Item 1. Business --------
Capital Preferred Yield Fund-III, L.P., a Delaware limited partnership (the "Partnership"), was organized on November 2, 1993 and is engaged in the business of owning and leasing equipment. CAI Equipment Leasing IV Corp., a Colorado corporation was a wholly owned subsidiary of Capital Associates, Inc. ("CAI"). CAI Equipment Leasing IV became a wholly owned subsidiary of Mishawaka Leasing Company, Inc. ("MLC") on September 12, 2000 and is the general partner of the Partnership. CAI discontinued its operations on December 15, 2000.
The Partnership entered its liquidation stage, as defined in the Partnership Agreement, in July 2000. During the liquidation stage, purchases of equipment have ceased (other than for prior commitments and equipment upgrades). The Partnership is required to dissolve and distribute all of its assets no later than December 31, 2011. However, the general partner anticipates that all equipment will be sold and the Partnership will be liquidated prior to that date.
CAII owed the Partnership $370,324 for rents, remarketing proceeds and other amounts (the "Prior Rents") collected by CAII on behalf of the Partnership during the periods prior to February 1, 2000. On September 12, 2000, as part of the Sale of the General Partnership interest owned by CAII to MLC, MLC repaid in full the Prior Rents owed by CAII to the Partnership. Included in payables to affiliates is $251,409 of administrative expenses that are reimbursable to the General Partner. During the year CAII was preparing to liquidate, which it did on December 15, 2000, CAII was unable to provide investment opportunities for reinvestment to the Partnership and consequently the Partnership's cash balances are higher than normal. Also during the same period, CAII did not keep up with collections of accounts receivable, which are higher than normal. Both of these events have adversely affected the Partnership's performance.
Capital Associates International, Inc. ("CAII") was the Class B limited partner of the Partnership through September 12, 2000. In exchange for its Class B limited partner interest, CAII contributed cash of $10,000 for each $1,000,000 of investors' capital contribution (i.e., cash investments in the Partnership) to the Partnership. The Class B limited partner's interest in Distributable Cash is subordinated to the Class A limited partners' interest. The contributions of CAII were made simultaneously with the purchase of equipment by the Partnership. CAII has contributed $500,000 to the Partnership making it the largest single investor in the Partnership. MLC became the Class B limited partner as of September 12, 2000.
The Partnership's overall investment objectives are to (i) raise the maximum allowable capital from investors for investment in accordance with the Partnership's investment objectives described in the Prospectus; (ii) invest such capital and related indebtedness in a diversified portfolio of equipment subject to leases to creditworthy businesses with terms ranging from two to seven years; (iii) if funds are available for distribution, make monthly cash distributions to the Class A and Class B limited partners during the reinvestment period (a period that ends approximately June 30, 2000); (iv) re-invest all available undistributed cash from operations and cash from sales in additional equipment during the reinvestment period to increase the Partnership's portfolio of revenue-generating equipment, provided that suitable equipment can be identified and acquired; and (v) sell or otherwise dispose of the Partnership's equipment and other assets in an orderly manner and promptly distribute cash from sales thereof to the Partners within three years of the end of the reinvestment period.
Item 1. Business, continued --------
Until July 2000 when the Partnership entered its liquidation stage, the Partnership acquired equipment of various types under lease to third parties. All of the equipment was purchased by CAII directly from manufacturers or from other independent third parties and sold to the Partnership. The equipment is generally comprised of material handling equipment, computer and peripheral equipment, industrial equipment, and telecommunications equipment, among others (the "equipment"). See Item 13 of this report, "Certain Relationships and Related Transactions" for the detail listing of equipment purchased during 2000.
The Partnership may assign the rentals from leases to financial institutions, or acquire leases subject to such assignments, at fixed interest rates on a non-recourse basis. The proceeds of this non-recourse debt financing will be utilized to finance the purchase of equipment under lease or to invest in additional equipment under lease. In the event of default by a lessee, the financial institution has a first lien on the underlying leased equipment with no further recourse against the Partnership. Cash proceeds from such financings, or financings assumed in the acquisition of leases, are recorded on the balance sheet as discounted lease rentals. As lessees make payments to financial institutions, leasing revenue and interest expense are recorded.
During 2000, the Partnership leased equipment to investment grade lessees in diverse industries including the financial services, retail, telecommunications, energy and manufacturing industries. Approximately 67% of the Partnership's total equipment under lease was leased to investment grade lessees as of December 31, 2000. Pursuant to the Partnership Agreement, an investment grade lessee is a company (i) with a net worth in excess of $100,000,000 (and no debt issues that are rated); or (ii) with a credit rating of not less than Baa as determined by Moody's Investor Services, Inc. or comparable credit rating, as determined by another recognized credit rating service; or (iii) a lessee, all of whose lease payments have been unconditionally guaranteed or supported by a letter of credit issued by a company meeting one of the above requirements. The Partnership limits its credit risk through selective use of non-recourse debt financing of future lease rentals, as described above.
The Partnership only acquires equipment that is on lease at the time of acquisition. After the initial term of its lease, each item of equipment is expected to provide additional investment income from its re-lease or sale. Upon expiration of the initial lease, the Partnership attempts to re-lease or sell the equipment to the existing lessee. If a re-lease or sale to the lessee cannot be negotiated, the Partnership will attempt to lease or sell the equipment to a third party.
The Partnership's business is not subject to seasonal variations.
The ultimate rate of return on leases depends, in part, on the general level of interest rates at the time the leases are originated as well as future equipment values and on-going lessee creditworthiness. Because leasing is an alternative to financing equipment purchases with debt, lease rates tend to rise and fall with interest rates (although lease rate movements generally lag interest rate changes in the capital markets). The amount of future distributions to the partners will depend, in part, on future interest rates.
