UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996 Commission File No. 2-95011
Wellesley Lease Income Limited Partnership III-D
(Exact Name of Registrant as Specified in its Charter)
Massachusetts 04-2850823
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
One Financial Center, 21st Floor, Boston, MA 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 482-8000
--------------------------------
Securities registered pursuant to Section 12(b) of the Act
None
--------------------------------
Securities registered pursuant to Section 12(g) of the Act
Units of Limited Partnership Interests
--------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 1997: Not applicable, since securities are
non-voting.
Documents incorporated by reference: None.
Exhibit Index on Page: 35
Page 1 of 36
Corporate organization as discussed in Part I, Item 1 Business is as follows:
TLP Holding LLC ("Holding") controls TLP Leasing Programs, Inc. ("TLP"), TLP
Management Services, Inc. ("TLPMS"), and TLP Securities, Inc. TLP controls TLP
Columbia Management Corp. ("TCMC") which serves as General Partner to the
Columbia Lease Income Funds. Torchmark Corporation ("Torchmark") controls
TMK/United, Inc. which controls Waddell and Reed Financial Services, Inc.
("Waddell and Reed").
Through various dealer-manager arrangements, TLP, TLPMS, and Waddell and Reed
serve as corporate general partners to the Wellesley Leasing Partnership
("Wellesley General Partner") and the Hanover Leasing Partnership. The Wellesley
General Partner is the general partner for the Wellesley Lease Income Limited
Partnerships. Hanover Leasing Partnership serves as the General Partner for
Hanover Lease Income Limited Partnership with BOT Financial Corporation serving
as agent.
Part I
Item 1. Business.
Wellesley Lease Income Limited Partnership III-D (the "Partnership") is a
limited partnership organized under the provisions of the Massachusetts Uniform
Limited Partnership Act on December 18, 1984. As of December 31, 1996, the
Partnership consisted of a General Partner and 1,973 Limited Partners owning
20,185 Units of Limited Partnership Interests of $500 each (the "Units"), except
that employees of the Corporate General Partners of the General Partner and
employees and securities representatives of its affiliates purchased 334 Units
for a net price of $460 per Unit, and the Partnership incurred no obligation to
pay any sales commissions with respect to such sales. The Units were sold
commencing March 19, 1985, pursuant to a Registration Statement on Form S-1
under the Securities Act of 1933. As set forth more fully at Item 10. Directors
and Executive Officers of the Partnership. of this report, the General Partner
is Wellesley Leasing Partnership, and the General Partner has three Corporate
General Partners (the "Corporate General Partners"): TLP Leasing Programs, Inc.
("TLP") and TLP Management Services Corporation ("TLPMS"), formerly CIS
Management Services Corporation ("CISMS"), both Massachusetts corporations and
Waddell & Reed Financial Services, Inc. ("Waddell & Reed", formerly TUP
Services, Inc., "TUPS"), a Missouri corporation.
The Partnership was organized to engage in the business of acquiring
income-producing computer peripheral equipment for investment purposes,
principally International Business Machines, Incorporated ("IBM") equipment. The
Partnership's principal objectives are as follows:
1. To acquire and lease equipment, primarily through operating leases, to
generate income during its entire useful life;
2. To provide quarterly distributions of cash to the Limited Partners from
leasing revenues and from the proceeds of sales or other disposition of
Partnership equipment; and
3. To reinvest a portion of lease revenues and a substantial portion of
cash from sales and refinancings in additional equipment during the
first nine years of the Partnership's operations.
The Partnership was formed primarily for investment purposes and not as a "tax
shelter".
The Partnership shall terminate on December 31, 2012, unless sooner dissolved or
terminated as provided in Section 11 of the Amended Agreement of Limited
Partnership.
The closing date of the Partnership was April 25, 1986, and aggregate equipment
purchased through December 31, 1996, is $30,407,483. At the end of 1996, there
are 46 leases in place with 20 lessees. The acquisition of these leases and
equipment is described more fully in Item 2. Properties. of this report and
notes 3 and 4 to the financial statements included in Item 8. Financial
Statements and Supplementary Data.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP and
TLPMS from CMI Holding Co. and CMI Corporation, respectively. Under the new
ownership, TLP and TLPMS will continue to operate in the same manner of business
as described below.
Under the Partnership Agreement, the General Partner, Wellesley Leasing
Partnership, is solely responsible for the operation of the Partnership and its
equipment. As discussed above, the General Partner has three Corporate General
Partners: TLP, TLPMS and Waddell & Reed. TLP was formed in December 1982 and is
a wholly-owned subsidiary of TLP Holding LLC ("Holding"). TLPMS was formed in
May 1985 as CISMS, and is a wholly-owned subsidiary of Holding and an affiliate
of TLP. Holding is primarily engaged in management services and equipment
leasing. Waddell & Reed (formerly TUPS) was formed in May 1986 and is an
affiliate of Waddell & Reed, Inc., which was one of the Soliciting Brokers for
this offering. Both Waddell & Reed and Waddell & Reed, Inc. are wholly-owned
subsidiaries of TMK/United Inc., which itself is an indirect 85% owned
subsidiary of Torchmark Corporation ("Torchmark").
The General Partnership Agreement between TLP and TLPMS (the "General
Partnership Agreement"), provides that TLPMS will propose to the Partnership
equipment acquisitions, leasing, financing and re-financing transactions, and
sale transactions, for approval by the Executive Committee, and will oversee the
operation, management and use of the Partnership's equipment, and that TLP will
oversee the marketing of the Units and all administrative functions of the
Partnership and, together with Waddell & Reed, will supply substantially all of
the General Partner's capital resources. All of the Partnership's equipment to
date has been acquired, and all dispositions of Partnership equipment have been
made, through TLPMS, using the personnel and resources of Holding and several
outside equipment lease brokers the General Partner believes would be most
advantageous for the Partnership.
The Partnership's investment policy provides for the acquisition of diversified
types of computer equipment and the leasing of such equipment to others on a
short-term basis under operating leases. The Partnership generally purchases
equipment for which a lease exists, or is entered into at the time of the
Partnership's acquisition of the equipment. This equipment is recorded and
depreciated at the Partnership cost (purchase price plus the acquisition fee).
If at any time the General Partner deems the equipment to be obsolete or related
maintenance and storage costs to be in excess of its fair market value, the
equipment is scrapped or sold at the current fair market value, which ever is
most advantageous for the Partnership.
Pursuant to its leasing policies, the General Partner performs a credit analysis
of potential lessees to determine their creditworthiness. The General Partner
leases all of its equipment to third parties by means of operating leases with
fixed base lease rates. Rents are payable monthly or quarterly. Operating leases
generally do not have terms greater than five years in duration and the
aggregate noncancelable rental payments during the term of the lease (on a net
present value basis), are not sufficient to permit the lessor to recover the
purchase price of the equipment.
