UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________ FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2000. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 0-18789 _______________________ PLM EQUIPMENT GROWTH FUND IV (Exact name of registrant as specified in its charter) California 94-3090127 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Market, Steuart Street Tower Suite 800, San Francisco, CA 94105-1301 (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code (415) 974-1399 _______________________ 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 ______ Aggregate market value of voting stock: N/A An index of exhibits filed with this Form 10-K is located on page 22. Total number of pages in this report: 48. PART I ITEM 1. BUSINESS (A) Background In March 1989, PLM Financial Services, Inc. (FSI or the General Partner), a wholly-owned subsidiary of PLM International, Inc. (PLM International or PLM), filed a Registration Statement on Form S-1 with the Securities and Exchange Commission with respect to a proposed offering of 8,750,000 limited partnership units (including 1,250,000 option units) (the units) in PLM Equipment Growth Fund IV, a California limited partnership (the Partnership, the Registrant, or EGF IV). The Partnership's offering became effective on May 23, 1989. FSI, as General Partner, owns a 5% interest in the Partnership. The Partnership engages in the business of investing in a diversified equipment portfolio consisting primarily of used, long-lived, low-obsolescence capital equipment that is easily transportable by and among prospective users. The Partnership's primary objectives are: (1) to maintain a diversified portfolio of long-lived, low-obsolescence, high residual-value equipment with the net proceeds of the initial partnership offering, supplemented by debt financing and reinvestment of cash generated by operations. All transactions of over $1.0 million must be approved by the PLM International Credit Review Committee (the Committee), which is made up of members of PLM International Senior Management. In determining a lessee's creditworthiness, the Committee will consider, among other factors, its financial statements, internal and external credit ratings, and letters of credit. (2) to generate sufficient net operating cash flow from lease operations to meet liquidity requirements and to generate cash distributions to the limited partners until such time as the General Partner commences the orderly liquidation of the Partnership assets or unless the Partnership is terminated earlier upon sale of all Partnership property or by certain other events. (3) to selectively sell equipment when the General Partner believes that, due to market conditions, market prices for equipment exceed inherent equipment values or that expected future benefits from continued ownership of a particular asset will have an adverse affect on the Partnership. As the Partnership is in the liquidation phase, proceeds from these sales, together with excess net operating cash flows from operations (net cash provided by operating activities plus distributions from unconsolidated special-purpose entities (USPEs)), are used to pay distributions to the partners. (4) to preserve and protect the value of the portfolio through quality management, maintaining the portfolio's diversity, and constantly monitoring equipment markets. The offering of the units of the Partnership closed on March 28, 1990. As of December 31, 2000, there were 8,628,420 limited partnership units outstanding. The General Partner contributed $100 for its 5% general partner interest in the Partnership. The Partnership has entered its liquidation phase and the General Partner is actively pursuing the sale of all of the Partnership's equipment with the intention of winding up the Partnership and distributing all available cash to the Partners. The liquidation phase will end on December 31, 2009, unless the Partnership is terminated earlier upon sale of all of the equipment or by certain other events. The General Partner anticipates that the liquidation of Partnership assets will be completed by the end of the year 2001. Table 1, below, lists the equipment and the cost of equipment in the Partnership's portfolio, and the cost of an investment in an unconsolidated special-purpose entity, as of December 31, 2000 (in thousands of dollars): TABLE 1 Units Type Manufacturer Cost - --------------------------------------------------------------------------------------------------------------------- Owned equipment held for operating leases: 277 Pressurized tank railcars Various $ 8,340 98 Woodchip gondola railcars General Electric 2,341 110 Bulkhead flat railcars Marine Industries Ltd. 2,153 24 Nonpressurized tank railcars Various 502 153 Refrigerated marine containers Various 4,115 161 Various marine containers Various 552 ----------- Total owned equipment held for operating leases $ 18,003 =========== Owned equipment held for sale: 1 737-200 stage II commercial aircraft Boeing $ 14,692 1 Dash 8-300 commuter aircraft Dehavilland 5,748 ----------- Total owned equipment held for sale $ 20,440 =========== Total owned equipment $ 38,443 1 =========== Investment in an unconsolidated special-purpose entity: 0.35 Equipment on direct finance lease: Two DC-9 stage III commercial aircraft McDonnell-Douglas $ 3,901 1,2 =========== 1 Includes equipment and investments purchased with the proceeds from capital contributions, undistributed cashflow from operations, and Partnership borrowings. Includes costs capitalized subsequent to the date of acquisition and equipment acquisition fees paid to PLM Transportation Equipment Corporation, a wholly-owned subsidiary of FSI. All equipment was used equipment at the time of purchase. 2 Jointly Owned: EGF IV and two affiliated programs. The Partnership's aircraft is generally leased under operating leases with terms of eight years. The Partnership's marine containers are leased to operators of utilization-type leasing pools, which include equipment owned by unaffiliated parties. In such instances, revenues received by the Partnership consist of a specified percentage of revenues generated by leasing the pooled equipment to sublessees, after deducting certain direct operating expenses of the pooled equipment. Rents for railcars are based on fixed rate with terms of one to six years. Lease revenues for trailers that operated in rental yards owned by PLM Rental, Inc. were based on a fixed rate for a specific period of time. Rental income related to trailers was reported as revenue in accordance with Financial Accounting Standards Board Statement No. 13 "Accounting for Leases". Direct expenses associated with the equipment were charged directly to the Partnership. An allocation of other indirect expenses of the rental yard operations was charged to the Partnership monthly. The lessees of the equipment include, but are not limited to: Aero California, Transamerica Leasing, and Canadian Pacific Railways. (B) Management of Partnership Equipment The Partnership has entered into an equipment management agreement with PLM Investment Management, Inc.(IMI), a wholly-owned subsidiary of FSI, for the management of the Partnership's equipment. The Partnership's management agreement with IMI is to co-terminate with the dissolution of the Partnership, unless the limited partners vote to terminate the agreement prior to that date or at the discretion of the General Partner. IMI has agreed to perform all services necessary to manage the equipment on behalf of the Partnership and to perform or contract for the performance of all obligations of the lessor under the Partnership's leases. In consideration for its services and pursuant to the partnership agreement, IMI is entitled to a monthly management fee (see Notes 1 and 2 to the audited financial statements). (C) Competition (1) Operating Leases versus Full Payout Leases Generally the equipment owned by or invested in the Partnership is leased out on an operating lease basis wherein the rents received during the initial noncancelable term of the lease are insufficient to recover the Partnership's purchase price of the equipment. The short- to mid-term nature of operating leases generally commands a higher rental rate than the longer-term, full payout leases and offers lessees relative flexibility in their equipment commitment. In addition, the rental obligation under an operating lease need not be capitalized on the lessee's balance sheet. The Partnership encounters considerable competition from lessors that utilize full payout leases on new equipment, i.e. leases that have terms equal to the expected economic life of the equipment. While some lessees prefer the flexibility offered by a shorter-term operating lease, other lessees prefer the rate advantages possible with a full payout lease. Competitors may write full payout leases at considerably lower rates and for longer terms than the Partnership offers, or larger competitors with a lower cost of capital may offer operating leases at lower rates, which may put the Partnership at a competitive disadvantage. (2) Manufacturers and Equipment Lessors The Partnership competes with equipment manufacturers who offer operating leases and full payout leases. Manufacturers may provide ancillary services that the Partnership cannot offer, such as specialized maintenance services (including possible substitution of equipment), training, warranty services, and trade-in privileges. The Partnership also competes with many equipment lessors, including ACF Industries, Inc. (Shippers Car Line Division), General Electric Railcar Services Corporation, General Electric Capital Aviation Services Corporation, and other investments programs that lease the same types of equipment. (D) Demand The Partnership currently operates in three primary operating segments: aircraft leasing, marine container leasing, and railcar leasing. Each equipment leasing segment engages in short-term to mid-term operating leases to a variety of customers. Except for those aircraft leased to passenger air carriers, the Partnership's equipment and investments are used to transport materials and commodities, rather than people. The following section describes the international and national markets in which the Partnership's capital equipment operates: (1) Aircraft (a) Commercial aircraft Both Boeing and Airbus Industries have predicted that the rate of growth in the demand for air transportation services will be relatively robust for the next 20 years. Boeing has predicted that the demand for passenger services will grow at an average rate of about 4.8% per year and the demand for cargo traffic will grow at about 6.4% per year during that period. Such growth will require a substantial increase in the numbers of commercial aircraft. According to Boeing, as of the end of 1999, the world fleet of jet powered commercial aircraft included a total of about 13,670 airplanes. That total included 11,994 passenger aircraft with 50 seats or more and 1,676 freighter aircraft. Boeing predicts that by the end of 2019 that fleet will grow to about 31,755 aircraft including 28,558 passenger aircraft with 50 seats or more and 3,197 freighter aircraft. To support this growth, Boeing received 502 new aircraft orders in the first ten months of 2000 and Airbus received 427. Airline economics will also require aircraft to be retained in active commercial service for longer periods than previously expected. Consequently, the market for environmentally acceptable and economically viable aircraft will continue to be robust and such aircraft will command relatively high residual values. In general, aircraft values have tended to grow at about 3% per year. Lease rates should also grow at similar rates. However, such rates are subject to variation depending on the state of the world economy and the resultant demand for air transportation services. (b) Commuter aircraft Regional jets have been well received in the commuter market. This has resulted in an increase in demand for regional jets at the expense of turboprops. Turboprop manufacturers are cutting back on production due to this reduced demand. The uncertainty of the future market for turboprops has an adverse effect on turboprop lease rates and residual values. The Partnership leases one commuter turboprop containing 50 seats. This aircraft flies in North America, which continues to be the fastest-growing market for commuter aircraft in the world. The Partnership's aircraft possess unique performance capabilities, compared to other turboprops, which allow them to readily operate at maximum payloads from unimproved surfaces, hot and high runways, and short runways. The Partnership's turboprop remained on lease throughout 2000 and its lease rate was constant. However as this aircraft was reclassed as an asset held for sale by the end of 2000 the sale price will be affected due to the decrease in residual value for all turboprops. (2) Railcars (a) Pressurized Tank Railcars Pressurized tank cars are used to transport liquefied petroleum gas (natural gas) and anhydrous ammonia (fertilizer). The United States (U.S.) markets for natural gas are industrial applications (46% of estimated demand in 2000), residential use (21%), electrical generation (15%), commercial applications (15%), and transportation (3%). Natural gas consumption is expected to grow over the next few years as most new electricity generation capacity planned for is expected to be natural gas fired. Within the fertilizer industry, demand is a function of several factors, including the level of grain prices, the status of government farm subsidy programs, amount of farming acreage and mix of crops planted, weather patterns, farming practices, and the value of the U.S. dollar. Population growth and dietary trends also play an indirect role. On an industry wide basis, North American carloadings of the commodity group that includes petroleum and chemicals increased 1% in 2000, compared to 1999. Consequently, demand for pressurized tank cars remained relatively constant during 2000, with utilization of this type of railcar within the Partnership remaining above 98%. While renewals of existing leases continue at similar rates, some cars continue to be renewed for "winter only" terms of approximately six months. As a result, there are many pressurized tank cars up for renewal in the spring of 2001. (b) Woodchip Gondolas Railcars These railcars are used to transport woodchips from sawmills to pulp mills, where the woodchips are converted into pulp. Thus, demand for woodchip cars is directly related to demand for paper, paper products, particleboard, and plywood. In Canada, where the Partnership's woodchip railcars operate, 2000 carloadings of forest products increased 2% over 1999 