Item 1. Business, continued --------
The Partnership has no employees. The officers, directors and employees of the general partner and its affiliates perform services on behalf of the Partnership. The general partner is entitled to receive certain fees and expense reimbursements in connection with the performance of these services. See Item 10 of this Report, "Directors and Executive Officers of the Partnership" and Item 13 of this Report, "Certain Relationships and Related Transactions," which are incorporated herein by reference.
The Partnership competes in the leasing marketplace as a lessor with a significant number of other companies, including equipment manufacturers, leasing companies and financial institutions. The Partnership competes mainly on the basis of the expertise of its general partner in remarketing equipment, terms offered in its transactions, pricing and service. Although the Partnership does not account for a significant percentage of the leasing market, the general partner believes that the Partnership's marketing strategies, financing capabilities, and remarketing expertise enable it to compete effectively in the equipment leasing and remarketing markets.
The Partnership leases equipment to a significant number of lessees. One lessee and its affiliates accounted for 15% of total leasing and remarketing revenue of Partnership during 2000.
Item 2.
Item 2. Properties ----------
Per the Partnership Agreement, the Partnership does not own or lease any physical properties other than the equipment discussed in Item 1 of this Report, "Business."
Item 3.
Item 3. Legal Proceedings -----------------
Neither the Partnership nor any of the Partnership's equipment is the subject of any material pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders ---------------------------------------------------
No matters were submitted to a vote of the limited partners of the Partnership, through the solicitation of proxies or otherwise, during the fourth quarter ended December 31, 2000.
Item 5.
Item 5. Market for the Partnership's Common Equity and Related Stockholder Matters -------
(a) The Partnership's Class A limited partner units, Class B limited partner interest and general partner interest are not publicly traded. There is no established public trading market for such units and interests and none is expected to develop.
(b) At December 31, 2000, there were 2,854 Class A limited partners.
(c) Distributions
During 2000, the Partnership made twelve (12) distributions (a portion of which constituted a return of capital) to Class A limited partners as follows:
Item 5. Market for the Partnership's Common Equity and Related Stockholder Matters, continued -------
(c) Distributions, continued -------------
Distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital or a portion of both. The portion of each cash distribution by a partnership which exceeds its net income for the fiscal period may be deemed a return of capital for accounting purposes. However, the total percentage of a leasing partnership's return on capital over its life can only be determined after all residual cash flows (which include proceeds from the re-leasing and sale of equipment) have been realized at the termination of the Partnership.
The distribution for the month ended December 31, 2000, totaling $614,657, was paid to the Class A limited partners in January, 2001. Distributions to the general partner and Class B limited partner during 2000 are discussed in Item 13 of this Report, "Certain Relationships and Related Transactions."
The general partner believes that the Partnership will generate sufficient cash flows from operations during 2001, to (1) meet current operating requirements, (2) enable it to fund cash distributions to the Class A limited partners in accordance with the Partnership Agreement. Distributions during the liquidation period will be based upon cash availability and may vary. All distributions are expected to be a return of capital for economic purposes.
During 1999, the Partnership made twelve (12) distributions (a portion of which constituted a return of capital) to Class A limited partners as follows:
Item 5. Market for the Partnership's Common Equity and Related Stockholder Matters, continued -------
(c) Distributions, continued -------------
The following represents annual and cumulative distributions per Class A limited partner unit, as described in note 1 to Notes to Consolidated Financial Statements.
Distribution Amount Distribution % per $100 Class A per $100 Class A Limited Partner Unit Limited Partner Unit Payment (computed on (computed on Made During weighted average) weighted average) (1) ------------- -------------------- ---------------------
1994 $ 5.25 10.5% 1995 10.50 10.5% 1996 10.50 10.5% 1997 10.50 10.5% 1998 10.50 10.5% 1999 10.50 10.5% 2000 16.06 16.1% ------- $ 73.81
(1) Cumulative distributions, as described in note 1 to Notes to Consolidated Financial Statements, began July 1994.
Item 6.
Item 6. Selected Financial Data
The following selected financial data relates to the years ended December 31, 1996 through 2000. The data should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and notes thereto appearing with Item 8 herein.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -------------
I. Results of Operations ---------------------
Presented below are schedules (prepared solely to facilitate the discussion of results of operations that follows) showing condensed income statement categories and analyses of changes in those condensed categories derived from the Statements of Income:
The Partnership is in its liquidation stage, as defined in the Partnership Agreement, and is not purchasing additional equipment. Initial leases are expiring, and the amount of equipment being remarketed (i.e., re-leased, renewed or sold) is increasing. As a result, both the size of the Partnership's leasing portfolio and the amount of leasing revenue are declining.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued -------------
Leasing Margin
Leasing margin consists of the following:
Leasing margin ratio will vary due to changes in the portfolio, including, among other things, the mix of operating leases versus direct finance leases, the average maturity of leases comprising the portfolio, the average residual value of leases in the portfolio, and the amount of discounted lease rentals financing the portfolio.
Leasing margin and the related leasing margin ratio decreased for the year 2000 as compared to the year 1999 due to portfolio runoff. Direct finance lease income increased due to the renewal of operating leases as direct finance leases. Interest expense on discounted lease rentals increased due to the increase in leases being financed with non- recourse debt.
The ultimate rate of return on leases depends, in part, on interest rates at the time the leases are originated, as well as future equipment values and on-going lessee creditworthiness. Because leasing is an alternative to financing equipment purchases with debt, lease rates tend to rise and fall with interest rates (although lease rate movements generally lag interest rate changes in the capital markets).
