MONTGOMERY PARTNERSHIP
(A LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
The Partners
Montgomery Partnership
We have audited the accompanying balance sheet of the Montgomery Partnership
(the Partnership) as of December 31, 1999 and the related statements of
operations, changes in partners' capital, and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit 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 statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Partnership is expected
to be terminated in 2001, as the marine vessel in the Partnership has been sold.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership as of December
31, 1999, and the results of its operations and its cash flows for the year
ended in conformity with accounting principles generally accepted in the United
States of America. The accompanying 2000 and 1998 financial statements were not
audited by us, and accordingly, we express no opinion or any other form of
assurance on them.
/S/ KPMG LLP
SAN FRANCISCO, CALIFORNIA
June 9, 2000
MONTGOMERY PARTNERSHIP
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
2000 1999
ASSETS (unaudited)
--------------------------------------
Accounts receivable $ -- $ 30
--------------------------------------
Total assets $ -- $ 30
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ -- $ 290
Due to affiliates -- 6
---------------------------------------
Total liabilities -- 296
Partners' capital (deficit):
Limited partners -- (69)
General partner -- (197)
---------------------------------------
Total partners' capital (deficit) -- (266)
---------------------------------------
Total liabilities and partners' capital $ -- $ 30
=======================================
See accompanying notes to financial statements.
MONTGOMERY PARTNERSHIP
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
2000 1999 1998
(unaudited) (unaudited)
---------------------------------------------
REVENUES
Lease revenue $ (3) $ 2,106 $ 2,466
Interest and other income (loss) 240 11 (9)
Gain on disposition of the marine vessel -- 3,812 --
---------------------------------------------
Total revenues 237 5,929 2,457
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EXPENSES
Depreciation expense -- 702 911
Marine operating expense 12 1,135 1,409
Repairs and maintenance (53) 251 500
Insurance expense (19) 173 69
Management fees to affiliate -- 105 123
Administrative expenses to affiliate 10 21 31
Administrative expenses and other 16 32 25
---------------------------------------------
Total expenses (34) 2,419 3,068
---------------------------------------------
Net income (loss) $ 271 $ 3,510 $ (611)
=============================================
See accompanying notes to financial statements.
MONTGOMERY PARTNERSHIP
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS OF DOLLARS)
Limited General
Partners Partner Total
---------------------------------------------
Partners' capital (deficit) as of December 31, 1997 $ 4,677 $ (149) $ 4,528
Net loss (605) (6) (611)
Cash contribution (197) (2) (199)
-------------------------------------------
Partners' capital (deficit) as of December 31, 1998 (unaudited) 3,875 (157) 3,718
Net income 3,475 35 3,510
Cash distribution (7,419) (75) (7,494)
-------------------------------------------
Partners' deficit as of December 31, 1999 (69) (197) (266)
Net income 268 3 271
Cash distribution (5) -- (5)
-------------------------------------------
Partners' capital as of December 31, 2000 (unaudited) $ 194 $ (194) $ --
===========================================
See accompanying notes to financial statements.
MONTGOMERY PARTNERSHIP
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
2000 1999 1998
(unaudited) (unaudited)
--------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ 271 $ 3,510 $ (611)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation -- 702 911
Gain on disposition of the marine vessel -- (3,812) --
Changes in operating assets and liabilities:
Accounts receivable 30 70 (24)
Prepaid expenses -- 27 (12)
Accounts payable and accrued expenses (290) (114) (159)
Due to affiliates (6) (2) (2)
Reserve for repairs -- (500 ) 96
--------------------------------------------
Net cash provided by (used in) operating activities 5 (119 ) 199
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INVESTING ACTIVITIES
Proceeds from disposition of vessel -- 7,613 --
--------------------------------------------
Net cash provided by investing activities -- 7,613 --
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FINANCING ACTIVITIES
Cash distributions - limited partners (5) (75) (2)
--------------------------------------------
Net cash used in financing activities (5) (7,494) (199)
--------------------------------------------
Net change in cash and cash equivalents -- -- --
Cash and cash equivalents at beginning of year -- -- --
--------------------------------------------
Cash and cash equivalents at end of year $ -- $ -- $ --
============================================
See accompanying notes to financial statements.
MONTGOMERY PARTNERSHIP
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Montgomery Partnership, a California limited partnership (the Partnership), was
formed during December 1990. The Partnership was formed for the purpose of
purchasing a bulk-carrier marine vessel and commenced significant operations in
January 1991. The Partnership had no employees nor operations other than the
operation of the marine vessel. The Partnership was owned 99% by the limited
partners and 1% by the General Partner. The Partnership had two limited
partners; PLM Equipment Growth Fund IV (EGF IV) and PLM Equipment Growth Fund V
(EGF V), (the Limited Partners). The General Partner is the Montgomery
Corporation (MC) which is owned by EGF IV and EGF V. The Limited Partnership
isowned 50% by EGF IV and 50% by EGF V.
The Partnership is expected to be terminated during 2001 as the marine vessel in
the Partnership was sold December 1999.
These accompanying financial statements had been prepared on the accrual basis
of accounting in accordance with generally accepted accounting principles. This
required 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. All amounts as of and for the years ended December 31,
2000 and 1998 are unaudited.