At the termination of the lease, the General Partner arranges for the equipment
to be re-leased (either to the same lessee or a new lessee) if it determines
that re-leasing is in the Partnership's best interests. Generally, equipment is
re-leased at least once and possibly several times during the Partnership's
life, unless it is determined that the equipment is not marketable and therefore
may be sold. The General Partner provides, or arranges for the installation,
removal, maintenance and modification of the Partnership's equipment. Also, the
General Partner will purchase and maintain, or cause to be purchased and
maintained, appropriate insurance coverage to protect the interests of the
Partnership.
Of the leases in place at December 31, 1996, the Partnership owned various
computer equipment with an original cost basis of $5,844,357. Listed below is a
breakdown of the various types of computer equipment owned:
Computer peripherals $ 2,279,299
Processors & upgrades 2,454,630
Other 1,110,428
---------------
$ 5,844,357
===============
Of the leases in place at December 31, 1996, the average lease term is 35 months
and the average monthly lease rate as a percentage of original equipment cost is
2.83%.
The Partnership's investments in computer peripheral equipment are and will
continue to be subject to various risk factors. The principal business risk
associated with ownership of the equipment is the inability to keep it fully
leased at rentals which, after payment of operating expenses and debt service on
Partnership borrowings, provide, together with any anticipated sales proceeds or
salvage value, an acceptable rate of return. Other risk factors include:
1. Technological and economic equipment obsolescence, physical
deterioration, malfunction, and risks attendant upon defaults by
lessees and credit losses.
2. Residual Values of Equipment. The Partnership's return on its
investment in equipment will depend in part upon the continuing value
of such equipment which in turn, depends upon, among other things: (1)
the quality of the equipment; (2) the condition of the equipment; (3)
the timing of the equipment's acquisition; (4) the cost of comparable
new equipment; (5) the technological obsolescence of the equipment; (6)
the General Partner's ability to forecast technological changes which
may reduce the value of the equipment; and (7) market factors.
3. Competition from Full Payout Lessors. In connection with operating
leases, the Partnership will encounter considerable competition from
those offering full payout leases, which are written for a longer term
and a lower rate than the Partnership's operating leases.
4. Competition from Manufacturers. Leases offered by the Partnership will
compete with operating leases and full payout leases offered by
equipment manufacturers in their own lease programs. In addition to
attractive financial terms, manufacturers may also provide certain
ancillary services which the Partnership cannot offer directly, such as
maintenance service (including possible equipment substitution rights),
warranty services and trade-in privileges.
5. Other Competition. There are numerous other potential investors,
including limited partnerships organized and managed similarly to the
Partnership, seeking to purchase equipment subject to either operating
leases or full payout leases, many of which will have greater financial
resources than the Partnership and more experience than the General
Partner. The Partnership will compete in the computer leasing
marketplace with many non-manufacturing firms, including other
equipment dealers, brokers and leasing companies, as well as with
financial institutions.
6. Changes in Marketing Policies. IBM's current marketing policy of
offering accrual discounts (i.e., applying lease payments as a credit
toward the purchase of equipment) and volume discounts enables certain
customers to obtain IBM equipment at a cost lower than its fair market
value. In the case of accrual discounts, lessees of IBM equipment who
have earned a purchase credit toward that equipment can purchase the
equipment from IBM and arrange a cost-effective sale and leaseback
arrangement with TLP or the Partnership. The sale price to the
Partnership will typically be less than the fair market value of the
equipment. The Partnership may be able to participate in volume
discounts through purchases arranged by lessees of TLP. The
Partnership's lower equipment costs in turn should enable the
Partnership to offer lower lease rates to customers and help offset the
risk of early obsolescence. If IBM were to eliminate these policies,
raise its prices, lower its lease rates, or become more active as a
lessor, the Partnership might find it more difficult to compete
successfully as a lessor of IBM equipment.
7. Defaults by Lessees. Default by a lessee may cause equipment to be
returned to the Partnership at a time when the General Partner may be
unable to promptly arrange for its re-leasing (at the rental rate
previously received or otherwise) or sale (with or without a loss),
thus resulting in the loss of anticipated revenues and the inability to
recover the Partnership's investment and repay related debt. Any
related debt may be secured by the returned equipment and, in some
cases, by the Partnership's other equipment. If the debt is not paid in
a timely manner, the lender may foreclose and assume ownership of all
equipment securing the debt, resulting in economic loss and adverse tax
consequences to the Partnership's partners. Four lessees, Coulter
Leasing Corporation, Halliburton Company, Incorporated, ON Technology
Corporation and The Internet Access Company, Incorporated, lease
equipment in excess of 10% of total rental income for the year ended
December 31, 1996. The related rental payments comprise 12.17%, 13.42%,
14.08% and 13.49%, respectively, of the total rental income for the
year ended December 31, 1996. Coulter Leasing Corporation, Halliburton
Company, Incorporated, ON Technology Corporation and The Internet
Access Company, Incorporated lease equipment comprising 11.47%, 10.88%,
13.32% and 10.45%, respectively, of the total equipment portfolio at
December 31, 1996.
8. Changes in Technology. The General Partner intends to offer lease rates
to the Partnership's lessees which take into account the risk of
technological advances which may reduce the value of such equipment
owned by the Partnership. However, the introduction of an entirely new
technology could lead to a radical reduction in the fair market value
of certain equipment and make such equipment difficult to re-lease.
The Partnership considers itself to be engaged in only one industry segment, the
business of investing primarily in IBM computer peripheral equipment and leasing
the equipment to major national corporations on an operating lease basis, and
therefore, industry segment information has not been provided.
Item 2. Properties.
At December 31, 1996, the Partnership owned computer equipment with a
depreciated cost basis of $1,903,483, subject to 46 existing leases with 19
different lessees, and equipment held in inventory, awaiting re-lease or sale,
with depreciated cost basis of $116,432. All purchases of computer equipment are
subject to a 3% acquisition fee paid to the General Partner.
Item 3. Legal Proceedings:
There are no material pending legal proceedings that the Partnership is a party
or of which any of its equipment or leases is the subject.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
CMI Holding Co. and all the common stock of TLP Management Services Corporation
("TLPMS", formerly CIS Management Services Corporation "CISMS") from CMI
Corporation. Under the new ownership, it is expected that TLP and TLPMS will
continue to operate in the same manner of business as each has in the past.
On January 13, 1989 (the "Petition Date"), Continental Information Systems
Corporation ("Continental"), CIS Corporation ("CIS"), CMI Holding Co. ("CMI
Holding"), CMI Corporation ("CMI") and certain of its affiliates (collectively,
the "Debtors"), voluntarily petitioned for relief under Chapter 11 of the United
States Bankruptcy Code ("Chapter 11"), and thereafter continued in the
management and operation of their businesses and property as Debtors In
Possession until October 25, 1989, when the United States Bankruptcy Court (the
"Court") confirmed the appointment of James P. Hassett as Chapter 11 trustee
(the "Trustee") of the Debtors. CMI Holding is the former parent of TLP and CMI
is the former parent of TLPMS. TLP and TLPMS, neither of which filed under
Chapter 11, are the two Corporate General Partners of Wellesley Leasing
Partnership, the General Partner of the Partnership. Both before and after the
Petition Date, CIS and CMI have acted as agents for the Partnership in selling,
leasing and remarketing Partnership equipment. CMI Holding became a wholly-owned
subsidiary of CIS pursuant to a Court ordered settlement on July 20, 1993.