Equipment Sales Margin
Equipment sales margin from remarketing consists of the following:
Years Ended December 31, ----------------------------------------- 2000 1999 1998 ---- ---- ----
Equipment sales revenue $ 3,822,554 $ 6,784,879 $ 4,934,639 Cost of equipment sales (2,889,065) (5,597,793) (4,484,453) ----------- ----------- ----------- Equipment sales margin $ 933,489 $ 1,187,086 $ 450,186 =========== =========== ===========
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued -------------
I. Results of Operations, continued --------------------------------
Equipment Sales Margin, continued
Equipment sales margin is affected by the number and dollar amount of equipment leases that mature in a particular period. Currently, a portion of the Partnership's initial leases have expired and the equipment is either being released or sold to the lessee or third parties. Equipment sales margin decreased for 2000 compared to 1999 primarily due to the composition of equipment that was sold. The Partnership sold certain computer, manufacturing and printing equipment at a lower fair market value than originally anticipated.
Interest Income
Interest income decreased due to a decrease in the amount of invested cash during the twelve months ended December 31,2000 as compared to the twelve months ended December 31, 1999. Interest income varies due to (1) the amount of cash available for investment (pending distribution or equipment purchases) and (2) the interest rate on such invested cash.
Expenses
Management fees are earned on gross rents received and will fluctuate due to variances in cash flow. Management fees paid to general partner for the twelve months ended December 31, 2000 were lower than the twelve months ended December 31, 1999 primarily due to a decrease in rents collected. Management fees are expected to decline during the liquidation period of the Partnership. The Partnership will no longer reinvest in additional equipment.
Direct services from general partner decreased for the twelve months ended December 31, 2000 compared to the twelve months ended December 31, 1999 primarily due to a change in the method in which the general partner charges for its asset management services that was implemented during the fourth quarter of 1999. The Partnership pays a refurbishing charge to the general partner at the time computer equipment is returned by the lessee to the Partnership. The refurbishing charge includes all services necessary to prepare the equipment for re-sale. Computer equipment returned to the Partnership for the twelve months ended December 31, 2000 generated refurbishing charges in the amount of $67,810.
General and administrative charges increased for the twelve months ended December 31, 2000 compared to the twelve months ended December 31, 1999 primarily due to an increase in storage charges for equipment returned to the Partnership at lease maturity, an increase in sales tax expense due to a change in the way Michigan apportions multi-state companies, an increase in appraisal fees, and the way expenses are apportioned to the fund by the General Partner.
Provision for losses
The remarketing of equipment for an amount greater than its book value is reported as equipment sales margin (if the equipment is sold) or leasing margin (if the equipment is re-leased). The realization of less than the carrying value of equipment is recorded as provision for losses.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued -------------
Provision for losses, continued
Residual values are established equal to the estimated value to be received from the equipment following termination of the lease. In estimating such values, the Partnership considers all relevant facts regarding the equipment and the lessee, including, for example, the likelihood that the lessee will re-lease the equipment. The nature of the Partnership's leasing activities is that it has credit and residual value exposure and, accordingly, in the ordinary course of business, it will incur losses from those exposures. The Partnership performs quarterly assessments of the estimated residual values of its assets to identify any other-than-temporary losses in value.
The provision for losses recorded during 2000 related to the following: o $293,807 related to the estimated decline in residual value of computer equipment returned to the Partnership at lease maturity. o $874,150 was recognized as a fair market value write-down of certain transportation and industrial equipment, computer, furniture, fixtures and equipment. o $173,000 related to lessees who have filed for Chapter 11 bankruptcy protection during 2000. o $117,000 was accrued to recognize an anticipated loss on the sale of certain computer equipment. o $90,000 was recorded as a reserve for uncollectible accounts receivable. o $277,165 was recorded due to the decline in the realizable values of leased furniture, fixtures and other equipment. o $300,000 was recorded as a reserve for a lessee that was placed on credit watch in January 2001. o $107,000 was recorded as reserve for estimated uncollectible accounts receivable.
The provision for losses recorded during 1999 related to the following: o $298,120 related to computer equipment that has been returned to the Partnership with fair market values that are lower than the book values. o $160,287 related to declines in the fair market value of forklifts returned to the Partnership at lease maturity. o $282,000 was recognized as losses on the sales of certain telecommunications, computer, furniture, fixtures, forklift and aircraft equipment. o $262,000 was recognized as losses on sales of certain computer equipment. o $501,000 and $186,898 related to anticipated declines of telecommunications equipment and other miscellaneous equipment. o $300,000 was recorded to cover a portion of the Receivable from Affiliates balance.
The provision for losses recorded during 1998 related to the following: o $286,000 was related to the estimated decline in residual value on computers and furniture, fixtures and equipment returned to the Partnership at lease maturity. o $495,000 was recognized as losses on the sales of certain earth moving, computer, manufacturing and printing equipment. o $350,000 and $119,000 related to anticipated declines in the realizable value of mining equipment and other miscellaneous equipment.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued -------------
II. Liquidity and Capital Resources -------------------------------
The Partnership funds its operating activities principally with cash from rents, discounted lease rentals (non-recourse debt), interest income, and sales of off-lease equipment. Available cash and cash reserves of the Partnership are invested in short-term government securities pending the acquisition of equipment or distribution to the partners.
During 2000, 1999 and 1998, the Partnership acquired equipment subject to leases with a total equipment purchase price of approximately $11,649,000, $13,586,000, and $15,381,000 respectively, net of non-recourse debt to lenders of $3,720,000, $6,646,000, $4,759,000, respectively. Also, during 2000 and 1999 the Partnership discounted future rental payments from certain leases to non-recourse lenders and received proceeds of $897,000 and $206,000, respectively. Non-recourse borrowing against unleveraged leases in the Partnership's lease portfolio may occur in the future as well, when the general partner, in its discretion, determines that such non- recourse financing is in the best interest of the Partnership.