OPERATIONS
The marine vessel in the Partnership was managed under a continuing management
agreement by PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of
PLM Financial Services Inc. (FSI). FSI is a wholly-owned subsidiary of PLM
International, Inc. (PLM International). IMI received a monthly management fee
from the Partnership for managing the marine vessel (Note 2). FSI, in
conjunction with its subsidiaries, sells equipment to investor programs and
third parties, manages pools of transportation equipment under agreements with
investor programs, and is the general partner of EGF IV, EGF V, and other
limited partnerships.
CASH AND CASH EQUIVALENTS
All cash generated from operations was distributed to the partners, accordingly,
the Partnership had no cash balance at December 31, 2000 and 1999.
ACCOUNTING FOR LEASES
The marine vessel in the Partnership was leased under 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 as earned in accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Leases". Lease origination costs
were capitalized and amortized equally over 36 months.
DEPRECIATION
Depreciation was computed using the double-declining balance method, taking a
full month's depreciation in the month of acquisition, based upon an estimated
useful life of 12 years. The depreciation method changed to straight-line when
annual depreciation expense using the straight-line method exceeded that
calculated by the double-declining balance method. Acquisition fees of $0.8
million, that were paid to FSI, were capitalized as part of the cost of the
equipment. Major expenditures
MONTGOMERY PARTNERSHIP
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
DEPRECIATION (continued)
that were expected to extend the marine vessel's useful life or reduce future
equipment operating expenses, were capitalized and amortized over the estimated
remaining life of the marine vessel.
MARINE VESSEL
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", FSI reviewed the carrying value of the Partnership's marine
vessel at least quarterly, and whenever circumstances indicated that the
carrying value of this 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 the fair
market value of the marine vessel was less than the carrying value of the marine
vessel, a loss on revaluation would have been recorded. No reduction to the
carrying value of the marine vessel was required during 2000, 1999, or 1998.
REPAIRS AND MAINTENANCE
Repair and maintenance costs were generally the obligation of the Partnership.
NET INCOME (LOSS) AND CASH DISTRIBUTION TO LIMITED PARTNERS
The net income (loss) and cash distributions of the Partnership were generally
allocated 99% to the limited partners and 1% to the General Partner. The net
income (loss) and cash distributions were allocated to the limited partners
based on their percentage of ownership in the Partnership. The limited partners
99% share of net income (loss) and cash distributions were allocated 50% to EGF
IV and 50% to EGF V.
Cash distributions were recorded when paid.
COMPREHENSIVE INCOME (LOSS)
The Partnership's net income (loss) was equal to comprehensive income (loss) for
the year ended December 31, 2000, 1999, and 1998.
2. GENERAL PARTNER
MC contributed $100 of the Partnership's initial capital. MC was owned by two
shareholders, EGF IV owned 50% and EGF V owned 50%. Dividends were paid to the
shareholders annually, when declared, based on the percentage of ownership each
shareholder owns.
3. TRANSACTIONS WITH AFFILIATES
Under the equipment management agreement, IMI, subject to certain reductions,
receives a monthly management fee attributable to owned equipment equal to the
lesser of (i) the fees that would be charged by an independent third party for
similar services for similar equipment or (ii) 5% of the gross lease revenues
attributable to equipment that is subject to operating leases. The Partnership's
management fee expense to affiliate was $0, $0.1 million, $0.1 million,
respectively, during 2000, 1999, and 1998. The Partnership reimbursed FSI
$10,000, $21,000, and $31,000 during 2000, 1999, and
MONTGOMERY PARTNERSHIP
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
3. TRANSACTIONS WITH AFFILIATES (continued)
1998, respectively, for data processing and administrative expenses directly
attributable to the Partnership.
Partnership management fees payable to IMI was $-0- and $6,000 as of December
31, 2000 and 1999, respectively.
4. MARINE VESSEL ON LEASE
During 1999, the Partnership sold the marine vessel with net book value of $3.8
million for proceeds of $7.6 million.
The Partnership's marine vessel was leased to operators of utilization-type
leasing pools that include equipment owned by unaffiliated parties. In such
instances, revenues earned by the Partnership consist of a specified percentage
of the total revenues generated by leasing the pooled equipment to sublessees
after deducting certain direct operating expenses of the pooled equipment.
The marine vessel lease was being accounted for as an operating lease. There are
no future minimum rentals under non-cancelable leases at December 31, 2000. Per
diem and short-term rentals consisting of utilization rate lease payments
included in lease revenues amounted to $-0- in 2000, $2.1 million in 1999, and
$2.5 million in 1998.
5. GEOGRAPHIC INFORMATION
The Partnership's marine vessel was leased to multiple lessees in different
regions that operated worldwide.
6. 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 owning the Limited
Partners. Accordingly, no provision for income taxes has been made in the
financial statements of the Partnership.
As of December 31, 2000, there were no temporary differences between the
financial statements carrying value of assets and the income tax basis.
7. CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Partnership to
concentrations of credit risk, consist principally of lease receivables.
No single lessee accounted for more than 10% of the consolidated revenues for
the years ended December 31, 2000, 1999, or 1998. CO. TBN by Messrs. Apex
Marine, New York purchased the marine vessel from the Partnership and the gain
from the sale accounted for 64% of total consolidated revenues during 1999.
As of December 31, 2000, the General Partner believes the Partnership had no
other significant concentrations of credit risk that could have a material
adverse effect on the Partnership.