As of the Petition Date, there were a number of unsettled transactions between
CIS and CMI and the Partnership and other affiliated partnerships (the
Partnership and such other partnerships are herein collectively referred to as
the "Partnerships"), including outstanding accounts receivable and accounts
payable between each of the Partnerships and CIS and CMI and their affiliates,
sales of equipment and related leases from CIS and CMI to each of the
Partnerships for which not all documentation had been completed as of the
Petition Date, and sales of equipment and related leases from which CIS had
failed to remove prior third-party liens. In addition, accounts receivable and
accounts payable continued to accrue and be paid between each of the
Partnerships and CIS and CMI and their affiliates subsequent to the Petition
Date.
On February 28, 1992, the Court granted an order implementing a settlement of
the outstanding issues between each of the Partnerships and the Debtors. The
settlement occurred on March 13, 1992. In the order the Court approved a set-off
on a partnership-by-partnership basis of pre-petition amounts owed by each
affected Debtor to each Partnership to the extent of pre-petition amounts owed
by that Partnership to that Debtor. The Partnership was a net creditor to the
Debtors and paid in full its amounts owing them.
On November 29, 1994, the Court confirmed the Trustee's proposed Joint Plan of
Reorganization dated October 4, 1994, and the Debtors emerged from Chapter 11
bankruptcy protection on December 21, 1994.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Market for the Partnership's Securities and Related Security Holder
Matters.
(a) Market Information
The Partnership's outstanding securities consist of Limited Partnership
Interests in Units of $500 each. As of December 31, 1996, 20,185 Units had been
sold to the public at a price of $500 per Unit (except for 334 Units which were
sold for a net price of $460 per Unit to employees of the Corporate General
Partners of the General Partner and employees and securities representatives of
its affiliates).
There is no public market for the Units, and it is not anticipated that such a
public market will develop.
(b) Approximate Number of Security Holders
Number of Unit Number of Units
holders on Record as of
Title of Class as of 12/31/96 12/31/96
-------------- --------
Units of
Limited
Partnership
Interests 1,973 20,185
(c) Dividend History and Restrictions
During the fiscal period ended December 31, 1986 the Partnership completed its
offering of 20,185 Units. Pursuant to Section 8 of the Limited Partnership
Agreement, the Partnership's "Distributable Cash From Operations" for each year
will be determined and then distributed to the Partners. Upon reaching the end
of its reinvestment period (the ninth anniversary of the Partnership's closing
date), the Partnership will also distribute to the Partners "Distributable Cash
From Sales or Refinancings", if any. The Partnership distributed $857,863,
$908,326, and $1,009,251 to the Limited Partners and $45,152, $47,808, and
$53,120 to the General Partners in 1996, 1995 and 1994, respectively. The
cumulative cash distributions to the Limited Partners through December 31, 1996
are $11,021,014 as compared with the contributed Limited Partners' net capital
of $8,987,039.
"Cash From Operations" and "Cash From Sales or Refinancing" means the net cash
provided by the Partnership's normal operations or as a result of any sales,
refinancings or other dispositions of equipment, respectively, after the general
expenses and current liabilities of the Partnership (other than the equipment
management fee) are paid, as reduced by any reserves for working capital and
contingent liabilities to the extent deemed reasonable by the General Partner,
and as increased by any portion of such reserves then deemed by the General
Partner not to be required for Partnership operations. "Distributable Cash From
Operations" and "Distributable Cash From Sales or Refinancings" means Cash From
Operations or Cash From Sales or Refinancings, respectively, reduced by amounts
which the General Partner determines shall be reinvested (through the ninth
anniversary of the Partnership's closing date) in additional Equipment and by
payments of all accrued but unpaid equipment management fees.
For rendering services in connection with the normal operations of the
Partnership, the Partnership will pay to the General Partner a Partnership
management fee equal to 7% of the monthly rental billings collected.
Each distribution of Distributable Cash From Operations and any Distributable
Cash From Sales or Refinancings from gains of the Partnership shall be allocated
95% to the Limited Partners and 5% to the General Partner. Any losses from sales
or refinancings of equipment shall be allocated 99% to the Limited Partners and
1% to the General Partner until "Payout" has occurred. "Payout" means the time
when the aggregate amount of all distributions to the Limited Partners of
Distributable Cash From Operations and of Distributable Cash From Sales or
Refinancings equals the aggregate amount of the Limited Partners' original
invested capital plus a cumulative 10% annual return (compounded daily) on their
aggregate unreturned invested capital (calculated from the beginning of the
first full fiscal quarter following the Partnership's closing date). Including
the distribution for the fourth quarter of 1996 made February 28, 1997,
cumulative distributions to date are $552.25 per Unit. This cumulative
distribution per Unit amount represents 13.70% of "Payout". After Payout has
occurred, any Distributable Cash From Sales or Refinancings will be distributed
15% (plus an additional 1% for each 1% by which the total of all Limited
Partners' original Capital Contributions actually paid or allocated to the
Partnership's investment in equipment exceeds the greater of (i) 80% of the
gross proceeds of the Partnership's offering of Units, reduced by 0.0625% for
each 1% of leverage encumbering Partnership equipment, or (ii) 75% of the gross
proceeds of such offering) to the General Partner, and the remainder to the
Limited Partners. It is not anticipated that Payout will occur as of the
liquidation of this Partnership.
Distributable Cash, if any, will be distributed within 60 days after the
completion of each of the first three fiscal quarters of each Partnership fiscal
year, and within 120 days after the completion of each fiscal year, beginning
after the first full fiscal quarter following the Partnership's closing date.
Each such distribution will be described in a statement sent to the Limited
Partners.
Item 6. Selected Financial Data.
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results. This information should
be read in conjunction with the financial statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included in Items 8. and 7., respectively, of this report.