During 2000, 1999 and 1998 the Partnership declared distributions to the partners of approximately $8,208,000, $5,271,000, and $5,275,000, respectively. A substantial portion of such distributions are expected to constitute a return of capital. Distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital or a portion of both. The portion of each cash distribution by a partnership which exceeds its net income for the fiscal period may be deemed a return of capital for accounting purposes. However, the total percentage of a partnership's return on capital over its life can only be determined after all residual cash flows (which include proceeds from the re-leasing and sale of equipment) have been realized at the termination of the Partnership.
The general partner believes that the Partnership will generate sufficient cash flows from operations during 2001, to (1) meet current operating requirements, (2) enable it to fund cash distributions to both the Class A limited partners in accordance with the Partnership Agreement. Distributions during the liquidation period will be based upon cash availability and may vary. All distributions are expected to be a return of capital for economic purposes.
Until September 2000, the Partnership relied upon the services of Capital Associates International, Inc. ("CAII"), its affiliate, for origination of leases, administrative and accounting services and remarketing of leases and equipment, among other services. The General Partner has terminated its relationship with CAII and has contracted with MLC to provide billing, administrative, remarketing and accounting services. Many of the management and administrative personnel of MLC formerly worked for CAII and serviced the Partnership leases.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued -------------
Liquidity and Capital Resources, continued - -------------------------------
CAII owed the Partnership $370,324 for rents, remarketing proceeds and other amounts (the "Prior Rents") collected by CAII on behalf of the Partnership during the periods prior to February 1, 2000. On September 12, 2000, as part of the Sale of the General Partnership interest owned by CAII to MLC, MLC repaid in full the Prior Rents owed by CAII to the Partnership. Included in payables to affiliates is $251,409 of administrative expenses that are reimbursable to the General Partner. During the year CAII was preparing to liquidate, which it did on December 15, 2000, CAII was unable to provide investment opportunities for reinvestment to the Partnership and consequently the Partnership's cash balances are higher than normal. Also during the same period, CAII did not keep up with collections of accounts receivable, which are higher than normal. Both of these events have adversely affected the Partnership's performance.
New Accounting Pronouncements - -----------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("Statement 133"). Statement 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Statement 133 is effective for fiscal years beginning after June 15, 1999, with earlier application permitted. In June 1999, the Financial Accounting Standards Board issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement 133, an Amendment of FASB Statement 133. Statement 137 effectively extends the required application of Statement 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000, with earlier application permitted. The Partnership adopted Statement 133 in the first quarter of 1999, and such adoption had no material impact on the Partnership.
IV. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995 --------
The statements contained in this report which are not historical facts may be deemed to contain forward-looking statements with respect to events, the occurrence of which involve risks and uncertainties, and are subject to factors that could cause actual future results to differ both adversely and materially from currently anticipated results, including, without limitation; the level of lease originations; realization of residual values; customer credit risk; competition from other lessors, specialty finance lenders or banks; and the availability and cost of financing sources. Certain specific risks associated with particular aspects of the Partnership's business are discussed in detail throughout Parts I and II when and where applicable.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ----------------------------------------------------------
The partnership's leases with equipment users are non-cancelable and have lease rates which are fixed at lease inception. The partnership finances its leases, in part, with discounted lease rentals at fixed debt rate. The partnership's other assets and liabilities are also at fixed rates. Consequently the partnership has no interest rate risk or other market risk exposure.
Item 8.
Item 8. Financial Statements and Supplementary Data -------------------------------------------
Index to Financial Statements and Financial Statement Schedule
Page Number ------ Financial Statements --------------------
Independent Auditors' Report 15
Balance Sheets as of December 31, 2000 and 1999 16
Statements of Income for the years ended December 31, 2000, 1999 and 1998 17
Statements of Partners' Capital for the years ended December 31, 2000, 1999 and 1998 18
Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 19-20
Notes to Financial Statements 21-30
Financial Statement Schedule ----------------------------
Independent Auditors' Report 31
Schedule II - Valuation and Qualifying Accounts 32
Independent Auditor's Report ----------------------------
The Partners Capital Preferred Yield Fund-III, L.P.:
We have audited the accompanying balance sheets of Capital Preferred Yield Fund-III, L.P. as of December 31, 2000 and 1999, and the related statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 2000. 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 auditing standards generally accepted in the United States of America. 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 financial statements referred to above present fairly, in all material respects, the financial position of Capital Preferred Yield Fund-III, L.P. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.
/s/KPMG LLP ----------- KPMG LLP
Denver, Colorado April 20, 2001
CAPITAL PREFERRED YIELD FUND-III, L.P.
BALANCE SHEETS Years Ended December 31, 2000 and 1999
See accompanying notes to financial statements.
CAPITAL PREFERRED YIELD FUND-III, L.P.
STATEMENTS OF INCOME Years Ended December 31, 2000, 1999 and 1998
See accompanying notes to financial statements.
CAPITAL PREFERRED YIELD FUND-III, L.P.
STATEMENTS OF PARTNERS' CAPITAL Years Ended December 31, 2000, 1999 and 1998
See accompanying notes to financial statements.
CAPITAL PREFERRED YIELD FUND-III, L.P. STATEMENTS OF CASH FLOWS Years Ended December 31, 2000, 1999 and 1998
CAPITAL PREFERRED YIELD FUND-III, L.P. STATEMENTS OF CASH FLOWS Years Ended December 31, 2000, 1999 and 1998
See accompanying notes to financial statements.
