will then be allocated to the General Partner and limited partners based on number of units held. During liquidation of the Partnership, when cash distributions are to be made 80% to the limited partners and 20% to the General Partner (see below), net income will be allocated 80% to the limited partners and 20% to the General Partner.
During the Partnership's operating phase, to the extent there is cash available for distribution, cash distributions will be made on a monthly or quarterly basis in the following order of priority: first, to reimburse the General Partner for administrative services it provides to the Partnership, as further described in the Agreement (see Note 7); second, to the limited partners up to amounts representing a 12% annual return on their adjusted capital contribution (as defined), of which 8% annually will be cumulative; and third, to the General Partner, representing a monthly equipment management fee of 5% of the gross rental payments received by the Partnership (see Note 7). To the extent that cash is not available to pay all or a portion of the equipment management fee pursuant to the above priority distributions, such fee will accrue and accumulate. Any remaining cash distributions after payment of the above (including arrearages) will be paid, at the discretion of the General Partner, to the limited partners.
During the Partnership's liquidation phase, cash available for distribution will be distributed in the following order of priority: first, for payment of the General Partner's administrative services expense described above; second, to the limited partners for any arrearage in their 8% cumulative priority return; third, to the limited partners for 100% of their adjusted capital contributions; fourth, to the limited partners, distributions totaling 12% annually, noncompounded, on their adjusted capital contributions; fifth, to the General Partner for any arrearage in its equipment management fee; and, sixth, 80% to the limited partners and 20% to the General Partner (provided, however, that the General Partner will not receive such amounts unless the limited partners have received total distributions equal to their capital contribution plus a 12% annualized return).
7. MANAGEMENT AND SERVICE AGREEMENTS
The Partnership pays an equipment management fee equal to 5% of the amount of gross rental payments received, to the General Partner. The General Partner, in turn, pays 50% of those fees to its parent. During the years ended December 31, 1997, 1996 and 1995, the management fees aggregated $274,588, $329,481 and $441,972, respectively.
In addition, the General Partner is reimbursed for certain other costs under an administrative services agreement. Amounts incurred by the Partnership pursuant to this agreement amounted to $84,000, $74,775 and $82,307 for the years ended December 31, 1997, 1996 and 1995, respectively.
As a part of the issuance of partnership units, the Partnership paid commissions of 10% to Berthel Fisher & Company Financial Services, Inc., a broker-dealer affiliated with the General Partner, and reimbursed other offering expenses of up to 4% of the gross proceeds to the General Partner. These fees have been treated as syndication costs and charged directly to partners' equity.
8. RECONCILIATION OF FINANCIAL AND INCOME TAX REPORTING BASIS
A reconciliation of net income (loss) for financial reporting purposes with the related amount reported for income tax purposes is as follows:
9. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value amounts disclosed below are based on estimates prepared by management of the Partnership based on valuation methods appropriate in the circumstances. Generally accepted accounting principles do not require disclosure for lease contracts. The carrying amount for financial instruments included among cash and cash equivalents, line-of-credit agreement, and other short-term payables approximates their fair value because of the short maturity of those instruments or the variable interest rate feature of the instrument. Also, the Partnership's available-for-sale security is reported at market value. The estimated fair value of other significant financial instruments are based principally on discounted future cash flows at rates commensurate with the credit and interest rate risk involved.
The estimated fair values of the Partnership's other significant financial instruments are as follows at December 31, 1997 and 1996:
* * * * *
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10.
ITEM 10. DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT
A. The General Partner of the registrant:
Berthel Fisher & Company Leasing, Inc., an Iowa corporation.
B. Executive officers of the General Partner of the Registrant:
Thomas J. Berthel (age 46) - Mr. Berthel is the Chief Executive Officer and Director of the General Partner, a position he has held since the General Partner's inception in 1988. Mr. Berthel is also President and a Director of the General Partner's parent, Berthel Fisher & Company, Inc. ("Berthel Fisher"), which he founded in 1985, and Berthel Fisher's other subsidiaries, Berthel Fisher & Company Financial Services, Inc.; Berthel Fisher & Company Management Corp.; Berthel Fisher & Company Planning, Inc.; and one other corporation which acts as general partner of a separate private program. He also serves as the Chairman of the Board and Director of Amana Colonies Golf Course, Inc. Mr. Berthel holds a bachelor's degree from St. Ambrose College in Davenport, Iowa (1974). From 1974 to 1982, Mr. Berthel was President and majority shareholder of Insurance Planning Services Corporation in Maquoketa, Iowa, which was engaged in the operation of a securities and insurance business. Mr. Berthel holds a Financial and Operation Principal license issued by the National Association of Securities Dealers, Inc. Mr. Berthel is also a Certified Life Underwriter. Mr. Berthel also serves as an individual general partner of the limited partnership referred to above. Mr. Berthel received a MBA degree from the University of Iowa in 1993.