For the Years Ended December 31,
1996 1995 1994 1993 1992
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Operating Data
Rental Income $ 1,557,912 $ 2,483,009 $ 2,315,814 $ 2,438,414 $ 2,854,774
Interest Income 18,063 16,961 30,787 18,320 12,361
Net Income 160,016 471,147 759,459 1,100,540 930,904
Net Income Per Limited
Partnership Unit 5.35 21.01 35.30 51.90 31.38
Balance Sheet Data
Cash and Cash Equivalents $ 265,199 $ 245,755 $ 592,377 $ 621,024 $ 226,142
Computer Equipment at Cost 5,844,357 7,636,323 7,469,559 9,161,088 10,175,119
Total Assets 2,451,823 3,116,203 3,284,409 3,444,411 3,271,941
Long-term Debt 795,925 732,726 366,745 199,949 149,327
Distributions to Partners 903,015 956,134 1,062,371 1,062,370 1,062,371
Distributions Per Limited
Partnership Unit 42.50 45.00 50.00 50.00 50.00
Partners' Equity 1,520,024 2,263,023 2,748,010 3,050,922 3,012,752
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
On April 25, 1986, the Partnership completed its offering and received from the
escrow account $10,079,140 representing 20,185 Units of Limited Partnership
Interests. Of this amount, the Partnership received proceeds from the sale of
334 Units at a price net of sales commissions for employees of the General
Partners of the General Partner and employees and securities representatives of
its affiliates, who are allowed to purchase Units for a net price of $460 per
Unit.
Results of Operations
The Partnership realized net income of $160,016, $471,147, and $759,459 for the
years ended December 31, 1996, 1995 and 1994, respectively. Rental income
decreased $925,097 or 37% and increased $167,195 or 7% in 1996 and 1995,
respectively. The current year decrease in rental income is primarily due to
lower rental rates obtained on equipment lease extensions and remarketings
resulting after the initial lease term expires. The 1995 increase is primarily
due to the rental stream related to the 1995 and prior year equipment
acquisitions in the amount of $1,923,713 and $1,930,160, respectively. Interest
income increased in the current year as a result of higher average short-term
investment balances held during 1996, versus the prior year in which interest
income decreased due to the lower average short-term balances held. The $238,012
net gain on sale of equipment recognized in 1996 resulted from the large sales
of equipment carrying low net book values as compared to the prior year in which
there was a $161,510 net loss on sale of equipment.
Total costs and expenses decreased 11% and 4% in 1996 and 1995, respectively,
compared to prior periods. The decrease in costs and expenses is primarily a
result of lower depreciation expense. The current year decrease in depreciation
expense is attributable to a large portion of the equipment becoming fully
depreciated. Included in depreciation expense in 1996 and 1995, respectively, is
a provision for $100,000 and $110,000 to properly reflect the equipment
portfolio's net realizable value. Interest expense increased $4,673 between 1996
and 1995 due to new debt leveraged during the current year and the continued
paydown of long-term debt. Management fees decreased in the current year as a
result of the decrease in rental income. General and administrative expenses
increased $29,797 and $22,926 for the years ended December 31, 1996 and 1995,
respectively. A major factor contributing to this increase is that salaries and
expenses of the partnership accounting and reporting personnel, of the General
Partner, which are reimbursable by the various partnerships under management are
being allocated over a diminishing number of partnerships. The provision for
doubtful accounts increased in the current year due to an increase in potential
uncollectible rents receivable, versus the prior year in which the reversal of
provision for doubtful accounts of $31,070 is due to successful collection
efforts on delinquent accounts.
The Partnership recorded net income per Limited Partnership Unit of $5.35,
$21.01 and $35.30 for the years ended December 31, 1996, 1995 and 1994,
respectively. The allocation for the years ended December 31, 1995 and 1994
includes a cost recovery allocation of profit and loss among the General and
Limited Partners which results in an allocation of net loss to the Limited
Partners. This cost recovery allocation is required to maintain capital accounts
consistent with the distribution provisions of the Partnership Agreement. In
certain periods, the cost recovery of profit and loss may result in an
allocation of net loss the Limited Partners in instances when the Partnership's
operations were profitable for the period.
Liquidity and Capital Resources
For the year ended December 31, 1996, rental revenue generated from operating
leases was the primary source of funds for the Partnership. As equipment leases
terminate, the General Partner determines if the equipment will be extended to
the same lessee, remarketed to another lessee, or if it is less marketable,
sold. This decision is made upon analyzing which options would generate the most
favorable results.
Rental income will continue to decrease due to two factors. The first factor is
the rate obtained when the original leases expire and are remarketed at a lower
rate. Typically the remarketed rates are lower due to the decrease in useful
life of the equipment. Secondly, the increasing change of technology in the
computer industry usually decreases the demand for older equipment, thus
increasing the possibility of obsolescence. Both of these factors together will
cause remarketed rates to be lower than original rates and will cause certain
leases to terminate upon expiration. This decrease however, should not affect
the partnership's ability to meet its future cash requirements, including
long-term debt obligations. To the extent that future cash flows should be
insufficient to meet the Partnership's operating expenses and liabilities,
additional funds could be obtained through the sale of equipment, or a reduction
in the rate of cash distributions. Future rental revenues amount to $2,535,782
and are to be received over the next three years (see note 4 to the financial
statements).
The Partnership's investing activities for the year resulted in equipment
purchases of $968,266 and equipment sales with a depreciated cost basis of
$153,303, generating $505,978 in proceeds. Included in equipment sales is a
$114,663 loss which was charged against the reserve, initially set up in a prior
period to account for estimated losses on the ultimate disposition of equipment.
The Partnership will purchase equipment in the future as the Partnership has
extended its reinvestment period through June, 1997.
The Partnership's financing activities resulted in proceeds from borrowings on
long-term debt of $488,322. The Partnership activities also included a paydown
on long-term debt during 1996 of $425,123. The Partnership will payoff its
remaining long-term debt of $795,925 by 1999. Total long-term debt assumed by
the Partnership from inception is $7,287,273, for a total leverage of 24%.
Cash distributions paid in this first quarter of 1997 are currently at an annual
level of 5% per Limited Partnership Unit, or $6.25 per Limited Partnership Unit.