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies -----------------------------------------------------------
Organization
Capital Preferred Yield Fund-III, L.P. (the "Partnership") was organized on November 2, 1993 as a limited partnership under the laws of the State of Delaware pursuant to an Agreement of Limited Partnership (the "Partnership Agreement"). The Partnership was formed for the purpose of acquiring and leasing a diversified portfolio of equipment to unaffiliated third parties. The Partnership will continue until December 31, 2011 unless terminated earlier in accordance with the terms of the Partnership Agreement. All equipment owned by the Partnership is expected to be sold and the Partnership liquidated between 2001 and 2003. The general partner of the Partnership is CAI Equipment Leasing IV Corp., a wholly owned subsidiary of Mishawaka Leasing Company, Inc. ("MLC").
The general partner manages the Partnership, including investment of funds, purchase and sale of equipment, lease negotiation and other administrative duties. The Partnership initially sold 500,000 Class A limited partner units to 4,968 investors at a price of $100 per Class A limited partner unit.
MLC is the Class B limited partner. The Class B limited partner contributed cash, upon acquisition of equipment, in an amount equal to 1% of gross offering proceeds received from the sale of Class A limited partner units.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. For leasing entities, this includes the estimate of residual values, as discussed below. Actual results could differ from those estimates.
Partnership Allocations
Cash Distributions ------------------
During the Reinvestment Period (as defined in the Partnership Agreement), available cash is distributed to the partners as follows:
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued -----------------------------------------------------------
Partnership Allocations, continued
Cash Distributions, continued ------------------
First, 1.0% to the general partner and 99.0% to the Class A limited partners until the class A limited partners receive annual, non-compounded cumulative distributions equal to 10.5% of their contributed capital.
Second, 1.0% to the general partner and 99.0% to the Class B limited partner until the Class B limited partner receives annual non-compounded cumulative distributions equal to 10.5% of its contributed capital.
Third, any remaining available cash will be reinvested or distributed to the partners as specified in the Partnership Agreement.
After the Reinvestment Period (as defined in the Partnership Agreement), available cash will be distributed to the partners as follows:
First, in accordance with the first and second allocations during the Reinvestment Period as described above.
Second, 99.0% to the Class A limited partners and 1.0% to the general partner, until the Class A limited partners achieve Payout (as defined in the Partnership Agreement).
Third, 99.0% to the Class B limited partner, 1.0% to the general partner, until the Class B limited partner achieves Payout (as defined in the Partnership Agreement).
Fourth, 99.0% to the Class A and Class B limited partners (as a class) and 1.0% to the general partner, until the Class A and Class B limited partners receive cash distributions equal to 170% of their capital contributions.
Thereafter, 90% to the Class A and Class B limited partners (as a class) and 10% to the general partner.
Federal Income Tax Basis Profits and Losses -------------------------------------------
There are several special allocations that precede the general allocations of profits and losses to the partners. The most significant special allocations are as follows:
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued -----------------------------------------------------------
Partnership Allocations, continued
Federal Income Tax Basis Profits and Losses (continued) -------------------------------------------
First, commissions and expenses paid in connection with the sale of Class A limited partner units are allocated 1.0% to the general partner and 99.0% to the Class A limited partners.
Second, depreciation relating to Partnership equipment and any losses resulting from the sale of equipment are generally allocated 1.0% to the general partner and 99.0% to the limited partners (shared 99.0%/1.0% by the Class A and Class B limited partners, respectively) until the cumulative amount of such depreciation and such losses allocated to each limited partner equals such limited partner's contributed capital reduced by commissions and other expenses paid in connection with the sale of Class A limited partner units allocated to such partner. Thereafter, gain on sale of equipment, if any, will be allocated to the general partner in an amount equal to the sum of depreciation and loss on sale of equipment previously allocated to the general partner.
Third, notwithstanding anything in the Partnership Agreement to the contrary, and before any other allocation is made, items of income and gain for the current year (or period) shall be allocated, as quickly as possible, to the general partner to the extent of any deficit balance existing in the general partner's capital account as of the close of the immediately preceding year, in order to restore the balance in the general partner's capital account to zero.
After giving effect to special allocations, profits (as defined in the Partnership Agreement) are first allocated in proportion to, and to the extent of, any previous losses, in reverse chronological order and priority. Any remaining profits are allocated in the same order and priority as cash distributions.
After giving effect to special allocations, losses (as defined in the Partnership Agreement) are allocated in proportion to, and to the extent of, any previous profits, in reverse chronological order and priority. Any remaining losses are allocated 1.0% to the general partner and 99.0% to the limited partners (shared 99.0%/1.0% by the Class A and Class B limited partners, respectively).
Financial Reporting - Profits and Losses ----------------------------------------
For financial reporting purposes, net income is allocated to the partners in a manner consistent with the allocation of cash distributions.
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued -----------------------------------------------------------
Recently Issued Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("Statement 133"). Statement 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In June 1999, the Financial Accounting Standards Board issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB No. 133, an Amendment of FASB Statement 133. Statement 137 effectively extends the required application of Statement 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000, with earlier application permitted. The Partnership adopted Statement 133 in the first quarter of 1999, and such adoption had no material impact on the Partnership.
Lease Accounting
Statement of Financial Accounting Standards No. 13, Accounting for Leases, requires that a lessor account for each lease by the direct finance, sales-type or operating lease method. The Partnership currently utilizes the direct financing and operating methods for all of the Partnership's equipment under lease. Direct finance leases are defined as those leases which transfer substantially all of the benefits and risks of ownership of the equipment to the lessee. For all types of leases, the determination of profit considers the estimated value of the equipment at lease termination, referred to as the residual value. After the inception of a lease, the Partnership may engage in financing of lease receivables on a nonrecourse basis (i.e., "non-recourse debt" or "discounted lease rentals") and/or equipment sale transactions to reduce or recover its investment in the equipment.
