EAST WEST 925
(A Tenancy-In-Common)
Financial Statements
- 4 -
INDEPENDENT AUDITORS' REPORT
The Owners
East West 925
We have audited the accompanying balance sheet of the East West 925 as of
March 31, 2000 and the related statement of income and changes in owners'
equity, and cash flows for the three months then ended. These financial
statements are the responsibility of the owner's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
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 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 audit provides a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the East West 925 was
terminated on March 31, 2000, as the aircraft equipment in the Tenancy-in-Common
had been sold.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the East West 925 as of
March 31, 2000, and the results of its operations and its cash flows for the
three months then ended in conformity with accounting principles generally
accepted in the United States of America. The accompanying 1999 financial
statements were not audited by us, and accordingly, we express no opinion or any
other form of assurance on them.
/s/ KPMG
SAN FRANCISCO, CALIFORNIA
March 2, 2001
EAST WEST 925
(A TENANCY-IN-COMMON)
BALANCE SHEETS
(IN THOUSAND OF DOLLARS)
March 31,
2000
------------------------
ASSETS
Aircraft equipment held for lease, at cost $ -- $
Less accumulated depreciation --
----------------------
Net equipment --
Accounts receivable, less allowance for
doubtful accounts of $0 in 2000 and $1,171 in 1999 --
Prepaid expenses --
----------------------
Total assets $ -- $
======================
Liabilities and owners' equity
Liabilities:
Accounts payable and accrued expenses $ -- $
---------------------
Total liabilities --
Owners' equity --
---------------------
Total liabilities and owner's equity $ -- $
=====================
See accompanying notes to financial statements.
EAST WEST 925
(A TENANCY-IN-COMMON)
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 2000
THROUGH MARCH 31, 2000 (DISSOLUTION)
AND THE YEAR ENDED DECEMBER 31, 1999
(in thousands of dollars)
2000 1999
(unaudited)
-----------------------------------------
REVENUES
Interest and other income $ 1 $ 200
Net gain on disposition of equipment 2,861 --
----------------------------------------
Total revenues 2,862 200
----------------------------------------
EXPENSES
Depreciation expense 150 903
Repairs and maintenance 65 131
Insurance expense 9 21
Administrative expenses to affiliates 4 12
Administrative expenses and other 29 105
Recovery of bad debts -- (76)
----------------------------------------
Total expenses 257 1,096
----------------------------------------
Net income (loss) $ 2,605 $ (896)
========================================
See accompanying notes to financial statements.
EAST WEST 925
(A TENANCY-IN-COMMON)
STATEMENTS OF CHANGES IN OWNERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 2000
THROUGH MARCH 31, 2000 (DISSOLUTION)
AND THE YEAR ENDED DECEMBER 31, 1999
(in thousands of dollars)
Owners' equity at December 31, 1998 (unaudited) $ 992
Net loss (896)
Additional capital contribution 643
-----------------
Owners' equity at December 31, 1999 (unaudited) 739
Net income 2,605
Dividends paid (3,344)
-----------------
Owners' equity at March 31, 2000 $ --
=================
See accompanying notes to financial statements.
EAST WEST 925
(A TENANCY-IN-COMMON)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 2000
THROUGH MARCH 31, 2000 (DISSOLUTION)
AND THE YEAR ENDED DECEMBER 31, 1999
(in thousands of dollars)
2000 1999
(unaudited)
----------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ 2,605 $ (896)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 150 903
Net gain on disposition of equipment (2,861) --
Changes in operating assets and liabilities:
Prepaid expenses 2 --
Accounts payable and accrued expenses (91) (650)
-------------------------------------
Net cash used in operating activities (195) (643)
-------------------------------------
INVESTING ACTIVITIES
Proceeds from disposition of aircraft 3,539 --
-------------------------------------
Net cash provided by investing activities 3,539 --
-------------------------------------
FINANCING ACTIVITIES
Additional capital contribution -- 643
Dividends paid (3,344) --
-------------------------------------
Net cash (used in) provided by financing activities (3,344) 643
-------------------------------------
Net increase 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.