During 1996, the Partnership distributed a total of $42.50 per Limited
Partnership Unit, of which $37.15 per Unit represents income and $5.35 per Unit
represents a return of capital. For the quarter ended December 31, 1996, the
Partnership declared a cash distribution of $132,796, of which $6,640 was
distributed to the General Partner and $126,156 was distributed to the Limited
Partners. The distribution subsequently occurred on February 28, 1997. The
Partnership expects to continue paying at or near this level in the future. The
effects of inflation have not been significant to the Partnership and are not
expected to have any material impact in future periods.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
The Partners of Wellesley Lease Income Limited Partnership III-D:
We have audited the accompanying balance sheets of Wellesley Lease Income
Limited Partnership III-D (a Massachusetts Limited Partnership) as of December
31, 1996 and 1995, and the related statements of operations, partners' equity
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1996. In connection with our audits of the financial statements, we
have also audited the accompanying financial statement schedule II for each of
the years in the three-year period ended December 31, 1996. These financial
statements and this financial statement schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and this financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wellesley Lease Income Limited
Partnership III-D as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related 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.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 21, 1997
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
Assets
1996 1995
---------------- ----------------
Investment property, at cost (notes 3 and 4):
Computer equipment $ 5,844,357 $ 7,636,323
Less accumulated depreciation 3,824,442 5,022,967
---------------- ----------------
Investment property, net 2,019,915 2,613,356
Cash and cash equivalents 265,199 245,755
Rents receivable, net (notes 2 and 4) 69,908 173,959
Sales receivable, net (note 2) - 4,275
Accounts receivable - affiliates (note 5) 84,022 66,971
Other assets 12,779 11,887
---------------- ----------------
Total assets $ 2,451,823 $ 3,116,203
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 6) $ 550,139 $ 380,602
Accounts payable and accrued expenses - affiliates (note 5) 27,168 32,533
Accounts payable and accrued expenses 93,581 87,381
Unearned rental revenue 15,125 540
Long-term debt, less current portion (note 6) 245,786 352,124
---------------- ----------------
Total liabilities 931,799 853,180
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 579,070 526,973
Cumulative cash distributions (580,070) (534,918)
---------------- ----------------
- (6,945)
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 3,553,999 3,446,080
Cumulative cash distributions (11,021,014) (10,163,151)
---------------- ----------------
1,520,024 2,269,968
---------------- ----------------
Total partners' equity 1,520,024 2,263,023
---------------- ----------------
Total liabilities and partners' equity $ 2,451,823 $ 3,116,203
================ ================
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Operations
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
--------------- -------------- ---------------
Revenue:
Rental income $ 1,557,912 $ 2,483,009 $ 2,315,814
Interest income 18,063 16,961 30,787
Net gain (loss) on sale of equipment 238,012 (161,510) 354,031
--------------- -------------- ---------------
Total revenue 1,813,987 2,338,460 2,700,632
--------------- -------------- ---------------
Costs and expenses:
Depreciation 1,293,741 1,556,918 1,655,122
Interest 52,340 47,667 13,525
Related party expenses (note 5):
Management fees 126,138 166,811 149,918
General and administrative 156,784 126,987 104,061
Provision for (reversal of)
doubtful accounts 24,968 (31,070) 18,547
--------------- -------------- ---------------
Total costs and expenses 1,653,971 1,867,313 1,941,173
--------------- -------------- ---------------
Net income $ 160,016 $ 471,147 $ 759,459
=============== ============== ===============
Net income per Limited
Partnership Unit $ 5.35 $ 21.01 $ 35.30
=============== ============== ===============
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Partners' Equity (Deficit)
For the Years Ended December 31, 1996, 1995 and 1994
General Limited
Partner Partners Total
------------- --------------- ----------------
Equity at
December 31, 1993 $ - $ 3,050,922 $ 3,050,922
Net income 46,928 712,531 759,459
Cash distributions (53,120) (1,009,251) (1,062,371)
------------- --------------- ----------------
Equity (deficit) at
December 31, 1994 (6,192) 2,754,202 2,748,010
Net income 47,055 424,092 471,147
Cash distributions (47,808) (908,326) (956,134)
------------- --------------- ----------------
Equity (deficit) at
December 31, 1995 (6,945) 2,269,968 2,263,023
Net income 52,097 107,919 160,016
Cash distributions (45,152) (857,863) (903,015)
------------- --------------- ----------------
Equity at
December 31, 1996 $ - $ 1,520,024 $ 1,520,024
============= =============== ================
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 160,016 $ 471,147 $ 759,459
--------------- ---------------- ----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,293,741 1,556,918 1,655,122
Provision for (reversal of) doubtful accounts 24,968 (31,070) 18,547
Net (gain) loss on sale of equipment (238,012) 161,510 (354,031)
Net decrease (increase) in current assets 65,415 (150,279) 34,474
Net increase (decrease) in current liabilities 15,420 (49,200) (23,886)
--------------- ---------------- ----------------
Total adjustments 1,161,532 1,487,879 1,330,226
--------------- ---------------- ----------------
Net cash provided by operating activities 1,321,548 1,959,026 2,089,685
--------------- ---------------- ----------------
Cash flows from investing activities:
Purchase of investment property (968,266) (1,923,713) (1,930,160)
Proceeds from sales of investment property 505,978 208,218 707,403
--------------- ---------------- ----------------
Net cash used in investing activities (462,288) (1,715,495) (1,222,757)
--------------- ---------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings on notes payable - affiliate - 339,047 -
Principal payments on notes payable - affiliate - (339,047) -
Proceeds from borrowings on long-term debt 488,322 913,792 427,765
Principal payments on long-term debt (425,123) (547,811) (260,969)
Cash distributions to partners (903,015) (956,134) (1,062,371)
--------------- ---------------- ----------------
Net cash used in financing activities (839,816) (590,153) (895,575)
--------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents 19,444 (346,622) (28,647)
Cash and cash equivalents at beginning of year 245,755 592,377 621,024
--------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 265,199 $ 245,755 $ 592,377
=============== ================ ================
Supplemental cash flow information:
Interest paid during the year $ 52,340 $ 46,503 $ 13,463
=============== ================ ================
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
(1) Organization and Partnership Matters
The Partnership was organized under the Massachusetts Uniform Limited
Partnership Act on March 19, 1985. The Amended Agreement of Limited Partnership
authorized the issuance of up to 25,000 Limited Partnership Units at a per unit
gross price of $500 and up to 20 additional units to affiliates. The Partnership
closed on April 25, 1986, with 20,185 units.
Pursuant to the terms of the Amended Agreement of Limited Partnership,
Distributable Cash From Operations and Profits for federal income tax and
financial reporting purposes from normal operations and any Distributable Cash
From Sales or Refinancings from gains of the Partnership shall be allocated 95%
to the Limited Partners and 5% to the General Partner. Further, gains on sales
of equipment occurring after the reinvestment period end shall be allocated
first to eliminate negative capital accounts, if any, and second 95% to the
Limited Partners and 5% to the General Partner until "Payout". "Payout" means
the time when the aggregate amount of all distributions to the Limited Partners
of Distributable Cash From Operations and of Distributable Cash From Sales or
Refinancings equals the aggregate amount of the Limited Partners' original
invested capital plus a cumulative 10% annual return (compounded daily) on their
aggregate unreturned invested capital (calculated from the beginning of the
first full fiscal quarter following the Partnership's closing date). Losses for
federal income tax and financial reporting purposes from normal operations and
any Distributable Cash From Sales or Refinancings from losses of the Partnership
shall be allocated 99% to the Limited Partners and 1% to the General Partner
until Payout has occurred, and 85% to the Limited Partners and 15% to the
General Partner thereafter. In addition, special cost recovery allocations may
be required to reflect the differing initial capital contributions of the
General Partner and the Limited Partners. The Partnership's books and records
are in accordance with the terms of the Amended Agreement of Limited
Partnership. Including the fourth quarter of 1996 distribution made February 28,
1997, cumulative distributions to date are $552.25 per Unit. This cumulative
distribution per Unit amount represents 13.70% of Payout. It is not anticipated
that Payout will occur as of the liquidation of this Partnership.