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued -----------------------------------------------------------
The Partnership's accounting methods and their financial reporting effects are described below.
Net Investment in Direct Finance Leases ("DFLs")
The cost of the equipment, including acquisition fees paid to the general partner, is recorded as net investment in DFLs on the accompanying balance sheet. Leasing revenue, which is recognized over the term of the lease, consists of the excess of lease payments plus the estimated residual value over the equipment's cost. Earned income is recognized monthly to provide a constant yield and is recorded as direct finance lease income on the accompanying income statements. Residual values are established at lease inception equal to the estimated value to be received from the equipment following termination of the initial lease as determined by the general partner. In estimating such values, the general partner considers all relevant information regarding the equipment and the lessee.
Equipment on Operating Leases ("OLs")
The cost of equipment, including acquisition fees paid to the general partner, is recorded as leased equipment in the accompanying balance sheets and is depreciated on a straight-line basis over the lease term to an amount equal to the estimated residual value at the lease termination date. Leasing revenue consists principally of monthly rents and is recognized as operating lease rentals in the accompanying income statements. Residual values are established at lease inception equal to the estimated value to be received from the equipment following termination of the initial lease as determined by the general partner. In estimating such values, the general partner considers all relevant information and circumstances regarding the equipment and the lessee. Because revenue, depreciation expense and the resultant profit margin before interest expense are recorded on a straight-line basis, and interest expense on discounted lease rentals (discussed below) is recorded on the interest method, lower returns are realized in the early years of the term of an OL and higher returns in later years.
Allowance for Losses
An allowance for losses is maintained at levels determined by the general partner to adequately provide for any other-than-temporary declines in asset values. In determining losses, economic conditions, the activity in the used equipment markets, the effect of actions by equipment manufacturers, the financial condition of lessees, the expected courses of action by lessees with regard to leased equipment at termination of the initial lease term, and other factors which the general partner believes are relevant, are considered. Asset chargeoffs are recorded upon the termination or remarketing of the underlying assets. The lease portfolio is reviewed quarterly to determine the adequacy of the allowance for losses.
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued -----------------------------------------------------------
Transactions Subsequent to Initial Lease Termination
After the initial term of equipment under lease expires, the equipment is either sold or re-leased to the existing lessee or another third party. The remaining net book value of equipment sold is removed and gain or loss recorded when equipment is sold. The accounting for re-leased equipment is consistent with the accounting described under "Net Investment in Direct Finance Leases" and "Equipment on Operating Leases" above.
Income Taxes
No provision for income taxes has been made in the financial statements since taxable income or loss is recorded in the tax return of the individual partners.
Cash Equivalents
The Partnership considers short-term, highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents. Cash equivalents of approximately $1,518,000 and $4,299,000 at December 31, 2000 and 1999, respectively, are comprised of investments in a mutual fund which invests solely in U.S. Government treasury bills having maturities of 90 days or less.
Net Income Per Class A Limited Partner Unit
Net income per Class A limited partner unit is computed by dividing the net income allocated to the Class A limited partners by the weighted average number of Class A limited partner units outstanding during the period.
2. Net Investment in Direct Finance Leases ----------------------------------------
The components of the net investment in direct finance leases as of December 31, 2000 and 1999 were:
2000 1999 ----------- -----------
Minimum lease payments receivable $ 2,559,381 $ 1,574,987 Estimated residual values 415,146 644,553 Less unearned income (442,880) (302,863) ----------- -----------
Total $ 2,531,647 $ 1,916,677 =========== ===========
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
3. Leased Equipment, net ---------------------
The Partnership's investment in equipment on operating leases by major classes as of December 31, 2000 and 1999 were:
2000 1999 ------------ ------------
Transportation and industrial equipment $ 24,138,413 $ 28,744,322 Computers and peripherals 12,861,053 11,919,735 Furniture, fixtures and equipment 14,927,965 16,203,136 Other 2,338,552 2,304,378 ------------ ------------ 54,265,983 59,171,571
Less accumulated depreciation (25,923,040) (26,737,041) Allowance for losses (1,066,536) (220,745) ------------ ------------
$ 27,276,407 $ 32,213,785 ============ ============
Depreciation expense for 2000, 1999 and 1998 was $10,923,830, $12,284,633 and $13,493,620, respectively.
4. Future Minimum Lease Payments -----------------------------
Future minimum lease payments receivable from noncancelable leases as of December 31, 2000 are:
Years Ending December 31, Direct Finance Leases Operating Leases ------------------------- --------------------- ----------------
2001 $ 870,888 $ 8,536,485 2002 814,791 5,327,406 2003 528,894 2,753,729 2004 324,748 1,437,144 Thereafter 20,060 135,130 ----------- ------------
Total $ 2,559,381 $ 18,189,894 =========== ============
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
5. Discounted Lease Rentals ------------------------
Discounted lease rentals outstanding at December 31, 2000 bear interest at rates primarily ranging between 6% and 11%. Aggregate maturities of such non-recourse obligations are:
Years Ending December 31, -------------------------
2001 $ 3,697,155 2002 2,498,317 2003 1,591,440 2004 876,043 Thereafter 23,536 ------------ Total $ 8,686,491 ============
6. Transactions With the General Partner and Affiliates ----------------------------------------------------
Origination Fee and Evaluation Fee ----------------------------------
The general partner receives a fee equal to 3.5% of the sales price of equipment sold to the Partnership (up to a maximum cumulative amount as specified in the Partnership Agreement), 1.5% of which represents compensation for selecting, negotiating and consummating the acquisition of the equipment and 2% of which represents reimbursement for services rendered in connection with evaluating the suitability of the equipment and the credit worthiness of the lessees. Origination and evaluation fees totaled approximately $385,000, $415,000 and $516,000 in 2000, 1999 and 1998, respectively, all of which were capitalized by the Partnership as part of the cost of equipment on operating leases and net investment in direct financing leases.