levels. Over the 2001-04 forecast period, U.S. market pulp suppliers should experience increased global demand and a corresponding increase in domestic sales as product shipments increase about 2% annually over these years. (c) Bulkhead Flat Railcars Bulkhead flatcars are used to transport pulpwood from sawmills to pulp mills. High-grade pulpwood is used to make paper, while low-grade pulpwood is used to make particleboard and plywood. In Canada, where the Partnership's bulkhead flatcars operate for the year, 2000 carloadings of forest products increased 2% over 1999 levels. Over the 2001-04 forecast period, U.S. market pulp suppliers should experience increased global demand and a corresponding increase in domestic sales as product shipments increase about 2% annually over these years. (d) Nonpressurized, General Purpose Tank Railcars These cars are used to transport bulk liquid commodities and chemicals not requiring pressurization, such as certain petroleum products, liquefied asphalt, lubricating oils, molten sulfur, vegetable oils and corn syrup. This car type continued to be in high demand during 2000. The overall health of the market for these types of commodities is closely tied to both the U.S. and global economies, as reflected in movements in the Gross Domestic Product, personal consumption expenditures, retail sales, and currency exchange rates. The manufacturing, automobile, and housing sectors are the largest consumers of chemicals. Within North America, 2000 carloadings of the commodity group that includes chemicals and petroleum products rose 1% over 1999 levels. Utilization of the Partnership's nonpressurized tank cars remained above 98% during 2000. (3) Marine Containers The Partnership's fleet of both standard dry and specialized containers is in excess of twelve years of age, and is generally no longer suitable for use in international commerce, either due to its specific physical condition, or the lessees' preferences for newer equipment. As individual containers are returned from their specific lessees, they are being marketed for sale on an 'as is, where is' basis. The market for such sales, although highly dependent upon the specific location and type of container, has continued to be strong over the last several years, as it relates to standard dry containers. The Partnership has in the last year experienced reduced residual values on the sale of refrigerated containers, due primarily to technological obsolesence associated with this equipment's refrigeration machinery. (E) Government Regulations The use, maintenance, and ownership of equipment are regulated by federal, state, local, or foreign governmental authorities. Such regulations may impose restrictions and financial burdens on the Partnership's ownership and operation of equipment. Changes in government regulations, industry standards, or deregulation may also affect the ownership, operation, and resale of the equipment. Substantial portions of the Partnership's equipment portfolio are either registered or operated internationally. Such equipment may be subject to adverse political, government, or legal actions, including the risk of expropriation or loss arising from hostilities. Certain of the Partnership's equipment is subject to extensive safety and operating regulations, which may require its removal from service or extensive modification of such equipment to meet these regulations, at considerable cost to the Partnership. Such regulations include but are not limited to: (1) the U.S. Department of Transportation's Aircraft Capacity Act of 1990, which limits or eliminates the operation of commercial aircraft in the United States that do not meet certain noise, aging, and corrosion criteria. In addition, under U.S. Federal Aviation Regulations, after December 31, 1999, no person shall operate an aircraft to or from any airport in the contiguous United States unless that airplane has been shown to comply with Stage III noise levels. The Partnership has one Stage II aircraft that does not meet Stage III requirements. As of December 31, 2000, this aircraft was reclassed as asset held for sale. The cost to install a hushkit to meet quieter Stage III requirements is approximately $2.0 million, depending on the type of aircraft. (2) the Montreal Protocol on Substances that Deplete the Ozone Layer and the United States Clean Air Act Amendments of 1990, which call for the control and eventual replacement of substances that have been found to cause or contribute significantly to harmful effects on the stratospheric ozone layer and that are used extensively as refrigerants in refrigerated marine cargo containers. (3) the U.S. Department of Transportation's Hazardous Materials Regulations regulates the classification and packaging requirements of hazardous materials which apply particularly to the Partnership's tank railcars. The Federal Railroad Administration has mandated that effective July 1, 2000, all tank railcars must be re-qualified every ten years from the last test date stenciled on each railcar to insure tank shell integrity. Tank shell thickness, weld seams, and weld attachments must be inspected and repaired if necessary to re-qualify a tank railcar for service. The average cost of this inspection is $1,800 for non-jacketed tank railcars and $3,600 for jacketed tank railcars, not including any necessary repairs. This inspection is to be performed at the next scheduled tank test and every ten years thereafter. The Partnership currently owns 214 non-jacketed tank railcars and 87 jacketed tank railcars of which a total of 10 tank railcars have been inspected with no reportable defects. As of December 31, 2000, the Partnership was in compliance with the above government regulations. Typically, costs related to extensive equipment modifications to meet government regulations are passed on to the lessee of that equipment. ITEM 2. PROPERTIES The Partnership neither owns nor leases any properties other than the equipment it has purchased and its interests in entities that own equipment for leasing purposes. As of December 31, 2000, the Partnership owned a portfolio of transportation and related equipment and an investment in equipment owned by an unconsolidated special-purpose entity (USPE) as described in Item I, Table 1. The Partnership acquired equipment with the proceeds of the Partnership offering of $174.8 million through the first half of 1990, proceeds from the debt financing of $33.0 million and by reinvesting a portion of its operating cash flow in additional equipment. The Partnership maintains its principal office at One Market, Steuart Street Tower, Suite 800, San Francisco, California 94105-1301. All office facilities are provided by FSI without reimbursement by the Partnership. ITEM 3. LEGAL PROCEEDINGS PLM International, (the Company) and various of its wholly owned subsidiaries are defendants in a class action lawsuit filed in January 1997 and which is pending in the United States District Court for the Southern District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) (the court). The named plaintiffs are six individuals who invested in PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII (Fund VII), collectively (the Funds), each a California limited partnership for which the Company's wholly owned subsidiary, PLM Financial Services, Inc. (FSI) acts as the General Partner. The complaint asserts causes of action against all defendants for fraud and deceit, suppression, negligent misrepresentation, negligent and intentional breaches of fiduciary duty, unjust enrichment, conversion, and conspiracy. Plaintiffs allege that each defendant owed plaintiffs and the class certain duties due to their status as fiduciaries, financial advisors, agents, and control persons. Based on these duties, plaintiffs assert liability against defendants for improper sales and marketing practices, mismanagement of the Funds, and concealing such mismanagement from investors in the Funds. Plaintiffs seek unspecified compensatory damages, as well as punitive damages. In June 1997, the Company and the affiliates who are also defendants in the Koch action were named as defendants in another purported class action filed in the San Francisco Superior Court, San Francisco, California, Case No.987062 (the Romei action). The plaintiff is an investor in Fund V, and filed the complaint on her own behalf and on behalf of all class members similarly situated who invested in the Funds. The complaint alleges the same facts and the same causes of action as in the Koch action, plus additional causes of action against all of the defendants, including alleged unfair and deceptive practices and violations of state securities law. In July 1997, defendants filed a petition (the petition) in federal district court under the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims. In October 1997, the district court denied the Company' s petition, but in November 1997, agreed to hear the Company's motion for reconsideration. Prior to reconsidering its order, the district court dismissed the petition pending settlement of the Romei action, as discussed below. The state court action continues to be stayed pending such resolution. In February 1999 the parties to the Koch and Romei actions agreed to settle the lawsuits, with no admission of liability by any defendant, and filed a Stipulation of Settlement with the court. The settlement is divided into two parts, a monetary settlement and an equitable settlement. The monetary settlement provides for a settlement and release of all claims against defendants in exchange for payment for the benefit of the class of up to $6.6 million. The final settlement amount will depend on the number of claims filed by class members, the amount of the administrative costs incurred in connection with the settlement, and the amount of attorneys' fees awarded by the court to plaintiffs' attorneys. The Company will pay up to $0.3 million of the monetary settlement, with the remainder being funded by an insurance policy. For settlement purposes, the monetary settlement class consists of all investors, limited partners, assignees, or unit holders who purchased or received by way of transfer or assignment any units in the Funds between May 23, 1989 and August 30, 2000. The monetary settlement, if approved, will go forward regardless of whether the equitable settlement is approved or not. The equitable settlement provides, among other things, for: (a) the extension (until January 1, 2007) of the date by which FSI must complete liquidation of the Funds' equipment, (b) the extension (until December 31, 2004) of the period during which FSI can reinvest the Funds' funds in additional equipment, (c) an increase of up to 20% in the amount of front-end fees (including acquisition and lease negotiation fees) that FSI is entitled to earn in excess of the compensatory limitations set forth in the North American Securities Administrator's Association's Statement of Policy; (d) a one-time repurchase by each of Fund V, Fund VI and Fund VII of up to 10% of that Partnership's outstanding units for 80% of net asset value per unit; and (e) the deferral of a portion of the management fees paid to an affiliate of FSI until, if ever, certain performance thresholds have been met by the Funds. Subject to final court approval, these proposed changes would be made as amendments to each Fund's limited partnership agreement if less than 50% of the limited partners of each Fund vote against such amendments. The equitable settlement also provides for payment of additional attorneys' fees to the plaintiffs' attorneys from Fund funds in the event, if ever, that certain performance thresholds have been met by the Funds. The equitable settlement class consists of all investors, limited partners, assignees or unit holders who on August 30, 2000 held any units in Fund V, Fund VI, and Fund VII, and their assigns and successors in interest. The court preliminarily approved the monetary and equitable settlements in August 2000, and information regarding each of the settlements was sent to class members in September 2000. The monetary settlement remains subject to certain conditions, including final approval by the court following a final fairness hearing. The equitable settlement remains subject to certain conditions, including judicial approval of the proposed amendments and final approval of the equitable settlement by the court following a final fairness hearing. A final fairness hearing was held on November 29, 2000 and the parties await the court's decision. The Company continues to believe that the allegations of the Koch and Romei actions are completely without merit and intends to continue to defend this matter vigorously if the monetary settlement is not consummated. The Company is involved as plaintiff or defendant in various other legal actions incidental to its business. Management does not believe that any of these actions will be material to the financial condition of the Partnership. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Partnership's limited partners during the fourth quarter of its fiscal year ended December 31, 2000. (this space intentionally left blank) PART II ITEM 5. MARKET FOR THE PARTNERSHIP's EQUITY AND RELATED UNITHOLDER MATTERS Pursuant to the terms of the partnership agreement, the General Partner is generally entitled to a 5% interest in the profits, losses and distributions of the Partnership. The General Partner is the sole holder of such interest. Special allocations of income are made to the General Partner equal to the deficit balance, if any, in the capital account of the General Partner. The General Partner's annual allocation of net income will generally be equal to the General Partner's cash distributions paid during the current year. The remaining interests in the profits, losses and distributions of the Partnership are owned, as of December 31, 2000, by the 9,220 holders of units in the Partnership. There are several secondary markets that will facilitate sales and purchases of units. Secondary markets are characterized as having few buyers for limited partnership interests and, therefore, are generally viewed as inefficient vehicles for the sale of units. Presently, there is no public market for the units and none is likely to develop. To prevent the units from being considered publicly traded and thereby to avoid taxation of the Partnership as an association treated as a corporation under the Internal Revenue Code, the units will not be transferable without the consent of the General Partner, which may be withheld at its absolute discretion. The General Partner intends to monitor transfers of units in an effort to ensure that they do not exceed the percentage or number permitted by certain safe harbors promulgated by the Internal Revenue Service. A transfer may be prohibited if the intended transferee is not an U.S. citizen or if the transfer would cause any portion of the units of a "Qualified Plan" as defined by the Employee Retirement Income Security Act of 1974 and Independent Retirement Accounts to exceed the limit allowable. The Partnership may redeem a certain number of units each year. As of December 31, 2000, the Partnership had repurchased a cumulative total of 121,580 units at a cost of $1.6 million. The General Partner does not intend to repurchase any additional units on behalf of the Partnership in the future. (this space intentionally left blank) ITEM 6. SELECTED FINANCIAL DATA Table 2, below, lists selected financial data for the Partnership: TABLE 2 For the Years Ended December 31, (In thousands of dollars, except weighted-average unit amounts) 2000 1999 1998 1997 1996 -------------------------------------------------------------------------- Operating results: Total revenues $ 4,847 $ 14,651 $ 10,768 $ 16,378 $ 22,120 Net gain (loss) on disposition of equipment 303 6,357 (464) 2,830 3,179 Loss on revaluation of equipment 106 -- -- -- -- Equity in net income (loss) of uncon- solidated special-purpose entities 673 2,224 348 2,952 (331) Net income (loss) 897 6,408 (1,127) 2,098 (4,119) At year-end: Total assets $ 12,863 $ 20,185 $ 31,250 $ 46,089 $ 59,009 Total liabilities 729 843 14,683 24,862 34,100 Notes payable -- -- 12,750 21,000 29,250 Cash distribution $ 3,564 $ 3,633 $ 3,533 $ 5,780 $ 7,271 Special cash distribution 4,541 -- -- -- -- Total cash distribution $ 8,105 $ 3,633 $ 3,533 $ 5,780 $ 7,271 Total cash distribution representing a return of capital to the limited partners $ 7,208 $ 0 $ 3,351 $ 3,682 $ 6,908 Per weighted-average limited partnership unit: Net income (loss) $ 0.06 1 $ 0.72 1 $ (0.15)1 $ 0.21 1 $ (0.52)1 Cash distribution $ 0.39 $ 0.40 $ 0.39 $ 0.64 $ 0.80 Special cash distribution 0.50 -- -- -- -- Total cash distribution $ 0.89 $ 0.40 $ 0.39 $ 0.64 $ 0.80 Total cash distribution representing a return of capital to the limited partners $ 0.84 $ N/A $ 0.39 $ 0.43 $ 0.80 1 After reduction of income of $359 ($0.04 per weighted-average depositary unit) in 2000, $138 ($0.02 per weighted-average depositary unit) in 1999, $238 ($0.03 per weighted-average depositary unit) in 1998, $190 ($0.02 per weighted-average depositary unit) in 1997, and $569 ($0.07 per weighted-average depositary unit) in 1996, representing allocations to the General Partner (see Note 1 to the financial statements). ITEM 7 MANAGEMENT's DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (A) Introduction Management's discussion and analysis of financial condition and results of operations relates to the financial statements of PLM Equipment Growth Fund IV (the Partnership). The following discussion and analysis of operations focuses on the performance of the Partnership's equipment in the various segments in which it operates and its effect on the Partnership's overall financial condition. (B) Results of Operations - Factors Affecting Performance (1) Re-leasing Activity and Repricing Exposure to Current Economic Conditions The exposure of the Partnership's equipment portfolio to repricing risk occurs whenever the leases for the equipment expire or are otherwise terminated and the equipment must be remarketed. Major factors influencing the current market rate for the Partnership's equipment include supply and demand for similar or comparable types of transport capacity, desirability of the equipment in the leasing market, market conditions for the particular industry segment in which the equipment is to be leased, overall economic conditions, and various regulations concerning the use of the equipment. Equipment that is idle or out of service between the expiration of one lease and the assumption of a subsequent lease can result in a reduction of contribution to the Partnership. The Partnership experienced re-leasing or repricing activity in 2000 primarily in its aircraft, marine container, and railcars portfolios. (a) Aircraft: The Partnership owns a Boeing 737-200 Stage II aircraft that has been off-lease throughout 2000 and 1999. This aircraft was reclassed as asset held for sale as of December 31, 2000. (b) The Partnership's remaining marine container portfolio operates in utilization-based leasing pools and, as such, is exposed to considerable repricing activity. The Partnership's marine container contributions declined from 1999 to 2000 due to equipment sales during 1999 and 2000. (c) Railcars: The Partnership's railcar contributions declined from 1999 to 2000, due to equipment sales during 1999 and 2000. (2) Equipment Liquidations and Nonperforming Lessees Liquidation of Partnership equipment and investments in unconsolidated special-purpose entities (USPEs) represents a reduction in the size of the equipment portfolio, and will result in reduction of contributions to the Partnership. Lessees not performing under the terms of their leases, either by not paying rent, not maintaining or operating the equipment in accordance with the conditions of the leases, or other possible departures from the lease terms, can result not only in reductions in net contribution, but also may require the Partnership to assume additional costs to protect its interests under the leases, such as repossession or legal fees. The Partnership experienced the following in 2000: (a) Liquidations: During 2000, the Partnership disposed of marine containers, railcars, and trailers, for proceeds of $1.9 million. (b) Nonperforming lessees: In 1997, the Partnership repossessed one aircraft from a lessee that did not comply with the terms of the lease agreement. The Partnership incurred legal fees, repossession costs, and repair costs associated with this aircraft. In addition, the Partnership wrote off all outstanding receivables from this lessee. This aircraft remained off lease throughout 1999 and 2000 and was reclassed as assets held for sale as of December 31, 2000. (3) Equipment Valuation In accordance with Financial Accounting Standards Board statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", the General Partner reviews the carrying value of the Partnership's equipment portfolio at least quarterly, and whenever circumstances indicate that the carrying value of an asset may not be recoverable in relation to expected future market conditions, for the purpose of assessing the recoverability of the recorded amounts. If projected undiscounted future cash flows and fair value are lower than the carrying value of the equipment, a loss on revaluation is recorded. A $0.1 million loss on revaluation was recorded during 2000. No reductions to the equipment carrying values were required for the years ended December 31, 1999 or 1998. (C) Financial Condition -- Capital Resources, Liquidity, and Unit Redemption Plan The General Partner purchased the Partnership's initial equipment portfolio with capital raised from its initial equity offering and permanent debt financing. No further capital contributions from the limited partners are permitted under the terms of the Partnership's limited partnership agreement. As of December 31, 2000, the Partnership had no outstanding indebtedness. The Partnership relies on operating cash flow and proceeds from sale of equipment to meet its operating obligations and make cash distributions to the limited partners. For the year ended December 31, 2000, the Partnership generated $3.3 million in operating cash (net cash provided by operating activities plus non-liquidating distributions from USPEs) to meet its operating obligations and make distributions (total of $8.1 million in 2000) to the partners, but also used undistributed available cash from prior periods including proceeds from the sale of equipment of approximately $4.8 million. During the year ended December 31, 2000, the Partnership sold or disposed of marine containers, railcars, and trailers for aggregate proceeds of $1.9 million. Accounts payable and accrued expenses decreased $0.1 million due to the reduction of the equipment portfolio. Investment in unconsolidated special-purpose entities (USPE) decreased $0.3 million. The decrease was due to a $0.9 million distribution to the Partnership, partially offset by net income from the USPE of $0.7 million during 2000. The Partnership is in its active liquidation phase. As a result, the size of the Partnership's remaining equipment portfolio and, in turn, the amount of net cash flows from operations will continue to become progressively smaller as assets are sold. Although distribution levels may be reduced, significant asset sales may result in potential special distributions to the partners. Pursuant to the terms of the limited partnership agreement, beginning January 1, 1993, if the number of units made available for purchase by limited partners in any calendar year exceeds the number that can be purchased with reinvestment plan proceeds during any calendar year, then the Partnership may redeem up to 2% of the outstanding units each year, subject to certain terms and conditions. The purchase price to be offered for such units is to be equal to 110% of the unrecovered principal attributed to the units. Unrecovered principal is defined as the excess of the capital contribution attributable to a unit over the distributions from any source paid with respect to that unit. The Partnership does not intend to repurchase any units in the future. The General Partner has not planned any expenditures, nor is it aware of any contingencies that would cause it to require any additional capital to that mentioned above. (D) Results of Operations - Year-to-Year Detailed Comparison (1) Comparison of Partnership's Operating Results for the Years Ended December 31, 2000 and 1999 (a) Owned Equipment Operations Lease revenues less direct expenses (defined as repair and maintenance, equipment operating, and asset-specific insurance expenses) on owned equipment decreased during the year ended December 31, 2000, compared to the same period of 1999. Gains or losses from the sale of equipment and certain expenses such as depreciation and amortization and general and administrative expenses relating to the operating segments (see Note 5 to the audited financial statements), are not included in the owned equipment operation discussion because they are more indirect in nature, not a result of operations but more the result of owning a portfolio of equipment. The following table presents lease revenues less direct expenses by segment (in thousands of dollars): For the Years Ended December 31, 2000 1999 --------------------------- Railcars $ 2,202 $ 2,448 Aircraft 648 1,061 Trailers 428 786 Marine containers 72 138 Marine vessel -- (81) Railcars: Railcar lease revenues and direct expenses were $2.9 million and $0.7 million, respectively, in 2000, compared to $3.1 million and $0.7 million, respectively, during 1999. The decrease in railcar contribution in 2000 was due to the sale of railcars in 2000 and 1999. Aircraft: Aircraft lease revenues and direct expenses were $0.8 million and $0.1 million, respectively, for the year ended December 31, 2000, compared to $2.6 million and $1.5 million, respectively, during the same period of 1999. The decrease in aircraft contribution in 2000 was due to the disposition of aircraft in 1999. Trailers: Trailer lease revenues and direct expenses were $0.6 million and $0.2 million, respectively, for the year ended December 31, 2000, compared to $1.1 million and $0.3 million, respectively, during the same period of 1999. The decrease in trailer contribution in 2000 was due to the disposition of trailers in 1999 and 2000. All of the Partnership's trailers were sold during 2000. Marine containers: Marine container lease revenues and direct expenses were $0.1 million and $6,000, respectively, in 2000, compared to $0.1 million and $5,000, respectively, during 1999. The decrease in marine containers contribution in 2000 was due to the disposition of marine containers in 1999 and 2000. Marine vessel: Marine vessel lease revenues and direct expenses were zero in 2000, compared to $1.1 million and $1.1 million, respectively, in 1999. The decrease in lease revenues and direct expenses in 2000, compared to 1999, was due to the sale of the remaining marine vessel in the fourth quarter of 1999. (b) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $3.5 million for the year ended December 31, 2000, decreased from $6.7 million for the same period in 1999. The significant variances are explained as follows: (i) A $2.0 million decrease in depreciation and amortization expenses from 1999 levels resulted from the sale of certain assets during 2000 and 1999. (ii)A $1.0 million decrease in interest expense was due to the repayment of the Partnership's debt in 1999. (iii) A $0.2 million decrease in general and administrative expenses from 1999 levels was due to the reduction of the size of the Partnership's equipment portfolio. (iv)A $0.2 million decrease in management fees to an affiliate reflects the lower levels of lease revenues on owned equipment in 2000, compared to 1999. (v) A $0.1 million increase in bad debt expenses in 2000 compared to 1999 was due to fewer recoveries of doubtful accounts in 2000 compared to 1999. $0.2 million was collected from unpaid invoices that had previously been reserved for as bad debts during 2000 compared to the collection of $0.3 million in 1999. (vi)An increase of $0.1 million in revaluation of equipment was due to the loss on revaluation of trailer equipment in 2000. A similar loss did not occur in 1999. (c) Net Gain on Disposition of Owned Equipment The net gain on disposition of equipment in 2000 totaled $0.3 million, which resulted from the sale of railcars, trailers and marine containers with an aggregate net book value of $1.6 million, for aggregate proceeds of $1.9 million. The net gain on disposition of equipment in 1999 totaled $6.4 million that resulted from the sale of a marine vessel, aircraft, railcars, trailers and marine containers with an aggregate net book value of $8.8 million, for aggregate proceeds of $15.2 million (d) Equity in Net Income of Unconsolidated Special Purpose Entities Net income generated from the operation of jointly-owned assets accounted for under the equity method is shown in the following table by equipment type (in thousands of dollars): For the Years Ended December 31, 2000 1999 --------------------------- Aircraft $ 538 $ 470 Marine vessels 135 1,754 --------------------------- Equity in Net Income of USPEs $ 673 $ 2,224 =========================== Aircraft: As of December 31, 2000 and 1999, the Partnership had an interest in a trust that owns two commercial aircraft on direct finance lease. Aircraft revenues and expenses were $0.5 million and a credit of $3,000, respectively, for the year ended December 31, 2000, compared to $0.6 million and $0.1 million, respectively, during the same period in 1999. The aircraft revenues decreased $0.1 million due to decreasing finance lease receivable based on lease payments schedules. The Partnership's share of expenses decreased $0.1 million due to the increase in bad debt expense to reflect the General Partner's evaluation of the collectibility of receivables due from the aircraft's lessee. Marine vessel: As of December 31, 2000, the Partnership had no remaining interests in entities that owned marine vessels. During the year ended December 31, 2000, marine vessel revenues of $0.1 million resulted from an insurance settlement. During the year ended December 31, 1999, lease revenues of $1.1 million and the gain of $1.9 million from the sale of the Partnership's interest in an entity that owned a marine vessel were offset by depreciation, direct and administrative expenses of $1.2 million. The decrease in income from an entity that owned marine vessels was due to the sale of the Partnership's interest in an entity that owned a marine vessel in 1999. (e) Net Income As a result of the foregoing, the Partnership's net income was $0.9 million for the year ended December 31, 2000, compared to $6.4 million during the same period of 1999. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the year ended December 31, 2000 is not necessarily indicative of future periods. In the year ended December 31, 2000, the Partnership distributed $7.7 million to the limited partners, or $0.89 per weighted-average limited partnership unit. (2) Comparison of Partnership's Operating Results for the Years Ended December 31, 1999 and 1998 (a) Owned Equipment Operations Lease revenues less direct expenses (defined as repair and maintenance, equipment operating, and asset-specific insurance expenses) on owned equipment decreased during the year ended December 31, 1999, compared to the same period of 1998. The following table presents lease revenues less direct expenses by segment (in thousands of dollars): For the Years Ended December 31, 1999 1998 ---------------------------- Railcars $ 2,448 $ 2,607 Aircraft 1,061 3,038 Trailers 786 1,132 Marine containers 138 712 Marine vessel (81) 623 Railcars: Railcar lease revenues and direct expenses were $3.1 million and $0.7 million, respectively, in 1999, compared to $3.5 million and $0.9 million, respectively, during 1998. The decrease in railcar contribution in 1999 was due to the sale or disposition of railcars in 1998 and 1999. Aircraft: Aircraft lease revenues and direct expenses were $2.6 million and $1.5 million, respectively, for the year ended December 31, 1999, compared to $3.5 million and $0.4 million, respectively, during the same period of 1998. Lease revenue decreased in 1999, compared to the same period in 1998 due to the sale of aircraft in 1999. Direct expenses increased due to higher costs incurred for repairs on an off-lease aircraft in 1999, when compared to the same period in 1998. Trailers: Trailer lease revenues and direct expenses were $1.1 million and $0.3 million, respectively, for the year ended December 31, 1999, compared to $1.6 million and $0.4 million, respectively, during the same period of 1998. During the year ended December 31, 1999, certain dry trailers were in the process of transitioning to a new PLM-affiliated short-term rental facility specializing in this type of trailer causing lease revenues for this group of trailers to decrease $0.1 million when compared to the same period of 1998. In addition, lease revenue decreased $0.4 million due to sales and dispositions of trailers during 1999 and 1998. Trailer repairs and maintenance decreased $0.1 million primarily due to required repairs during 1998 that were not needed during the same period of 1999. Marine containers: Marine container lease revenues and direct expenses were $0.1 million and $5,000, respectively, in 1999, compared to $0.7 million and $8,000, respectively, during 1998. Marine container contributions decreased $0.2 million due to the disposition of containers in 1998 and 1999. In addition, marine container contributions decreased $0.4 million due to a group of containers being off lease during 1999 which were on-lease for all of 1998. Marine vessel: Marine vessel lease revenues and direct expenses were $1.1 million and $1.1 million, respectively, in 1999, compared to $1.7 million and $1.0 million, respectively, in 1998. Marine vessel contribution decreased in 1999, compared to 1998, due to the sale of the remaining marine vessel in the fourth quarter of 1999. Direct expenses increased in 1999 due to higher operating expenses compared to the same period in 1998. (b) Indirect Expenses Related to Owned Equipment Operations Total indirect expenses of $6.7 million for the year ended December 31, 1999, decreased from $9.3 million for the same period in 1998. The significant variances are explained as follows: (i) A $1.5 million decrease in depreciation and amortization expenses from 1998 levels resulted from an approximately $0.6 million decrease due to the sale of certain assets during 1999 and 1998 and an approximately $0.9 million decrease resulting from the use of the double-declining balance depreciation method which results in greater depreciation the first years an asset is owned. (ii)A $0.6 million decrease in interest expense was due to a decrease of $0.7 million resulting from lower average borrowings outstanding during 1999, compared to 1998. This decrease was offset by an increase in interest expense of $0.1 million as a result of the prepayment penalty. In the third quarter of 1999, the Partnership paid the regularly scheduled annual principal payment of $8.3 million of the outstanding debt. In addition, in December 1999 the Partnership prepaid the remaining principal balance of $4.5 million. (iii) A $0.3 million decrease in bad debt expenses in 1999 compared to 1998 was primarily due to the collection of $0.3 million from unpaid invoices in 1999 that had previously been reserved for as bad debts. (iv)A $0.1 million decrease in management fees to an affiliate that reflects the lower levels of lease revenues on owned equipment in 1999, when compared to 1998. (c) Net Gain (Loss) on Disposition of Owned Equipment The net gain on disposition of equipment in 1999 totaled $6.4 million, which resulted from the sale of a marine vessel, aircraft, railcars, trailers and marine containers with an aggregate net book value of $8.8 million, for aggregate proceeds of $15.2 million. In 1998, the loss on disposition of equipment totaled $0.5 million, which resulted from the sale of trailers with a net book value of $1.4 million, for proceeds of $0.9 million. In addition, the Partnership sold or disposed of marine containers and railcars with an aggregate net book value of $0.6 million, for aggregate proceeds of $0.6 million. (d) Equity in Net Income of Unconsolidated Special Purpose Entities Net income (loss) generated from the operation of jointly-owned assets accounted for under the equity method is shown in the following table by equipment type (in thousands of dollars): For the Years Ended December 31, 1999 1998 ---------------------------- Marine vessels $ 1,754 $ (306) Aircraft 470 654 ---------------------------- Equity in Net Income of USPEs $ 2,224 $ 348 ============================ Marine vessel: During the year ended December 31, 1999, lease revenues of $1.1 million and the gain from the sale of the Partnership's interest in an entity owning a marine vessel of $1.9 million sold in the fourth quarter of 1999 were offset by depreciation, direct and administrative expenses of $1.2 million. During the year ended December 31, 1998, revenues of $1.2 million were offset by depreciation, direct and administrative expenses of $1.5 million. Direct expenses decreased $0.1 million due to lower required scheduled drydock expenses in 1999 compared to 1998. In addition, direct expenses decreased $0.1 million due to certain repairs required in 1998 that were not necessary in 1999. Also, expenses decreased $0.1 million for the year ended December 31, 1999 compared to the same period in 1998, due to lower depreciation expense as a result of the double declining-balance method of depreciation which results in greater depreciation in the first years an asset is owned. Aircraft: As of December 31, 1999 and 1998, the Partnership had an interest in a trust that owns two commercial aircraft on direct finance lease. Aircraft revenues and expenses were $0.6 million and $0.1, respectively, for the year ended December 31, 1999, compared to $0.6 million and $0, respectively, during the same period in 1998. The Partnership's share of expenses increased $0.1 million due to the increase in bad debt expense to reflect the General Partner's evaluation of the collectibility of receivables due from the aircraft's lessee. (e) Net Income (Loss) As a result of the foregoing, the Partnership's net income was $6.4 million for the year ended December 31, 1999, compared to a net loss of $1.1 million during the same period of 1998. The Partnership's ability to operate and liquidate assets, secure leases, and re-lease those assets whose leases expire is subject to many factors, and the Partnership's performance in the year ended December 31, 1999 is not necessarily indicative of future periods. In the year ended December 31, 1999, the Partnership distributed $3.5 million to the limited partners, or $0.40 per weighted-average limited partnership unit. (E) Geographic Information Certain of the Partnership's equipment operates in international markets. Although these operations expose the Partnership to certain currency, political, credit, and economic risks, the General Partner believes these risks are minimal or has implemented strategies to control the risks. Currency risks are at a minimum because all invoicing, with the exception of a small number of railcars operating in Canada, is conducted in U.S. dollars. Political risks are minimized generally through the avoidance of operations in countries that do not have a stable judicial system and established commercial business laws. Credit support strategies for lessees range from letters of credit supported by U.S. banks to cash deposits. Although these credit support mechanisms generally allow the Partnership to maintain its lease yield, there are risks associated with slow-to-respond judicial systems when legal remedies are required to secure payment or repossess equipment. Economic risks are inherent in all international markets, and the General Partner strives to minimize this risk with market analysis prior to committing equipment to a particular geographic area. Refer to Note 6 to the audited financial statements for information on the revenues, net income (loss), and net book value of equipment in various geographic regions. Revenues and net operating income by geographic region are impacted by the time period the asset is owned and the useful life ascribed to the asset for depreciation purposes. Net income (loss) from equipment is significantly impacted by depreciation charges, which are greatest in the early years of ownership due to the use of the double-declining balance method of depreciation. The relationships of geographic revenues, net income (loss), and net book value of equipment are expected to significantly change in the future as assets come off lease and decisions are made to either redeploy the assets in the most advantageous geographic location, or sell the assets. An explanation of the current relationships is presented below. The Partnership's owned equipment on lease to United States (U.S.)-domiciled lessees consists of trailers and railcars. During 2000, U.S. lease revenues accounted for 21% of the total lease revenues from wholly and partially owned equipment. U.S. operations resulted in a net loss of $0.5 million. The Partnership's owned equipment on lease to Canadian-domiciled lessees consists of railcars and aircraft. During 2000, Canadian lease revenues accounted for 77% of the total lease revenues from wholly and partially owned equipment. Canadian operations generated a net income of $1.3 million. The Partnership's owned equipment on lease to lessees in the rest of the world consisted of marine containers. During 2000, lease revenues for these lessees accounted for 2% of the total lease revenues from wholly and partially owned equipment. Net loss from this region was $0.1 million. (F) Inflation Inflation had no significant impact on the Partnership's operations during 2000, 1999, or 1998. (G) Forward-Looking Information Except for historical information contained herein, the discussion in this Form 10-K contains forward-looking statements that involve risks and uncertainties, such as statements of the Partnership's plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-K should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-K. The Partnership's actual results could differ materially from those discussed here. (H) Outlook for the Future The Partnership is in its active liquidation phase. The General Partner is seeking to selectively re-lease or sell assets as the existing leases expire. Sale decisions will cause the operating performance of the Partnership to decline over the remainder of its life. The General Partner anticipates that the liquidation of Partnership assets will be completed by the end of the year 2001. Several factors may affect the Partnership's operating performance in the year 2001, including changes in the markets for the Partnership's equipment and changes in the regulatory environment in which that equipment operates. Liquidation of the Partnership's equipment and its investment in a USPE will cause a reduction in the size of the equipment portfolio and may result in a reduction of contribution to the Partnership. Other factors affecting the Partnership's contribution in the year 2001 include: 1. One of the Partnership's aircraft has been off-lease for approximately three years. This Stage II aircraft required extensive repairs and maintenance and the Partnership has had difficulty selling its aircraft. This aircraft was reclassed to an asset held for sale as of December 31, 2000. 2. The Partnership's fleet of both standard dry and specialized marine containers is in excess of twelve years of age and is generally no longer suitable for use in international commerce either due to its specific physical condition, or lessees preferences for newer equipment. Demand for the Partnership's marine containers will continue to be weak due to the age of the fleet. 