The General Partner has contributed $1,000 in respect of its General Partnership
interest. In addition, the General Partner and its affiliates have acquired an
additional $10,000 of Limited Partnership Units in accordance with the Amended
Agreement of Limited Partnership.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(2) Summary of Significant Accounting Policies
General
The Partnership's records are maintained on the accrual basis of accounting so
that revenues are recognized as earned and expenses are recognized as incurred.
Assets and liabilities are those of the Partnership and do not include any
assets and liabilities of the individual partners. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Depreciation on investment property purchased in 1987 and thereafter is provided
using the double-declining balance method, generally over a five-year period.
The Partnership's policy is to periodically review the estimated fair market
value of its equipment to assess the recoverability of its undepreciated cost.
In accordance with this policy, the Partnership records a charge to depreciation
expense in instances when the net book value of equipment exceeds its net
realizable value. Included in depreciation expense in 1996 and 1995,
respectively, is a provision for $100,000 and $110,000 to properly reflect the
equipment portfolio's net realizable value. Routine maintenance and repairs are
expensed as incurred. Major betterments and enhancements are capitalized and
depreciated in accordance with the Partnership's depreciation policy.
Cash and Cash Equivalents
The Partnership considers cash and short-term investments with original
maturities of three months or less to be cash and cash equivalents.
Allowance for Doubtful Accounts
The financial statements include allowances for estimated losses on receivable
balances. The allowances for doubtful accounts are based on past write off
experience and an evaluation of potential uncollectible accounts within the
current receivable balances. Receivable balances which are determined to be
uncollectible are charged against the allowance and subsequent recoveries, if
any, are credited to the allowance. At December 31, 1996 and 1995, the allowance
for doubtful accounts included in rents receivable was $51,713 and $28,448,
respectively, and $1,703 and $0 included in sales receivable, respectively.
Income Taxes
No provision for federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership. Taxable income, as
reported on Schedule K-1, Form 1065 "Partner's Share of Income, Credits,
Deductions, etc.", was $162,413, $410,616, and $711,665 in 1996, 1995 and 1994,
respectively (see note 7).
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(3) Investment Property
At December 31, 1996, the Partnership owned computer equipment with a
depreciated cost basis of $1,903,483, subject to existing leases and equipment
with a depreciated cost basis of $116,432 in inventory, awaiting re-lease or
sale. All purchases of computer equipment are subject to a 3% acquisition fee
paid to the General Partner.
(4) Leases
Description of leasing arrangements:
Operations consist primarily of leasing computer equipment. All equipment leases
are classified as operating leases and expire over the next three years.
Minimum lease payments scheduled to be received in the future under existing
noncancelable operating leases are as follows:
1997 $ 1,467,473
1998 786,861
1999 281,448
--------------
$ 2,535,782
==============
The following schedule provides an analysis of the cost of capital equipment by
major classes as of December 31, 1996:
Computer peripherals $ 2,279,299
Processors & upgrades 2,454,630
Other 1,110,428
---------------
$ 5,844,357
===============
Four lessees, Coulter Leasing Corporation, Halliburton Company, Incorporated, ON
Technology Corporation and The Internet Access Company, Incorporated, lease
equipment in excess of 10% of total rental income for the year ended December
31, 1996. The related rental payments comprise 12.17%, 13.42%, 14.08% and
13.49%, respectively, of the total rental income for the year ended December 31,
1996. Coulter Leasing Corporation, Halliburton Company, Incorporated, ON
Technology Corporation and The Internet Access Company, Incorporated lease
equipment comprising 11.47%, 10.88%, 13.32% and 10.45%, respectively, of the
total equipment portfolio at December 31, 1996.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(5) Related Party Transactions
Fees, commissions and other expenses paid or accrued by the Partnership to the
General Partner or affiliates of the General Partner for the years ended
December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
---- ---- ----
Equipment acquisition fees $ 28,202 $ 56,030 $ 55,983
Management fees 126,138 166,811 149,918
Reimbursable expenses paid 147,986 119,397 100,349
------------ ------------ ------------
$ 302,326 $ 342,238 $ 306,250
============ ============ ============
Under the terms of the Partnership Agreement, the General Partner is entitled to
an equipment acquisition fee of 3% of the purchase price paid by the Partnership
for the equipment. The General Partner is also entitled to a management fee
equal to 7% of the monthly rental billings collected. Also, the Partnership
reimburses the General Partner and its affiliates for certain expenses incurred
by them in connection with the operation of the Partnership.
(6) Long-term Debt
Long-term debt at December 31, 1996 consists of two loans totaling $117,499 from
Union Chelsea National Bank each with an interest rate of 9.00%, one loan for
$29,454 from CIT Group/Equipment Financing, Incorporated with an interest rate
of 14.17%, one installment note from Pullman Capital Corporation totaling
$23,523 with an interest rate of 8.00%, and nine loans totaling $625,449 from
Liberty Bank, one bearing interest at 7.75%, one bearing interest at 11.00%, two
bearing interest at 7.90% and the five remaining loans bearing interest at
8.25%. All loans are non-recourse and are collateralized by equipment on the
respective leases with a total net book value of $776,161 and assignment of the
related leases.