Management Fees Paid to General Partner ---------------------------------------
The general partner earns management fees for services performed in connection with managing the Partnership's equipment equal to 2% of gross rentals received as permitted under terms of the Partnership Agreement. The general partner earned approximately $318,000, $349,000, and $420,000 during 2000, 1999 and 1998, respectively.
Direct Services from General Partner ------------------------------------
The general partner and its affiliates provide accounting, investor relations, billing, collecting, asset management, and other administrative services to the Partnership. The Partnership reimburses the general partner for these services performed on its behalf as permitted under the terms of the Partnership Agreement. The Partnership recorded approximately $84,000, $136,000, and $210,000 during 2000, 1999 and 1998, respectively.
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
6. Transactions With the General Partner and Affiliates, continued ----------------------------------------------------
Equipment Purchases -------------------
The Partnership purchased equipment from CAII, with a total purchase price of approximately $11,649,000, $13,583,000 and $15,381,000 (including approximately $3,720,000, $6,646,000 and $4,759,000 of discounted lease rentals) during 2000, 1999 and 1998, respectively. The Partnership purchased the equipment at CAII's historical cost plus reimbursement of other net acquisition costs, as provided for in the Partnership Agreement.
Payables to Affiliates ----------------------
Payables to affiliates of approximately $195,000 and $60,000 during 2000 and 1999, respectively, consists $24,000 for management fees paid to general partner and $171,000 for reimbursable general and administrative expenses for 2000 and $13,000 for direct services from general partner, $27,000 for management fees paid to general partner and $20,000 for reimbursable general and administrative expenses for 1999.
Receivable From Affiliates --------------------------
The General Partner collects and applies rental payments to the lessee's account with the Partnership, for those lessees who remit directly to the General Partner. The rental payments are then transferred to the Partnership, eliminating the receivable from related party balance.
7. Tax Information (Unaudited) ---------------------------
The following reconciles net income for financial reporting purposes to the income for federal income tax purposes for the year and period ended December 31,:
CAPITAL PREFERRED YIELD FUND-III, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
7. Tax Information (Unaudited), continued --------------------------
The following reconciles partners' capital for financial reporting purposes to partners' capital for federal income tax purposes for the year and period ended December 31,:
8. Concentration of Credit Risk ----------------------------
Approximately 67% of the Partnership's equipment under lease was leased to investment grade companies. Pursuant to the Partnership Agreement, an investment grade lessee is a company (i) with a net worth in excess of $100,000,000 (and no debt issues that are rated), or (ii) with a credit rating of not less than Baa as determined by Moody's Investor Services, Inc. or comparable credit rating as determined by another recognized credit rating service; or (iii) a lessee, all of whose lease payments have been unconditionally guaranteed or supported by a letter of credit issued by a company meeting one of the above requirements.
The Partnership's cash balance is maintained with a high credit quality financial institution. At times, such balances may be in excess of the FDIC insurance limit due to the receipt of lockbox amounts that have not cleared the presentment bank (generally for less than two days). As the funds become available, they are invested in a money market mutual fund.
The Partnership leases equipment to a significant number of lessees. One lessee and its affiliates accounted for more than 15% of total revenue of Partnership during 2000.
9. Disclosures about Fair Value of Financial Instruments -----------------------------------------------------
Statement of Financial Standards No. 107, Disclosures about Fair Value of Financial Instruments specifically excludes certain items from its disclosure requirements such as the Company's investment in leased assets. The carrying amounts at December 31, 2000 for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, payable to affiliates, rents and sale proceeds received in advance and distributions payable to partners approximate their fair values due to the short maturity of these instruments.
As of December 31, 2000, discounted lease rentals of approximately $8,686,000 had a fair value of approximately $9,036,000. The fair value was estimated utilizing market rates of comparable debt having similar maturities and credit quality as of December 31, 2000.
Independent Auditor's Report ----------------------------
The Partners Capital Preferred Yield Fund-III, L.P.:
Under date of April 20, 2001, we reported on the balance sheets of Capital Preferred Yield Fund-III, L.P. as of December 31, 2000 and 1999, and the related statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 2000 as contained in the Partnership's annual report on Form 10-K for the year 2000. In connection with our audits of the aforementioned financial statements, we also audited the related financial statement Schedule II. This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/KPMG LLP ------------ KPMG LLP
Denver, Colorado April 20, 2001
CAPITAL PREFERRED YIELD FUND-III, L.P. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years ended December 31, 2000, 1999 and 1998
(1) Principally charge-offs of assets against the established allowances.
See accompanying independent auditor's report
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure --------------------
None.
Item 10.
Item 10. Directors and Executive Officers of the Partnership ---------------------------------------------------
The Partnership has no officers and directors. The general partner manages and controls the affairs of the Partnership and has general responsibility and authority in all matters affecting its business. Information concerning the directors and executive officers of the general partner is as follows:
CAI Equipment Leasing IV Corporation
Name Positions Held ---- --------------
John F. Olmstead President and Director
John F. Olmstead, age 57, is President of Mishawaka Leasing Co., Inc. since its formation in September 2000. He was SeniorVice President of CAI from December, 1988 until June 2000. He has served as Chairman of the Board for Neo-kam Industries, Inc., Matchless Metal Polish Company, Inc. and ACL, Inc. since 1983. He has over 30 years of experience holding various positions of responsibility in the leasing industry. Mr. Olmstead holds a Bachelor of Science degree from Indiana University and a Juris Doctorate degree from Indiana Law School.