Ronald O. Brendengen (age 42) - Mr. Brendengen is the Treasurer, Chief Financial Officer, and a Director (1988 to present) of the General Partner. He was elected to his current offices in October, 1996. He has served as Secretary (1994 - March, 1995), Treasurer (1988 - August 1995) and Chief Financial Officer (1994 - August 1995) of the General Partner. He served as Controller (1985-1993), Treasurer (1987-present), Chief Financial Officer, Secretary and a Director (1987-present), and was also elected Chief Operating Officer in January 1998, of Berthel Fisher & Company, the parent company of the General Partner. Mr. Brendengen serves as the Treasurer, Chief Financial Officer and a Director of Berthel Fisher & Company Planning, Inc., the trust advisor of Berthel Growth & Income Trust I, a company required to file reports pursuant to the Securities Exchange Act of 1934. He also serves in various offices and as a Director of each subsidiary of Berthel Fisher & Company. Mr. Brendengen holds a certified public accounting certificate and worked in public accounting during 1984 and 1985. From 1979 to 1984, Mr. Brendengen worked in various capacities for Morris Plan and MorAmerica Financial Corp., Cedar Rapids, Iowa. Mr. Brendengen attended the University of Iowa before receiving a bachelor's degree in Accounting and Business Administration with a minor in Economics from Mt. Mercy College, Cedar Rapids, Iowa, in 1978.
Nancy L. Lowenberg (age 39), has been elected Vice President and Chief Operating Officer of the General Partner beginning January 2, 1997. From September 1986 to December 1996, Ms. Lowenberg was employed by Firstar Bank Iowa, N.A., in Cedar Rapids. Since 1986 Ms. Lowenberg was Vice President Commercial Loans. As Vice President Commercial Loans, she was relationship manager of 62 accounts with approximately $70,000,000 of committed credit. She had responsibility for credit quality, annual review and maintenance of existing accounts and business development. From 1981 to 1986 Ms. Lowenberg was employed by First Bank Systems. Ms. Lowenberg received her Bachelor of Science Agricultural Business with a minor in Finance in 1981 from Iowa State University, Ames, Iowa.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Set forth is the information relating to all direct remuneration paid or accrued by the Registrant during the last three years to the General Partner:
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person owns of record, or is known by the Registrant to own beneficially, more than five percent of the Partnership Units.
(b) The General Partner of the Registrant owns Units of the Registrant set forth in the following table.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related party transactions are described in Notes 2 and 7 of Notes to Financial Statements.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ------------------------- (1) Incorporated herein by reference to Partnership Exhibit A to the prospectus included in the Partnership's post effective amendment No. 4 to Form S-1 registration statement filed on December 22, 1992.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TELECOMMUNICATIONS INCOME FUND IX, L.P. --------------------------------------- (REGISTRANT)
By Berthel Fisher & Company Leasing, Inc.
By: Thomas J. Berthel/s/ Date: March 13, 1998 ----------------------------------------- ----------------- Thomas J. Berthel President
By Berthel Fisher & Company Leasing, Inc.
By: Ronald O. Brendengen/s/ Date: March 13, 1998 ----------------------------------------- ------------------ Ronald O. Brendengen Chief Financial Officer, Treasurer
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 capacities and on the dates indicated.
Thomas J. Berthel/s/ Date: March 13, 1998 - -------------------------------------- ------------------ Thomas J. Berthel Chief Executive Officer President, Director Berthel Fisher & Company Leasing, Inc. Corporate General Partner
Nancy L, Lowenberg/s/ Date: March 13, 1998 - -------------------------------------- ------------------ Nancy L. Lowenberg Chief Operating Officer, Director Berthel Fisher & Company Leasing, Inc. Corporate General Partner
Ronald O. Brendengen/s/ Date: March 13, 1998 - -------------------------------------- ------------------ Ronald O. Brendengen Treasurer, Director Berthel Fisher & Company Leasing, Inc. Corporate General Partner
Daniel P. Wegmann/s/ Date: March 13, 1998 - -------------------------------------- ------------------ Daniel P. Wegmann Controller Berthel Fisher & Company Leasing, Inc. Corporate General Partner
EXHIBIT INDEX
3,4 Amended and Restated Agreement of Telecommunications Income Fund IX, L.P. currently in effect dated as of August 12, 1991 (1)
- ---------------------------------------------
(1) Incorporated herein by reference to Partnership Exhibit A to the prospectus included in the Partnership's post effective amendment No. 4 to Form S-1 registration statement filed on December 22, 1992.