Maturities on long-term debt are as follows:
1997 $ 550,139
1998 240,896
1999 4,890
--------------
$ 795,925
==============
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(7) Reconciliation of Financial Statement Net Income to Taxable Income to
Partners
A reconciliation of financial statement net income to taxable income to partners
is as follows for the years ended December 31, 1996, 1995 and 1994:
1996 1995 1994
---- ---- ----
Net income per financial statements $ 160,016 $ 471,147 $ 759,459
Provision for doubtful accounts expense for financial
statement purposes in excess of (less than) provision
for doubtful accounts expense for tax purposes 24,968 (31,070) 3,614
Depreciation expense for financial statement purposes
in excess of depreciation expense for tax purposes 93,800 94,021 -
Net gain on sale of equipment for financial statement
purposes in excess of net gain on sale of equipment
for tax purposes (116,371) (123,482) (51,408)
-------------- ------------- -------------
Taxable income to partners $ 162,413 $ 410,616 $ 711,665
============== ============= =============
Losses for federal tax purposes from normal operations are allocated 99% to the
Limited Partners and 1% to the General Partner. Profits for federal tax purposes
from normal operations are allocated 95% to the Limited Partners and 5% to the
General Partner. In addition, special cost recovery allocations may be required
to reflect the differing initial capital contribution of the General Partner and
the Limited Partners.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Schedule II - Valuation and Qualifying Accounts and Reserves
Additions charged
Balance at to (recoveries Balance
beginning credited from) at end
Classification of year costs and expenses Charge-offs of year
---------------- ------------------- ---------------- -----------------
Year ended
December 31, 1994 $ 55,904 $ 18,547 $ 14,933 $ 59,518
================ ================ ================ =================
Year ended
December 31, 1995 $ 59,518 $ (31,070) $ - $ 28,448
================ ================ ================ =================
Year ended
December 31, 1996 $ 28,448 $ 24,968 $ - $ 53,416
================ ================ ================ =================
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
December 31, 1996
Lessee
American Hard Cider, Incorporated
Caterpillar, Incorporated
Cerulean Technology, Incorporated
Coulter Leasing Corporation
George Melhado and Company
H.J. Meyers & Company, Incorporated
Halliburton Company, Incorporated
Hughes Aircraft Corporation
Invetech Company
J. Walter Thompson, U.S.A., Incorporated
Magnavox Electronic Systems Company, Incorporated
Merchants Association of Florida, Incorporated
Mercury Marine, Division of Brunswick Corporation
NYNEX National, Incorporated
ON Technology Corporation
Owens - Corning Fiberglass Corporation
Packard Hughes Interconnect, Incorporated
Simmons Market Research Bureau, Incorporated
Sports & Recreation Company, Incorporated
The Internet Access Company, Incorporated
Equipment Description Acquisition Price
Computer peripherals $ 2,279,299
Processors & upgrades 2,454,630
Other 1,110,428
----------------
$ 5,844,357
================
Exhibit 11 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computation of Net Income per Limited Partnership Unit
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Net income $ 160,016 $ 471,147 $ 759,459
Gain on sale (245,351) (36,097) (430,824)
Loss on sale 7,339 197,607 76,793
Special cost recovery allocation - (6,945) (6,192)
-------------- ---------------- ----------------
Available (loss) income from operations (77,996) 625,712 399,236
-------------- ---------------- ----------------
Allocations to General Partner:
(Loss) income from operations (780) 31,286 19,962
Gain on sale 52,950 10,800 21,541
Loss on sale (73) (1,976) (767)
Special cost recovery allocation - 6,945 6,192
-------------- ---------------- ----------------
Income allocated to General Partner 52,097 47,055 46,928
-------------- ---------------- ----------------
Income allocated to Limited Partners $ 107,919 $ 424,092 $ 712,531
============== ================ ================
Number of Limited Partnership Units $ 20,185 $ 20,185 $ 20,185
============== ================ ================
Net income per Limited Partnership Unit $ 5.35 $ 21.01 $ 35.30
============== ================ ================
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Statement Disclosures.
None.
Part III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1. of this
report, the General Partner of the Partnership is Wellesley Leasing Partnership.
Under the Partnership Agreement, the General Partner is solely responsible for
the operation of the Partnership's properties, and the Limited Partners have no
right to participate in the control of such operations. The General Partner has
three Corporate General Partners: TLP and TLPMS, both Massachusetts corporations
and Waddell & Reed, a Missouri corporation. The names and ages of the Directors
and Executive Officers of the Corporate General Partners are as follows:
TLP and TLPMS
Name Title Age
Nicholas C. Bogard Director 51
Arthur P. Beecher Director and President 59
Nancy E. Malone Vice President, Lease Financing 38
Irene V. King Vice President, Satellite Operations 50
Joseph P. Colonna Vice President, Marketing 37
James S. Felman Clerk 32
Waddell & Reed
Name Title Age
Keith A. Tucker President, Chief Executive Officer 52
and Director
Robert L. Hechler Vice President, Chief Operations Officer, 60
Treasurer and Director
Henry J. Herrmann Vice President, Chief Investment Officer 55
and Director
Robert J. Williams, Jr. Vice President and National Sales Manager 53
Sharon K. Pappas Vice President, Secretary 38
and General Counsel
(c) Identification of certain significant persons
See Item 10. (a-b)
(d) Family relationship
No family relationship exists between any of the foregoing Directors or
Officers.
(e) Business experience
Nicholas C. Bogard is Director of TLP and TLPMS. Mr. Bogard served as President
and Director of TLP from 1982 - 1992, and served as Director of CS First Boston
from 1992 - 1994. He has been working as an independent consultant since 1994.
Mr. Bogard holds a B.A. from Princeton University and an M.B.A. from Harvard
University.
Arthur P. Beecher is President and Director of TLP and TLPMS. Prior to joining
TLP, he was an officer of CSA Financial Corp. of Boston, Massachusetts, most
recently as Vice President, Finance and Administration since 1975. Mr. Beecher
holds a B.S. from Boston University and is a Certified Public Accountant.
Nancy E. Malone is Vice President, Lease Financing of TLP and TLPMS. Prior to
joining TLP, she was Manager, Lease Financing for 11 years at CSA Financial
Corp. of Boston, Massachusetts. Ms. Malone holds a B.A. from The College of the
Holy Cross.
Irene V. King is Vice President, Satellite Operations for TLP and TLPMS. Prior
to joining TLP in April 1994, she was Director of Public Income Funds at CSA
Financial Corp. of Boston, Massachusetts and was previously Vice President of
Finance at First Alliance Corp. of Wellesley, Massachusetts. Ms. King holds a
B.A. from Barat College of the Sacred Heart, Lake Forest, Illinois.
James S. Felman is Clerk of TLP and TLPMS. Prior to joining TLP, he was in
private practice and was previously employed as a Tax Consultant with Price
Waterhouse in Miami, Florida and New York, New York. Mr. Felman received his
J.D. from S.U.N.Y. at Buffalo Law School, holds a B.S. in Economics and Business
Management from Cornell University, and is a licensed attorney in New York and
Florida.
Joseph P. Colonna is Vice President, Marketing of TLP and TLPMS. Prior to
joining TLP, he was Associate Counsel at CSA Financial Corp. of Boston,
Massachusetts in charge of Domestic and International Leasing Transactions. He
received his B.A. from Rutgers University, J.D. from Suffolk University Law
School and M.S.L. from Vermont Law School.
Keith A. Tucker is President, Chief Executive Officer and Director of Waddell &
Reed; Chairman of the Board of Directors of WRIMCO, Waddell & Reed, Inc.,
Waddell & Reed Services Company, Waddell & Reed Asset Management Company and
Torchmark Distributors, Inc., an affiliate of Waddell & Reed, Inc.; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; and President of each of the funds in the United, Waddell
& Reed and TMK/United mutual fund groups. He is also Director of Southwestern
Life Corporation. Prior to joining Torchmark Corporation in 1991, Mr. Tucker was
with Trivest, Inc. and Trivest Securities Corporation in Miami, Florida since
1987, most recently as the Senior Vice President and President, respectively.
Prior to Trivest, Inc., he was Director of Atlantis Group, Inc., a diversified
company. Mr. Tucker holds a B.B.A. and a J. D. both from the University of
Texas.
Robert L. Hechler is Vice President, Chief Operations Officer, Director and
Treasurer of Waddell & Reed; Executive Vice President, Principal Financial
Officer, Director and Treasurer of WRIMCO; President, Chief Executive Officer,
Principal Financial Officer, Director and Treasurer of Waddell & Reed, Inc.;
Director and Treasurer of Waddell & Reed Services Company; Vice President,
Treasurer and Director of Torchmark Distributors, Inc.; and Vice President and
Principal Financial Officer of each of the funds in the United, Waddell & Reed
and TMK/United mutual fund groups. He has been employed by Waddell & Reed and
its affiliates since 1977. Mr. Hechler holds a B.S. from the University of
Illinois and an M.B.A. from the University of Chicago.