Item 11.
Item 11. Executive Compensation ----------------------
No compensation was paid by the Partnership to the officers and directors of the general partner. See Item 13 of this Report, "Certain Relationships and Related Transactions," which is incorporated herein by reference, for a description of the compensation and fees paid to the general partner and its affiliates by the Partnership during 1998.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management --------------------------------------------------------------
(a) As of the date hereof, no person is known by the Partnership to be the beneficial owner of more than 5% of the Class A limited partner units of the Partnership. The Partnership has no directors or officers, and neither the general partner nor the Class B limited partner of the Partnership own any Class A limited partner units.
MLC is the Class B limited partner.
CAI Equipment Leasing IV Corp. is the general partner.
The names and addresses of the general partner and the Class B limited partner are as follows:
Item 12. Security Ownership of Certain Beneficial Owners and Management, continued --------------------------------------------------------------
General Partner ---------------
CAI Equipment Leasing IV Corp. 2750 South Wadsworth C-200 Denver, Colorado 80227
Class B Limited Partner -----------------------
Mishawaka Leasing Company, Inc. 2750 South Wadsworth C-200 Denver, Colorado 80227
(b) No directors or officers of the general partner or the Class B limited partner owned any Class A limited partner units as of December 31, 2000.
(c) The Partnership knows of no arrangements, the operation of which may at a subsequent date result in a change in control of the Partnership.
Item 13.
Item 13. Certain Relationships and Related Transactions ----------------------------------------------
The general partner and its affiliates receive certain types of compensation, fees or other distributions in connection with the operations of the Partnership.
Following is a summary of the amounts paid or payable to the general partner and its affiliates during 2000:
Acquisition and Operating Stages
Acquisition Fee and Acquisition Cost Reimbursement - --------------------------------------------------
The general partner receives a fee equal to 3.5% of the sales price of equipment sold to the Partnership, 1.5% of which represents compensation for selecting, negotiating and consummating the acquisition of the equipment and 2% of which represents reimbursement for services rendered in connection with evaluating the suitability of the equipment and the credit worthiness of the Lessee. Origination and evaluation fees totaled approximately $385,000 in 2000, all of which were capitalized by the Partnership as part of the cost of equipment on operating leases and net investment in direct financing leases.
Management Fees - ---------------
The general partner earns management fees as compensation for services rendered in connection with managing the Partnership's equipment equal to 2% of gross rentals received. Such fees totaled approximately $318,000 for 2000.
Accountable General and Administrative Expenses - -----------------------------------------------
The general partner is entitled to reimbursement of certain expenses paid on behalf of the Partnership which are incurred in connection with the Partnership's operations. Such reimbursable expenses amounted to approximately $171,000 during 2000.
Additionally, the general partner is allocated 1% of Partnership cash distributions and net income relating to its general partner interest in the Partnership. Distributions and net income allocated to the general partner totaled $82,094 and $82,094, respectively, for 2000. Distributions and net income allocated to the Class B limited partner totaled $52,500 and $3,911, respectively, for 2000.
During 2000, the Partnership acquired the equipment described below from CAII:
* The lower of (a) the price for the equipment plus all costs incurred in maintaining the equipment (including, without limitation, the reasonable, necessary and actual expenses, as determined in accordance with generally accepted accounting principles, of storage, carrying, warehousing, repair, marketing, financing and taxes) from the date of acquisition thereof, provided that any proceeds accrued from the first basic rent date thereof and retained by the general partner or an affiliate thereof from leasing the equipment or any other arrangement with respect to the equipment shall be deemed a credit towards the purchase price paid by the Partnership, or (b) the fair market value of such equipment, as determined by an independent nationally recognized appraiser selected by the general partner.
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ---------------------------------------------------------------
(a) and (d) The following documents are filed as part of this Report:
1. Financial Statements: (Incorporated by reference to Item 8 of this Report, "Financial Statements and Supplementary Data").
2. Financial Statement Schedule: (Incorporated by reference to Item 8 of this Report, "Financial Statements and Supplementary Data").
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ---------------------------------------------------------------
(b) The Partnership did not file any reports on Form 8-K during the quarter ended December 31, 2000.
(c) Exhibits required to be filed.
Exhibit Exhibit Number Name ------- -------
4.1* Capital Preferred Yield Fund-III Limited Partnership Agreement
4.2* First Amendment to Limited Partnership Agreement dated June 14, 1994
4.3* Amended and Restated Agreement of Limited Partnership of Capital Preferred Yield Fund-III, L.P.
* Not filed herewith. In accordance with Rule 12b-32 of the General Rules and Regulations under the Securities Exchange Act of 1934, reference is made to the document previously filed with the Commission.
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.
Dated: April 23, 2001 Capital Preferred Yield Fund-III, L.P.
By: CAI Equipment Leasing IV Corporation
By: ------------------------------------- Susan M. Landi Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the general partner of the Partnership and in the capacities indicated on April 23, 2001.
Signature Title --------- -----
- ---------------- John F. Olmstead President and Director
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.
Dated: April 23, 2001 Capital Preferred Yield Fund-III, L.P.
By: CAI Equipment Leasing IV Corporation
By: /s/Susan M. Landi ------------------------------------- Susan M. Landi Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the general partner of the Partnership and in the capacities indicated on April 23, 2001.
Signature Title --------- -----
/s/John F. Olmstead - -------------------- John F. Olmstead President and Director