3. The softening in the railcars market has lead to lower utilization and lower contribution to the Partnership as existing leases expire and renewal leases are negotiated. The ability of the Partnership to realize acceptable lease rates on its equipment in the different equipment markets is contingent on many factors, such as specific market conditions and economic activity, technological obsolescence, and government or other regulations. The General Partner continually monitors both the equipment markets and the performance of the Partnership's equipment in these markets. The General Partner may make an evaluation to reduce the Partnership's exposure to equipment markets in which it determines that it cannot operate equipment and achieve acceptable rates of return. The Partnership intends to use cash flow from operations and proceeds from disposition of equipment to satisfy its operating requirements, maintain working capital reserves, and pay cash distributions to the investors. Several other factors may affect the Partnership's operating performance in the year 2001, including changes in the markets for the Partnership's equipment and changes in the regulatory environment in which that equipment operates. (1) Repricing Risk Certain of the Partnership's marine containers and railcars will be remarketed in 2001 as existing leases expire, exposing the Partnership to some repricing risk/opportunity. Additionally, the Partnership entered its liquidation phase on January 1, 1999 and has commenced an orderly liquidation of the Partnership's assets. In either case, the General Partner intends to sell equipment at prevailing market rates; however, the General Partner cannot predict these future rates with any certainty at this time, and cannot accurately assess the effect of such activity on future Partnership performance. (2) Impact of Government Regulations on Future Operations The General Partner operates the Partnership's equipment in accordance with current applicable regulations (see Item 1, Section E, Government Regulations). However, the continuing implementation of new or modified regulations by some of the authorities mentioned previously, or others, may adversely affect the Partnership's ability to continue to own or operate equipment in its portfolio. Additionally, regulatory systems vary from country to country, which may increase the burden to the Partnership of meeting regulatory compliance for the same equipment operated between countries. Ongoing changes in the regulatory environment, both in the United States and internationally, cannot be predicted with any accuracy and preclude the General Partner from determining the impact of such changes on Partnership operations, or sale of equipment. Under U.S. Federal Aviation Regulations, after December 31, 1999, no person shall operate an aircraft to or from any airport in the contiguous United States unless that airplane has been shown to comply with Stage III noise levels. The Partnership has Stage II aircraft that does not meet Stage III requirements. As of December 31, 2000, this aircraft was reclassed to an asset held for sale. Furthermore, the Federal Railroad Administration has mandated that effective July 1, 2000, all tank railcars must be re-qualified every ten years from the last test date stenciled on each railcar to insure tank shell integrity. Tank shell thickness, weld seams, and weld attachments must be inspected and repaired if necessary to re-qualify a tank railcar for service. The average cost of this inspection is $1,800 for non-jacketed tank railcars and $3,600 for jacketed tank railcars, not including any necessary repairs. This inspection is to be performed at the next scheduled tank test and every ten years thereafter. The Partnership currently owns 214 non-jacketed tank railcars and 87 jacketed tank railcars of which a total of 10 tank railcars have been inspected with no reportable defects. (3) Distributions During the active liquidation phase, the Partnership will use operating cash flow and proceeds from the sale of equipment to meet its operating obligations, and make distributions to the partners. Although the General Partner intends to maintain a sustainable level of distributions prior to final liquidation of the Partnership, actual Partnership performance and other considerations may require adjustments to then-existing distribution levels. In the long term, changing market conditions and used equipment values preclude the General Partner from accurately determining the impact of future re-leasing activity and equipment sales on Partnership performance and liquidity. Since the Partnership has entered the active liquidation phase, the size of the Partnership's remaining equipment portfolio and, in turn, the amount of net cash flows from operations will continue to become progressively smaller as assets are sold. Although distribution levels may be reduced, significant asset sales may result in special distributions to unitholders. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership's primary market risk exposure is that of currency devaluation risk. During 2000, 79% of the Partnership's total lease revenues from wholly- and partially-owned equipment came from non-United States domiciled lessees. Most of the leases require payment in United States (U.S.) currency. If these lessees currency devalues against the U.S. dollar, the lessees could potentially encounter difficulty in making the U.S. dollar denominated lease payment. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements for the Partnership are listed in the Index to Financial Statements included in Item 14(a) of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. (This space intentionally left blank.) PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PLM FINANCIAL SERVICES, INC. As of the date of this annual report, the directors and executive officers of PLM Financial Services, Inc. (and key executive officers of its subsidiaries) are as follows: Name Age Position - ------------------------ ------------ ------------------------------------------------------------------ Stephen M. Bess 55 President, PLM Financial Services, Inc., PLM Investment Management, Inc. and PLM Transportation Equipment Corporation, Director of PLM Financial Services, Inc. Richard K Brock 38 Vice President and Chief Financial Officer, PLM Financial Services, Inc., PLM Investment Management, Inc. and PLM Transportation Equipment Corporation, Director of PLM Financial Services, Inc. Susan C. Santo 38 Vice President, Secretary, and General Counsel, PLM Financial Services, Inc., Director of PLM Financial Services, Inc. Stephen M. Bess was appointed a Director of PLM Financial Services, Inc. in July 1997. Mr. Bess has served as President of PLM Investment Management, Inc., an indirect wholly-owned subsidiary of PLM International, since August 1989, and as an executive officer of certain other of PLM International's subsidiaries or affiliates since 1982. Richard K Brock was appointed a Director of PLM Financial Services, Inc. in October 1, 2000. Mr. Brock was appointed as Vice President and Chief Financial Officer of PLM International and PLM Financial Services, Inc. in January 2000, having served as Acting Chief Financial Officer since June 1999 and as Vice President and Corporate Controller of PLM International and PLM Financial Services, Inc. since June 1997. Prior to June 1997, Mr. Brock served as an accounting manager beginning in September 1991 and as Director of Planning and General Accounting beginning in February 1994. Susan C. Santo was appointed a Director of PLM Financial Services, Inc., a subsidiary of PLM International, in October 1, 2000. Miss Santo was appointed as Vice President, Secretary, and General Counsel of PLM International and PLM Financial Services, Inc. in November 1997. She has worked as an attorney for PLM International and PLM Financial Services, Inc. since 1990 and served as its Senior Attorney from 1994 until her appointment as General Counsel. The directors of PLM Financial Services, Inc. are elected for a one-year term or until their successors are elected and qualified. No family relationships exist between any director or executive officer of PLM Financial Services, Inc., PLM Transportation Equipment Corp., or PLM Investment Management, Inc. ITEM 11. EXECUTIVE COMPENSATION The Partnership has no directors, officers, or employees. The Partnership has no pension, profit sharing, retirement, or similar benefit plan in effect as of December 31, 2000. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (A) Security Ownership of Certain Beneficial Owners The General Partner is generally entitled to a 5% interest in the profits and losses and distributions of the Partnership subject to certain allocations of income. As of December 31, 2000, no investor was known by the General Partner to beneficially own more than 5% of the limited partnership units. (B) Security Ownership of Management Neither the General Partner and its affiliates nor any executive officer or director of the General Partner and its affiliates own any limited partnership units of the Partnership as of December 31, 2000. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with Management and Others During 2000, management fees to PLM Investment Management, Inc. (IMI) were $0.3 million. The Partnership reimbursed PLM Financial Services, Inc. (FSI) and its affiliates $0.4 million for administrative and data processing services performed on behalf of the Partnership in 2000. During 2000, the USPEs paid or accrued the following fees to FSI or its affiliates (based on the Partnership's proportional share of ownership): management fees, $17,000, and administrative and data processing services, $5,000. (this space intentionally left blank) PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) 1. Financial Statements The financial statements listed in the accompanying Index to Financial Statements are filed as part of this Annual Report on Form 10-K. 2. Financial Statements required under Regulation S-X Rule 3-09 The following financial statements are filed as Exhibits of this Annual Report on Form 10K: a. Aero California Trust b. Canadian Air Trust #2 c. Montgomery Partnership (B) Financial Statement Schedules Schedule II Valuation Accounts All other financial statement schedules have been omitted, as the required information is not pertinent to the registrant or is not material, or because the information required is included in the financial statements and notes thereto. (C) Reports on Form 8-K None. (D) Exhibits 4. Limited Partnership Agreement of Registrant, incorporated by reference to the Partnership's Registration Statement on Form S-1 (Reg. No. 33-27746), which became effective with the Securities and Exchange Commission on May 23, 1989. 10.1 Management Agreement between Partnership and PLM Investment Management, Inc., incorporated by reference to the Partnership's Registration Statement on Form S-1 (Reg. No. 33-27746), which became effective with the Securities and Exchange Commission on May 23, 1989. 24. Powers of Attorney. Financial Statements required under Regulation S-X Rule 3-09: 99.1 Aero California Trust. 99.2 Canadian Air Trust #2. 99.3 Montgomery Partnership. 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. The Partnership has no directors or officers. The General Partner has signed on behalf of the Partnership by duly authorized officers. Date: March 12, 2001 PLM EQUIPMENT GROWTH FUND IV PARTNERSHIP By: PLM Financial Services, Inc. General Partner By: /s/ Stephen M. Bess Stephen M. Bess President and Chief Executive Officer By: /s/ Richard K Brock Richard K Brock Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following directors of the Partnership's General Partner on the dates indicated. Name Capacity Date * Stephen M. Bess Director, FSI March 12, 2001 * Richard K Brock Director, FSI March 12, 2001 * Susan C. Santo Director, FSI March 12, 2001 *Susan Santo, by signing her name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission. /s/ Susan C. Santo Susan C. Santo Attorney-in-Fact PLM EQUIPMENT GROWTH FUND IV (A Limited Partnership) INDEX TO FINANCIAL STATEMENTS (Item 14(a)) Page Independent auditors' report 25 Balance sheets as of December 31, 2000 and 1999 26 Statements of operations for the years ended December 31, 2000, 1999, and 1998 27 Statements of changes in partners' capital for the years ended December 31, 2000, 1999, and 1998 28 Statements of cash flows for the years ended December 31, 2000, 1999, and 1998 29 Notes to financial statements 30-41 Independent auditor report on financial statement schedule 42 Schedule II Valuation Accounts 43 INDEPENDENT AUDITORS' REPORT The Partners PLM Equipment Growth Fund IV: We have audited the accompanying financial statements of PLM Equipment Growth Fund IV (the Partnership) as listed in the accompanying index to the financial statements. 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 have 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. As described in Note 1 to the financial statements, PLM Equipment Growth Fund IV, in accordance with the limited partnership agreement, entered its liquidation phase on January 1, 1999 and has commenced an orderly liquidation of the Partnership assets. The Partnership will terminate on December 31, 2009, unless terminated earlier upon sale of all equipment or by certain other events. The General Partner anticipates that the liquidation of Partnership assets will be completed by the end of the year 2001. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PLM Equipment Growth Fund IV 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 SAN FRANCISCO, CALIFORNIA March 2, 2001 PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) BALANCE SHEETS DECEMBER 31, (IN THOUSANDS OF DOLLARS, EXCEPT UNIT AMOUNTS) 2000 1999 --------------------------------- Assets Equipment held for operating leases, at cost $ 18,003 $ 45,468 Less accumulated depreciation (13,436 ) (34,920) --------------------------------- 4,567 10,548 Equipment held for sale 1,931 -- -------------------------------------------------------------------------------------------------------- Net equipment 6,498 10,548 Cash and cash equivalents 2,742 5,587 Restricted cash 272 147 Accounts receivable, less allowance for doubtful accounts of $5 in 2000 and $2,843 in 1999 171 440 Investments in unconsolidated special-purpose entities 3,143 3,415 Prepaid expenses and other assets 37 48 --------------------------------- Total assets $ 12,863 $ 20,185 ================================= Liabilities and partners' capital Liabilities Accounts payable and accrued expenses $ 186 $ 292 Due to affiliates 174 211 Lessee deposits and reserve for repairs 369 340 --------------------------------- Total liabilities 729 843 Partners' capital Limited partners (8,628,420 limited partnership units as of December 31, 2000 and 1999) 12,134 19,342 General Partner -- -- --------------------------------- Total partners' capital 12,134 19,342 --------------------------------- Total liabilities and partners' capital $ 12,863 $ 20,185 ================================= See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, (IN THOUSANDS OF DOLLARS EXCEPT WEIGHTED-AVERAGE UNIT AMOUNTS) 2000 1999 1998 ------------------------------------------- Revenues Lease revenue $ 4,385 $ 8,054 $ 10,981 Interest and other income 159 240 251 Net gain (loss) on disposition of equipment 303 6,357 (464) ------------------------------------------- Total revenues 4,847 14,651 10,768 Expenses Depreciation and amortization 2,320 4,291 5,802 Repairs and maintenance 982 2,838 1,905 Equipment operating expenses 34 797 805 Insurance expense to affiliate -- -- (88) Other insurance expenses 85 102 285 Management fees to affiliate 274 475 622 Interest expense -- 1,016 1,652 General and administrative expenses to affiliates 395 530 584 Other general and administrative expenses 609 691 667 (Recovery of) provision for bad debts (182) (273) 9 Loss on revaluation of equipment 106 -- -- ------------------------------------------- Total expenses 4,623 10,467 12,243 Equity in net income of unconsolidated special-purpose entities 673 2,224 348 ------------------------------------------- Net income (loss) $ 897 $ 6,408 $ (1,127) =========================================== Partners' share of net income (loss) Limited partners $ 492 $ 6,226 $ (1,309) General Partner 405 182 182 ------------------------------------------- Total $ 897 $ 6,408 $ (1,127) =========================================== Limited partners' net income (loss) per weighted-average partnership unit $ 0.06 $ 0.72 $ (0.15) =========================================== Cash distribution $ 3,564 $ 3,633 $ 3,533 Special cash distribution 4,541 -- -- ------------------------------------------- Total distribution $ 8,105 $ 3,633 $ 3,533 =========================================== Per weighted-average partnership unit: Cash distribution $ 0.39 $ 0.40 $ 0.39 Special cash distribution 0.50 -- -- ------------------------------------------- Total distribution per weighted-average partnership unit $ 0.89 $ 0.40 $ 0.39 =========================================== See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 (IN THOUSANDS OF DOLLARS) Limited General Partners Partner Total ------------------------------------------------- Partners' capital as of December 31, 1997 $ 21,227 $ -- $ 21,227 Net income (loss) (1,309) 182 (1,127) Cash distribution (3,351) (182) (3,533) ------------------------------------------------- Partners' capital as of December 31, 1998 16,567 -- 16,567 Net income (loss) 6,226 182 6,408 Cash distribution (3,451) (182) (3,633) ------------------------------------------------- Partners' capital as of December 31, 1999 19,342 -- 19,342 Net income 492 405 897 Cash distribution (3,386) (178) (3,564) Special cash distribution (4,314) (227) (4,541) ------------------------------------------------- Partners' capital as of December 31, 2000 $ 12,134 $ -- $ 12,134 ================================================= See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, (IN THOUSANDS OF DOLLARS) 2000 1999 1998 -------------------------------------------- Operating activities Net income (loss) $ 897 $ 6,408 $ (1,127) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,320 4,291 5,802 Net (gain) loss on disposition of equipment (303) (6,357) 464 Loss on revaluation of equipment 106 -- -- Equity in net income of unconsolidated special- purpose entities (673) (2,224) (348) Changes in operating assets and liabilities: Restricted cash (125) -- 100 Accounts receivable, net 269 458 127 Prepaid expenses and other assets 11 2 8 Accounts payable and accrued expenses (106) (271) (534) Due to affiliates (37) (33) (12) Lessee deposits and reserve for repairs 29 (786) (1,383) -------------------------------------------- Net cash provided by operating activities 2,388 1,488 3,097 -------------------------------------------- Investing activities Purchase of equipment and capital repairs (7) (9) -- Proceeds from disposition of equipment 1,934 15,165 1,449 Distribution from liquidation of unconsolidated special-purpose entities -- 3,807 3,470 Distribution from unconsolidated special-purpose entities 945 741 895 -------------------------------------------- Net cash provided by investing activities 2,872 19,704 5,814 -------------------------------------------- Financing activities Repayment of notes payable -- (12,750) (8,250) Cash distribution paid to limited partners (7,700) (3,451) (3,351) Cash distribution paid to General Partner (405) (182) (182) -------------------------------------------- Net cash used in financing activities (8,105) (16,383) (11,783) -------------------------------------------- Net (decrease) increase in cash and cash equivalents (2,845) 4,809 (2,872) Cash and cash equivalents at beginning of year 5,587 778 3,650 -------------------------------------------- Cash and cash equivalents at end of year $ 2,742 $ 5,587 $ 778 ============================================ Supplemental information Interest paid $ -- $ 1,016 $ 1,652 ============================================ See accompanying notes to financial statements. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 1. BASIS OF PRESENTATION ORGANIZATION PLM Equipment Growth Fund IV, a California limited partnership (the Partnership), was formed on March 25, 1989. The Partnership engages primarily in the business of owning, leasing or otherwise investing in predominately used transportation and related equipment. The Partnership commenced significant operations in September 1989. PLM Financial Services, Inc. (FSI) is the General Partner of the Partnership. FSI is a wholly-owned subsidiary of PLM International, Inc. (PLM International). The Partnership will terminate on December 31, 2009, unless terminated earlier upon sale of all equipment or by certain other events. On January 1, 1999, the General Partner began the liquidation phase of the Partnership with the intent to commence an orderly liquidation of the Partnership assets. During the liquidation phase, the Partnership's assets will continue to be recorded at the lower of carrying amount or fair value less cost to sell. The General Partner anticipates that the liquidation of Partnership assets will be completed by the end of the year 2001. FSI manages the affairs of the Partnership. The cash distributions of the Partnership are generally allocated 95% to the limited partners and 5% to the General Partner (see Net Income (Loss) and Distribution per Limited Partnership Unit, below). Net income is allocated to the General Partner to the extent necessary to cause the General Partner's capital account to equal zero. The General Partner is also entitled to a subordinated incentive fee equal to 7.5% of surplus distributions, as defined in the limited partnership agreement, remaining after the limited partners have received a certain minimum rate of return on, and a return of, their invested capital. The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures 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. OPERATIONS The equipment of the Partnership is managed, under a continuing management agreement, by PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI. IMI receives a monthly management fee from the Partnership for managing the equipment (see Note 2). FSI, in conjunction with its subsidiaries, sells equipment to investor programs and third parties, manages pools of equipment under agreements with the investor programs, and is a general partner of other programs. ACCOUNTING FOR LEASES The Partnership's leasing operations generally consist of operating leases. Under the operating lease method of accounting, the leased asset is recorded at cost and depreciated over its estimated useful life. Rental payments are recorded as revenue over the lease term. Lease origination costs were capitalized and amortized over the term of the lease. DEPRECIATION AND AMORTIZATION Depreciation of transportation equipment held for operating leases is computed on the double-declining balance method, taking a full month's depreciation in the month of acquisition, based upon estimated useful lives of 15 years for railcars and 12 years for most other types of equipment. The depreciation method changes to straight-line when annual depreciation expense using the straight-line method exceeds that calculated by the double-declining balance method. Acquisition fees have been capitalized as part of the cost of the equipment. Major expenditures that are expected to extend the useful lives or reduce future operating expenses of equipment are capitalized and amortized over the estimated remaining life of the equipment. Lease negotiation fees were PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 1. BASIS OF PRESENTATION (continued) DEPRECIATION AND AMORTIZATION (continued) amortized over the initial equipment lease term. Debt placement fees and issuance costs were amortized over the term of the related loan. TRANSPORTATION EQUIPMENT In accordance with the Financial Accounting Standards Board's Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", the General Partner reviews the carrying value of the Partnership's equipment at least quarterly, and whenever circumstances indicate the carrying value of an asset may not be recoverable in relation to expected future market conditions for the purpose of assessing recoverability of the recorded amounts. If projected undiscounted future cash flows and fair value are less than the carrying value of the equipment, a loss on revaluation is recorded. A $0.1 million loss on revaluation was recorded during 2000. No reductions to the equipment carrying values were required for the years ended December 31, 1999 or 1998. Equipment held for operating leases is stated at cost. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES The Partnership has interests in unconsolidated special-purpose entities (USPEs) that own transportation equipment. These interests are accounted for using the equity method. The Partnership's investment in USPEs includes acquisition and lease negotiation fees paid by the Partnership to PLM Transportation Equipment Corporation (TEC), a wholly-owned subsidiary of FSI, and PLM Worldwide Management Services (WMS), a wholly-owned subsidiary of PLM International. The Partnership's interests in USPEs are managed by IMI. The Partnership's equity interest in the net income of USPEs is reflected net of management fees paid or payable to IMI and the amortization of acquisition and lease negotiation fees paid to TEC or WMS. REPAIRS AND MAINTENANCE Repair and maintenance costs related to railcars and trailers are usually the obligation of the Partnership. The reserve accounts for these repairs are included in the balance sheet as lessee deposits and reserve for repairs. Net Income (Loss) and Distribution per Limited Partnership Unit Cash distributions are allocated 95% to the limited partners and 5% to the General Partner. Special allocations of income are made to the General Partner equal to the deficit balance, if any, in the capital account of the General Partner. Cash distributions of the Partnership are generally allocated 95% to the limited partners and 5% to the General Partner and may include amounts in excess of net income. The limited partners' net income (loss) is allocated among the limited partners based on the number of limited partnership units owned by each limited partner and on the number of days of the year each limited partner is in the Partnership. Cash distributions are recorded when paid. Monthly unitholders receive a distribution check 15 days after the close of the previous month's business and quarterly unitholders receive a distribution check 45 days after the close of the quarter. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 1. BASIS OF PRESENTATION (continued) NET INCOME (LOSS) AND DISTRIBUTION PER LIMITED PARTNERSHIP UNIT (continued) Cash distributions to investors in excess of net income are considered a return of capital. Cash distributions to the limited partners of $7.2 million, $0, and $3.4 million, in 2000, 1999, and 1998, respectively, were deemed to be a return of capital. Cash distributions of $0.9 million for 2000, 1999, and 1998, relating to the fourth quarter of that year, were paid during the first quarter of 2001, 2000, and 1999. The Partnership made a special distribution of $4.3 million to the limited partners during 2000. No special distributions were made during 1999 or 1998. NET INCOME (LOSS) PER WEIGHTED-AVERAGE PARTNERSHIP UNIT Net income (loss) per weighted-average Partnership unit was computed by dividing net income (loss) attributable to limited partners by the weighted-average number of Partnership units deemed outstanding during the period. The weighted-average number of Partnership units deemed outstanding during the years ended December 31, 2000, 1999, and 1998 was 8,628,420. CASH AND CASH EQUIVALENTS The Partnership considers highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less as cash equivalents. The carrying amount of cash and cash equivalents approximates fair market value due to the short-term nature of the investments. COMPREHENSIVE INCOME The Partnership's net income (loss) is equal to comprehensive income for the years ended December 31, 2000, 1999, and 1998. RESTRICTED CASH As of December 31, 2000 and 1999, restricted cash represented lessee security deposits held by the Partnership. 