Henry J. Herrmann is Vice President, Chief Investment Officer and Director of
Waddell & Reed; Director of Waddell & Reed, Inc.; President, Chief Executive
Officer, Chief Investment Officer and Director of WRIMCO and Waddell & Reed
Asset Management Company; Senior Vice President and Chief Investment Officer of
United Investors Management Company; and Vice President of each of the funds in
the United, Waddell & Reed and TMK/United mutual fund groups. He has been
employed by Waddell & Reed and its affiliates since 1971. Mr. Herrmann holds a
B.S. from New York University.
Robert J. Williams, Jr. is Vice President and National Sales Manager of Waddell
& Reed and Executive Vice President and National Sales Manager of Waddell &
Reed, Inc. He has been employed by Waddell & Reed, Inc. since July 1996. He was
employed with Charles Schwab & Company from November 1991 to July 1995. From
August 1984 to October 1991, he was employed by American Express Financial
Advisors or its affiliates. Mr. Williams holds a B.S. from the University of
Utah and an M.B.A. from California State-Humbolt.
Sharon K. Pappas is Vice President, Secretary and General Counsel of Waddell &
Reed; Senior Vice President, Secretary and General Counsel of WRIMCO and Waddell
& Reed, Inc.; Director, Senior Vice President, Secretary and General Counsel of
Waddell & Reed Services Company; Director, Secretary and General Counsel of
Waddell & Reed Asset Management Company; Vice President, Secretary and General
Counsel of Torchmark Distributors, Inc.; formerly, Assistant General Counsel of
WRIMCO, Waddell & Reed Financial Services, Inc., Waddell & Reed, Inc., Waddell &
Reed Asset Management Company and Waddell & Reed Services Company. She is Vice
President, Secretary and General Counsel of each of the funds in the United,
Waddell & Reed and TMK/United mutual fund groups. Prior to joining Waddell &
Reed and its affiliates in 1989, Ms. Pappas was employed with Stinson, Mag &
Fizzell in Kansas City, Missouri. Ms. Pappas holds a B.S. from Kansas State
University and a J.D. from the University of Kansas.
(f) Involvement in certain legal proceedings
The Partnership is not aware of any legal proceedings against any Director or
Executive Officer of the Corporate General Partners which may be important for
the evaluation of any such person's ability and integrity.
Item 11. Management Remuneration and Transactions.
(a), (b), (c), (d), and (e): The Officers and Directors of the Corporate General
Partners receive no current or proposed direct remuneration in such capacities,
pursuant to any standard arrangements or otherwise, from the Partnership. In
addition, the Partnership has not paid and does not propose to pay any options,
warrants or rights to the Officers and Directors of the Corporate General
Partners. There exists no remuneration plan or arrangement with any Officer or
Director of the Corporate General Partners resulting from the resignation,
retirement or any other termination. See note 5 to the financial statements
included in Item 8. of this report for a description of the remuneration paid by
the Partnership to the General Partner and its affiliates during 1996, 1995 and
1994.
Item 12. Security Ownership of Certain Owners and Management.
By virtue of its organization as a limited partnership, the Partnership has
outstanding no securities possessing traditional voting rights. However, as
provided for in Section 13.2 of the Amended Agreement of Limited Partnership
(subject to Section 13.3), a majority interest of the Limited Partners have
voting rights with respect to:
1. Amendment of the Limited Partnership Agreement;
2. Termination of the Partnership;
3. Removal of the General Partner; and
4. Approval or disapproval of the sale of substantially all the assets of the
Partnership.
No person or group is known by the General Partner to own beneficially more than
5% of the Partnership's 20,185 outstanding Limited Partnership Units as of
December 31, 1996.
By virtue of its organization as a limited partnership, the Partnership has no
Officers or Directors. See also note 1 to the financial statements included in
Item 8. and Item 10. of this report.
Item 13. Certain Relationships and Related Transactions.
(a), (b), and (c): The General Partner of the Partnership is Wellesley Leasing
Partnership, a Massachusetts general partnership which in turn has three
Corporate General Partners: TLP and TLPMS, both Massachusetts corporations and
Waddell & Reed, a Missouri corporation. The Corporate General Partners'
Directors and Executive Officers are identified in Item 10. of this report. The
Partnership was not involved in any transaction involving any of these Directors
or Officers or any member of the immediate family of these individuals, nor did
any of these persons provide services to the Partnership for which they received
direct or indirect remuneration. Similarly, there exists no business
relationship between the Partnership and any of the Directors or Officers of the
Corporate General Partners, nor were any of the individuals indebted to the
Partnership.
The General Partner is responsible for acquiring, financing, leasing and selling
equipment for the Partnership. TLPMS proposes for the Partnership equipment
acquisitions, leasing transactions, financing and refinancing transactions, and
sale transactions for approval by the Executive Committee and oversees the
operation, management and use of each Partnership's equipment. TLP oversaw the
marketing of the Units and oversees all administrative functions of the
Partnership and, together with Waddell & Reed, provides substantially all of the
General Partner's capital resources. In consideration of such services and
capital commitments, TLP receives 30%, Waddell & Reed receives 10% and TLPMS
receives 60% of all compensation received by the General Partner in connection
with the formation and operation of the Partnership (including equipment
management fees, acquisition fees, subordinated remarketing fees and the General
Partner's share of Distributable Cash From Sales or Refinancings), except for
Acquisition Fees, as to which TLP receives 15%, Waddell & Reed receives 10% and
TLPMS receives 75%. The General Partner also was reimbursed in an amount equal
to 3% of the gross proceeds of the Partnership's offerings for organizational
and offering expenses; all such expenses in excess of that amount were borne by
TLP. See note 5 to the financial statements included in Item 8. of this report
for a description of payments made by the Partnership to the General Partner.
For information regarding the settlements between the Partnership and the
Liquidating Estate of CIS Corporation, et al, arising out of the emergence from
bankruptcy of CIS and CMI, see Item 3. Legal Proceedings.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K: None.
(a) 1. Financial Statements Page No.
Independent Auditors' Report 15
Balance Sheets at December 31, 1996 and 1995 16
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 17
Statements of Partners' Equity (Deficit) for
the Years Ended December 31, 1996, 1995 and 1994 18
Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994 19
Notes to Financial Statements 20-24
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and Reserves 25
All other financial statement schedules are omitted because they are
not applicable, the data is not significant, or the required
information is shown elsewhere in this report.
Computer Equipment Portfolio (Unaudited) 26
3. Exhibit Index
11 Statement regarding computation of net income per Limited Partnership Unit 27
(b) Report on Form 8-K
N/A
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.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
Date: March 27, 1997
By: Arthur P. Beecher,
President