2. GENERAL PARTNER AND TRANSACTIONS WITH AFFILIATES An officer of PLM Securities Corp., a wholly-owned subsidiary of the General Partner, contributed $100 of the Partnership's initial capital. Under the equipment management agreement, IMI, subject to certain reductions, receives a monthly management fee attributable to either owned equipment or interests in equipment owned by the USPEs equal to the lesser of (a) the fees that would be charged by an independent third party for similar services for similar equipment or (b) the sum of (i) 5% of the gross lease revenues attributable to equipment that is subject to operating leases, (ii) 2% of the gross lease revenues attributable to equipment that is subject to full payout net leases, and (iii) 7% of the gross lease revenues attributable to equipment for which IMI provides both management and additional services relating to the continued and active operation of program equipment, such as on-going marketing and re-leasing of equipment, hiring or arranging for the hiring of crew or operating personnel for equipment, and similar services. Partnership management fees of $27,000 and $0.1 million were payable as of December 31, 2000 and 1999, respectively. The Partnership's proportional share of the USPE management fees of $9,000 and $25,000 were payable as of December 31, 2000 and 1999, respectively. The Partnership's proportional share of USPE management fees were $17,000, $0.1 million, and $0.1 million during 2000, 1999, and 1998, PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 2. GENERAL PARTNER AND TRANSACTIONS WITH AFFILIATES (continued) respectively. The Partnership reimbursed FSI and its affiliates $0.4 million, $0.5 million, and $0.6 million during 2000, 1999, and 1998, respectively, for data processing expenses and administrative services performed on behalf of the Partnership. The Partnership's proportional share of USPE administrative and data processing expenses was $5,000, $11,000, and $18,000 during 2000, 1999, and 1998, respectively. The Partnership paid $2,000 in 1998 to Transportation Equipment Indemnity Company Ltd. (TEI), an affiliate of the General Partner, which provided marine insurance coverage and other insurance brokerage services. The Partnership's proportional share of USPE marine insurance coverage paid to TEI was $17,000 during 1998. A substantial portion of this amount was paid to third-party reinsurance underwriters or placed in risk pools managed by TEI on behalf of affiliated programs and PLM International, which provide threshold coverages on marine vessel loss of hire and hull and machinery damage. All pooling arrangement funds are either paid out to cover applicable losses or refunded pro rata by TEI. Also, during 1998, the Partnership and the USPEs received a $0.1 million loss-of-hire insurance refund from TEI due to lower claims from the insured Partnership and other insured affiliated programs. In 2000 and 1999, TEI did not provide insurance coverage to the Partnership. These services were provided by an unaffiliated third party. PLM International liquidated TEI in the first quarter of 2000. The Partnership had an interest in certain equipment in conjunction with affiliated programs during 2000, 1999, and 1998 (see Note 4). The balance due to affiliates as of December 31, 2000 and 1999 includes $27,000 and $0.1 million, respectively, due to FSI and its affiliates for management fees and $0.1 million due to affiliated USPEs. 3. EQUIPMENT The components of owned equipment as of December 31, are as follows (in thousands of dollars): 2000 1999 ---------------------------------- Equipment held for operating leases Railcars $ 13,336 $ 13,454 Marine containers 4,667 8,073 Aircraft -- 20,440 Trailers -- 3,501 ---------------------------------- 18,003 45,468 Less accumulated depreciation (13,436) (34,920) ---------------------------------- 4,567 10,548 Equipment held for sale 1,931 -- ---------------------------------- Net equipment $ 6,498 $ 10,548 ================================== Revenues are earned under operating leases. The Partnership's marine containers are leased to operators of utilization-type leasing pools that include equipment owned by unaffiliated parties. In such instances, revenues received by the Partnership consist of a specified percentage of revenues generated by leasing the equipment to sublessees, after deducting certain direct operating expenses of the pooled equipment. Rents for railcars are based on a fixed rate. Lease revenues for trailers that operated in rental yards owned by PLM Rental, Inc. were based on a fixed rate for a specific period of time. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 3. EQUIPMENT (continued) As of December 31, 2000, all owned equipment in the Partnership portfolio was on lease except for an aircraft and 34 railcars with a net book value of $0.7 million. During the first nine months of 2000, trailer equipment was either on lease or operating in PLM-affiliated short-term trailer rental facilities, all the Partnership's trailers were sold on September 30, 2000. As of December 31, 1999, all owned equipment in the Partnership portfolio was either on lease or operating in PLM-affiliated short-term trailer rental facilities, except for an aircraft, 221 marine containers, and seven railcars with a net book value of $2.1 million. During 2000, the Partnership sold or disposed of marine containers, railcars, and trailers, with an aggregate net book value of $1.6 million, for proceeds of $1.9 million. During 1999, the Partnership sold or disposed of a marine vessel, marine containers, railcars, aircraft and trailers, with an aggregate net book value of $8.8 million, for proceeds of $15.2 million. During 2000, the Partnership entered into contracts to sell the Partnership's 737-200 stage II and Dash 8-300 aircraft. Consequently, these two aircraft were reclassed as asset held for sale. There were no assets held for sale as of December 31, 1999. All owned equipment on lease is being accounted for as operating leases. Future minimum rentals receivable under noncancelable operating leases, as of December 31, 2000, for owned equipment during each of the next five years, are approximately $2.0 million in 2001, $1.3 million in 2002, $0.4 million in 2003, $0.1 million in 2004, $36,000 in 2005, and $6,000 thereafter. Per diem and short-term rentals consisting of utilization rate lease payments included in revenue amounted to approximately $0.7 million, $1.2 million, and $2.2 million in 2000, 1999, and 1998, respectively. 4. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES The net investments in USPEs include the following jointly-owned equipment (and related assets and liabilities) as of December 31, (in thousands of dollars): 2000 1999 ------------------------- 35% interest in two Stage II commercial aircraft on a direct finance lease $ 3,143 $ 3,548 50% interest in an entity that owned a bulk carrier -- (133) ------------------------- Net investments $ 3,143 $ 3,415 ========================= As of December 31, 2000 and 1999, all jointly-owned equipment in the Partnership's USPE portfolio was on lease. During 1999, the General Partner sold the Partnership's 50% interest in an entity owning a marine vessel. The Partnership's interest in this entity was sold for proceeds of $3.8 million for its net investment of $1.9 million. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 4. INVESTMENTS IN UNCONSOLIDATED SPECIAL-PURPOSE ENTITIES (continued) The following summarizes the financial information for the special-purpose entities and the Partnership's interests therein as of and for the years ended December 31, (in thousands of dollars): 2000 1999 1998 --------- ---------- ---------- Net Net Net Total Interest of Total Interest of Total Interest of USPEs Partnership USPEs Partnership USPEs Partnership ------------------------- ------------------------------------------------------- Net investments $ 8,981 $ 3,143 $ 9,489 $ 3,415 $ 14,339 $ 5,739 Lease revenues (3) -- 2,106 1,053 4,066 1,233 Net income 1,838 673 4,881 2,224 9,921 348 5. OPERATING SEGMENTS The Partnership operates or operated in five primary operating segments: aircraft leasing, marine container leasing, marine vessel leasing, trailer leasing, and railcar leasing. Each equipment leasing segment engages in short-term to mid-term operating leases to a variety of customers. The General Partner evaluates the performance of each segment based on profit or loss from operations before allocation of certain general and administrative expenses, interest expense and certain other expenses. The segments are managed separately due to different business strategies for each operation. The following tables present a summary of the operating segments (in thousands of dollars): Marine Aircraft Container Trailer Railcar For the Year Ended December 31, 2000 Leasing Leasing Leasing Leasing All 1 Total Other Revenues Lease revenue $ 784 $ 78 $ 635 $ 2,888 $ -- $ 4,385 Interest income and other 3 -- -- -- 156 159 Gain (loss) on disposition of -- 229 87 (13) -- 303 equipment -------------------------------------------------------------- Total revenues 787 307 722 2,875 156 4,847 Costs and expenses Operations support 136 6 207 686 66 1,101 Depreciation and amortization 1,343 364 186 427 -- 2,320 Management fee 16 4 49 205 -- 274 General and administrative expenses 138 1 165 133 567 1,004 Recovery of bad debts (9) -- (143) (30) -- (182) Loss on revaluation of equipment -- -- 106 -- -- 106 -------------------------------------------------------------- Total costs and expenses 1,624 375 570 1,421 633 4,623 -------------------------------------------------------------- Equity in net income of USPEs 538 -- -- -- 135 673 -------------------------------------------------------------- -------------------------------------------------------------- Net income (loss) $ (299) $ (68) $ 152 $ 1,454 $ (342) $ 897 ============================================================== As of December 31, 2000 Total assets $ 5,356 $ 421 $ -- $ 4,302 $ 2,784 $ 12,863 ============================================================== 1 Includes certain interest income and costs not identifiable to a particular segment such as interest and amortization expense and certain operations support and general and administrative expenses PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 5. OPERATING SEGMENTS (continued) Marine Marine Aircraft Container Vessel Trailer Railcar For the Year Ended December 31, 1999 Leasing Leasing Leasing Leasing Leasing All 1 Total Other Revenues Lease revenue $ 2,590 $ 143 $ 1,067 $ 1,122 $ 3,132 $ -- $ 8,054 Interest income and other 37 -- -- -- 26 177 240 Gain (loss) on disposition of 6,312 167 167 (159) (130) -- 6,357 equipment ------------------------------------------------------------------------- Total revenues 8,939 310 1,234 963 3,028 177 14,651 Costs and expenses Operations support 1,529 5 1,148 336 684 35 3,737 Depreciation and amortization 2,409 565 296 326 636 59 4,291 Interest expense -- -- -- -- -- 1,016 1,016 Management fee 104 7 53 89 222 -- 475 General and administrative expenses 253 7 88 282 113 478 1,221 (Recovery of) provision for bad (278) -- -- 1 4 -- (273) debts ------------------------------------------------------------------------- Total costs and expenses 4,017 584 1,585 1,034 1,659 1,588 10,467 ------------------------------------------------------------------------- Equity in net income of USPEs 470 -- 1,754 -- -- -- 2,224 ------------------------------------------------------------------------- Net income (loss) $ 5,392 $ (274) $ 1,403 $ (71) $ 1,369 $ (1,411) $ 6,408 ========================================================================= As of December 31, 1999 Total assets (liabilities) $ 6,873 $ 1,202 $ (133) $ 1,682 $ 4,781 $ 5,780 $ 20,185 ========================================================================= Marine Marine Aircraft Container Vessel Trailer Railcar For the Year Ended December 31, 1998 Leasing Leasing Leasing Leasing Leasing All 1 Total Other Revenues Lease revenue $ 3,484 $ 720 $ 1,666 $ 1,578 $ 3,533 $ -- $ 10,981 Interest income and other 15 -- -- -- 21 215 251 Gain (loss) on disposition of (2) 77 -- (530) (9) -- (464) equipment ------------------------------------------------------------------------- Total revenues 3,497 797 1,666 1,048 3,545 215 10,768 Costs and expenses Operations support 446 8 1,043 446 926 38 2,907 Depreciation and amortization 3,314 699 383 498 846 62 5,802 Interest expense 6 -- -- -- -- 1,646 1,652 Management fee 156 36 83 96 251 -- 622 General and administrative expenses 336 20 26 368 139 362 1,251 (Recovery of) provision for bad (95) -- -- 154 (50) -- 9 debts ------------------------------------------------------------------------- Total costs and expenses 4,163 763 1,535 1,562 2,112 2,108 12,243 ------------------------------------------------------------------------- Equity in net income (loss) of USPEs 654 -- (306) -- -- -- 348 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) $ (12) $ 34 $ (175) $ (514) $ 1,433 $ (1,893) $ (1,127) ========================================================================= As of December 31, 1998 Total assets $ 15,434 $ 2,169 $ 3,727 $ 2,035 $ 5,978 $ 1,907 $ 31,250 ========================================================================= 1 Includes certain interest income and costs not identifiable to a particular segment such as interest and amortization expense and certain operations support and general and administrative expenses PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 6. GEOGRAPHIC INFORMATION The Partnership owns certain equipment that is leased and operated internationally. A limited number of the Partnership's transactions are denominated in a foreign currency. Gains or losses resulting from foreign currency transactions are included in the results of operations and are not material. The Partnership leases or leased its aircraft, railcars, and trailers to lessees domiciled in five geographic regions: the United States, Canada, South Asia, South America, and Mexico. Marine vessels and marine containers are leased to multiple lessees in different regions that operate the marine vessels and marine containers worldwide. The table below sets forth lease revenues by geographic region for the Partnership's owned equipment and investments in USPEs, grouped by domicile of the lessee as of and for the years ended December 31 (in thousands of dollars): Region Owned Equipment Investments in USPEs ------------------------- --------------------------------------- ------------------------------------- 2000 1999 1998 2000 1999 1998 --------------------------------------- ------------------------------------- Canada $ 3,394 $ 2,298 $ 2,698 $ -- $ -- $ -- United States 913 3,683 4,516 -- -- -- South Asia -- -- -- -- -- -- South America -- 863 1,380 -- -- -- Rest of the world 78 1,210 2,387 -- 1,053 1,233 --------------------------------------- ------------------------------------- Lease revenues $ 4,385 $ 8,054 $ 10,981 $ -- $ 1,053 $ 1,233 ======================================= ===================================== The following table sets forth net income (loss) information by region for the owned equipment and investments in USPEs for the years ended December 31 (in thousands of dollars): Region Owned Equipment Investments in USPEs --------------------------------- -------------------------------------- ------------------------------------- 2000 1999 1998 2000 1999 1998 -------------------------------------- ------------------------------------- Canada $ 1,267 $ 1,129 $ 622 $ -- $ -- $ 84 United States (498) 2,584 847 -- -- -- South Asia -- (502) (2,021) -- -- -- South America -- 3,009 805 -- -- -- Mexico -- -- -- 538 470 570 Rest of the world (68) (625) 164 135 1,754 (306) ------------------------------------ ------------------------------------- Regional net income 701 5,595 417 673 2,224 $ 348 Administrative and other (477 ) (1,411) (1,892) -- -- -- -------------------------------------- ------------------------------------- Net income (loss) $ 224 $ 4,184 $ (1,475) $ 673 $ 2,224 $ 348 ====================================== ===================================== PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 6. GEOGRAPHIC INFORMATION (continued) The net book value of these assets as of December 31, are as follows (in thousands of dollars): Region Owned Equipment Investments in USPEs --------------------------- --------------------------------- --------------------------------- 2000 1999 1998 2000 1999 1998 --------------------------------- -------------------------------- Canada $ 4,176 $ 4,799 $ 5,728 $ -- $ -- $ -- United States 1,555 3,401 6,550 -- -- -- South Asia 378 1,202 4,519 -- -- -- South America -- -- 2,770 -- -- -- Mexico -- -- -- 3,143 3,548 3,880 Rest of the world 389 1,146 4,037 -- (133) 1,859 --------------------------------- --------------------------------- Total net book value $ 6,498 $ 10,548 $ 23,604 $ 3,143 $ 3,415 $ 5,739 ================================= ================================= 7. CONCENTRATIONS OF CREDIT RISK Time Air, Inc. accounted for 14% of the consolidated revenues for the year ended December 31, 2000. No other lessee accounted for more than 10% of consolidated lease revenues in 2000. No single lessee accounted for more than 10% of the consolidated revenues for the years ended December 31, 1999 and 1998. In 1999, however, the Partnership sold three aircraft and a marine vessel that the Partnership owned an interest in. The following is a list of the buyers and the percentage of the gain from the sale of the total consolidated revenues: Aircraft Lease Finance IV, Inc. (14%), Fuerza Aerea Del Peru (11%), Triton Aviation Services (10%) and Lisa Navigation Company LLC (10%). As of December 31, 2000 and 1999, the General Partner believes the Partnership had no other significant concentrations of credit risk that could have a material adverse effect on the Partnership. 8. INCOME TAXES The Partnership is not subject to income taxes, as any income or loss is included in the tax returns of the individual Partners. Accordingly, no provision for income taxes has been made in the financial statements of the Partnership. As of December 31, 2000, the federal income tax basis was higher than the financial statement carrying values of certain assets and liabilities by $20.0 million, primarily due to differences in depreciation methods and equipment reserves and the tax treatment of underwriting commissions and syndication costs. 9. CONTINGENCIES PLM International, (the Company) and various of its wholly owned subsidiaries are defendants in a class action lawsuit filed in January 1997 and which is pending in the United States District Court for the Southern District of Alabama, Southern Division (Civil Action No. 97-0177-BH-C) (the court). The named plaintiffs are six individuals who invested in PLM Equipment Growth Fund IV, PLM Equipment Growth Fund V (Fund V), PLM Equipment Growth Fund VI (Fund VI), and PLM Equipment Growth & Income Fund VII (Fund VII), collectively (the Funds), each a California limited partnership for which the Company's wholly owned subsidiary, PLM Financial Services, Inc. (FSI) acts as the General Partner. The complaint asserts causes of action against all defendants for fraud and deceit, suppression, negligent misrepresentation, negligent and intentional breaches of fiduciary duty, unjust enrichment, conversion, and conspiracy. Plaintiffs allege that each defendant owed plaintiffs and the class PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 9. CONTINGENCIES (continued) certain duties due to their status as fiduciaries, financial advisors, agents, and control persons. Based on these duties, plaintiffs assert liability against defendants for improper sales and marketing practices, mismanagement of the Funds, and concealing such mismanagement from investors in the Funds. Plaintiffs seek unspecified compensatory damages, as well as punitive damages. In June 1997, the Company and the affiliates who are also defendants in the Koch action were named as defendants in another purported class action filed in the San Francisco Superior Court, San Francisco, California, Case No.987062 (the Romei action). The plaintiff is an investor in Fund V, and filed the complaint on her own behalf and on behalf of all class members similarly situated who invested in the Funds. The complaint alleges the same facts and the same causes of action as in the Koch action, plus additional causes of action against all of the defendants, including alleged unfair and deceptive practices and violations of state securities law. In July 1997, defendants filed a petition (the petition) in federal district court under the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims. In October 1997, the district court denied the Company's petition, but in November 1997, agreed to hear the Company's motion for reconsideration. Prior to reconsidering its order, the district court dismissed the petition pending settlement of the Romei action, as discussed below. The state court action continues to be stayed pending such resolution. In February 1999 the parties to the Koch and Romei actions agreed to settle the lawsuits, with no admission of liability by any defendant, and filed a Stipulation of Settlement with the court. The settlement is divided into two parts, a monetary settlement and an equitable settlement. The monetary settlement provides for a settlement and release of all claims against defendants in exchange for payment for the benefit of the class of up to $6.6 million. The final settlement amount will depend on the number of claims filed by class members, the amount of the administrative costs incurred in connection with the settlement, and the amount of attorneys' fees awarded by the court to plaintiffs' attorneys. The Company will pay up to $0.3 million of the monetary settlement, with the remainder being funded by an insurance policy. For settlement purposes, the monetary settlement class consists of all investors, limited partners, assignees, or unit holders who purchased or received by way of transfer or assignment any units in the Funds between May 23, 1989 and August 30, 2000. The monetary settlement, if approved, will go forward regardless of whether the equitable settlement is approved or not. The equitable settlement provides, among other things, for: (a) the extension (until January 1, 2007) of the date by which FSI must complete liquidation of the Funds' equipment, (b) the extension (until December 31, 2004) of the period during which FSI can reinvest the Funds' funds in additional equipment, (c) an increase of up to 20% in the amount of front-end fees (including acquisition and lease negotiation fees) that FSI is entitled to earn in excess of the compensatory limitations set forth in the North American Securities Administrator's Association's Statement of Policy; (d) a one-time repurchase by each of Fund V, Fund VI and Fund VII of up to 10% of that Partnership's outstanding units for 80% of net asset value per unit; and (e) the deferral of a portion of the management fees paid to an affiliate of FSI until, if ever, certain performance thresholds have been met by the Funds. Subject to final court approval, these proposed changes would be made as amendments to each Fund's limited partnership agreement if less than 50% of the limited partners of each Fund vote against such amendments. The equitable settlement also provides for payment of additional attorneys' fees to the plaintiffs' attorneys from Fund funds in the event, if ever, that certain performance thresholds have been met by the Funds. The equitable settlement class consists of all investors, limited partners, assignees or unit holders who on August 30, 2000 held any units in Fund V, Fund VI, and Fund VII, and their assigns and successors in interest. The court preliminarily approved the monetary and equitable settlements in August 2000, and information regarding each of the settlements was sent to class members in September 2000. The monetary settlement remains subject to certain conditions, including final approval by the court following a final fairness hearing. The equitable settlement remains subject to certain conditions, PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 9. CONTINGENCIES (continued) including judicial approval of the proposed amendments and final approval of the equitable settlement by the court following a final fairness hearing. A final fairness hearing was held on November 29, 2000 and the parties await the court's decision. The Company continues to believe that the allegations of the Koch and Romei actions are completely without merit and intends to continue to defend this matter vigorously if the monetary settlement is not consummated. The Company is involved as plaintiff or defendant in various other legal actions incidental to its business. Management does not believe that any of these actions will be material to the financial condition of the Partnership. 10. LIQUIDATION AND SPECIAL DISTRIBUTIONS On January 1, 1999, the General Partner began the liquidation phase of the Partnership with the intent to commence an orderly liquidation of the Partnership assets. The General Partner is actively marketing the remaining equipment portfolio with the intent of maximizing sale proceeds. As sale proceeds are received the General Partner intends to periodically declare special distributions to distribute the sale proceeds to the partners. During the liquidation phase of the Partnership the equipment will continue to be leased under operating leases until sold. Operating cash flows, to the extent they exceed Partnership expenses, will continue to be distributed from time to time to partners. The amounts reflected for assets and liabilities of the Partnership have not been adjusted to reflect liquidation values. The equipment portfolio continues to be carried at the lower of depreciated cost or fair value less cost to dispose. Although the General Partner estimates that there will be distributions after liquidation of assets and liabilities, the amounts cannot be accurately determined prior to actual liquidation of the equipment. Any excess proceeds over expected Partnership obligations will be distributed to the Partners throughout the liquidation period. Upon final liquidation, the Partnership will be dissolved. Special distributions totaling $4.5 million were paid in 2000. No special distibutions were paid in 1999 or 1998. The Partnership is not permitted to reinvest proceeds from sales or liquidations of equipment. These proceeds, in excess of operational cash requirements, are periodically paid out to limited partners in the form of special distributions. The sales and liquidations occur because of certain damaged equipment, the determination by the General Partner that it is the appropriate time to maximize the return on an asset through sale of that asset, and, in some leases, the ability of the lessee to exercise purchase options. PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 11. QUARTERLY RESULTS OF OPERATIONS (unaudited) The following is a summary of the quarterly results of operations for the years ended December 31, 2000 (in thousands of dollars, except per share amounts): March June September December 31, 30, 30, 31, Total ---------------------------------------------------------------------------- Operating results: Total revenues $ 1,313 $ 1,238 $ 1,292 $ 1,004 $ 4,847 Net income 518 166 85 128 897 Per weighted-average limited partners unit: Limited partners' net income $ 0.03 $ 0.01 $ 0.01 $ 0.01 $ 0.06 The following is a summary of the quarterly results of operations for the years ended December 31, 1999 (in thousands of dollars, except per share amounts): March June September December 31, 30, 30, 31, Total ---------------------------------------------------------------------------- Operating results: Total revenues $ 2,288 $ 4,302 $ 4,508 $ 3,553 $ 14,651 Net income (loss) (991) 1,089 2,494 3,816 6,408 Per weighted-average limited partners unit: Limited partners' net income (loss) $ (0.12) $ 0.12 $ 0.28 $ 0.44 $ 0.72 12. SUBSEQUENT EVENT During February 2001, the Partnership sold a Boeing 737-200 commercial aircraft with a net book value of $0.4 million which was an asset held for sale as of December 31, 2000. In February 2001, PLM International, the parent of the Partnership, announced that MILPI Acquisition Corp. (MILPI) completed its cash tender offer for the outstanding common stock of PLM International. To date, MILPI has acquired 83% of the common shares outstanding. MILPI will complete its acquisition of PLM International by effecting a merger of MILPI into PLM International under Delaware law. The merger is expected to be completed after MILPI obtains approval of the merger by PLM International's shareholders pursuant to a special shareholders' meeting which is expected to be held during the first half of 2001. Independent Auditors' Report The Partners PLM Equipment Growth Fund IV: Under date of March 2, 2001, we reported on the balance sheets of PLM Equipment Growth Fund IV as of December 31, 2000 and 1999, and the related statements of income, changes in partners' capital, and cash flows for each of the years in the three-year period ended December 31, 2000, as contained in the 2000 annual report to stockholders. These financial statements and our report thereon are incorporated by reference in the 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 as listed in the accompanying index. 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 San Francisco, CA March 2, 2001 SCHEDULE II PLM EQUIPMENT GROWTH FUND IV (A LIMITED PARTNERSHIP) VALUATION AND QUALIFYING ACCOUNTS YEAR ENDED DECEMBER 31, 2000, 1999, AND 1998 (IN THOUSANDS OF DOLLARS) Additions Balance at Charged to Balance at Beginning of Cost and Close of Year Expense Deductions Year ---------------- ---------------- -------------- ------------- Year Ended December 31, 2000 Allowance for Doubtful Accounts $ 2,843 $ -- $ (2,838 ) $ 5 ====================================================================== Year Ended December 31, 1999 Allowance for Doubtful Accounts $ 3,126 $ 5 $ (288 ) $ 2,843 ====================================================================== Year Ended December 31, 1998 Allowance for Doubtful Accounts $ 3,332 $ 9 $ (215 ) $ 3,126 ====================================================================== PLM EQUIPMENT GROWTH FUND IV INDEX OF EXHIBITS EXHIBIT Page 4. Limited Partnership Agreement of Registrant * 10.1 Management Agreement between Registrant and * PLM Investment Management, Inc. 24. Powers of Attorney 45 - 47 Financial Statements required under Regulation S-X Rule 3-09: 99.1 Aero California Trust. 99.2 Canadian Air Trust #2. 99.3 Montgomery Partnership. * Incorporated by reference. See page 22 of this report.