EAST WEST 925
(A TENANCY-IN-COMMON)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
In December 1988, a Tenancy-In-Common Agreement was entered into between
PLM Equipment Growth Fund (EGF), a California limited partnership and PLM,
Equipment Growth Fund II (EGFII), a California limited partnership
(collectively the Partnerships). The tenancy-in-common (TIC) was entered
into for the purpose of purchasing a Boeing 737 aircraft. The TIC was owned
50% by EGF and 50% by EGFII. PLM Financial Services Inc., (FSI) was the
General Partner of the Partnerships owning the TIC. FSI is a wholly-owned
subsidiary of PLM International, Inc.
The aircraft was purchased in December 1988 for $15.3 million. A five-year
lease with East West Travel Trade Links was signed upon the acquisition of
the aircraft. In March 2000, the aircraft was sold for proceeds of $3.8
million resulting in a gain of $2.9 million. The TIC was liquidated on
March 31, 2000, as the aircraft in the TIC was sold.
These accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with accounting principles generally
accepted in the United States of America. 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 aircraft in the TIC was managed under a continuing management agreement
by PLM Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI.
IMI received a monthly management fee from the Partnerships for managing
the aircraft (Note 2). FSI, in conjunction with its subsidiaries, sells
transportation equipment to investor programs and third parties, manages
pools of transportation equipment under agreements with the investor
programs, and is a general partner in limited partnerships.
ACCOUNTING FOR LEASES
The aircraft under the TIC was leased under an operating lease. Under the
operating lease method of accounting, the leased asset was recorded at cost
and depreciated over its estimated useful life. Rental payments were
recorded as revenue over the lease term in accordance with Financial
Accounting Standards Board Statement No. 13 "Accounting for Leases".
DEPRECIATION
Depreciation of aircraft equipment was computed on 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. Acquisition
fees of $0.7 million, which were paid to FSI, were capitalized as part of
the cost of the equipment and depreciated over the life of the aircraft.
Major expenditures that were expected to extend the equipment's useful life
or reduce future equipment operating expenses were capitalized and
amortized over the estimated remaining life of the equipment.
EAST WEST 925
(A TENANCY-IN-COMMON)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
AIRCRAFT
In accordance with the Financial Accounting Standards Board 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 equipment
under the TIC at least quarterly, and whenever circumstances indicated that
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 were less than the carrying value of the
equipment, a loss on revaluation would have been recorded. No reductions to
the carrying value of equipment were required during the period from
January 1, 2000 through March 31, 2000, (dissolution) and the year ended
December 31, 1999.
REPAIRS AND MAINTENANCE
Repair and maintenance cost to aircraft were usually the obligation of the
lessee. To meet the maintenance requirements of certain aircraft airframes
and engines, reserve accounts were funded monthly by the lessee based on
engine hours.
NET INCOME (LOSS) AND DISTRIBUTION TO OWNERS
The net income (loss) and distributions of the TIC were allocated to the
owners based on their percentage ownership in the TIC
COMPREHENSIVE INCOME (LOSS)
The TIC's net income (loss) was equal to comprehensive income (loss) for
the period from January 1, 2000 through March 31, 2000 (dissolution) and
the year ended December 31, 1999.
2. GENERAL PARTNER AND TRANSACTIONS WITH AFFILIATES
Under the equipment management agreement, IMI received a monthly management
fee equal to (i) a) 10% of the amount of Cash Flows from operations or b)
1/12 of 1/2% of the book value of the equipment portfolio, subject to a
reduction in certain events, as described in the limited partnership
agreement for PLM Equipment Growth Fund and (ii) 5% of gross revenues for
PLM Equipment Growth Fund II.
FSI and its affiliates were reimbursed $4,000, and $12,000, by the TIC for
administrative services performed on behalf of the TIC during the period
from January 1, 2000 through March 31, 2000 (dissolution) and the year
ended December 31, 1999.
EAST WEST 925
(A TENANCY-IN-COMMON)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
3. EQUIPMENT
The component of owned equipment were as follows (in thousands of dollars):
Equipment Held for Operating Leases: March 31,
2000
----------------
Aircraft $ --
Less accumulated depreciation --
---------------
Net equipment $ --
===============
A five-year lease with East West Airlines was signed upon the acquisition
of the aircraft in 1988. No lease revenue was earned on this aircraft for
the three months ended March 31, 2000, and the year ended December 31,
1999.
In March 2000, the aircraft was sold for proceeds of $3.8 million, which
resulted in a gain of $2.9 million.
4. GEOGRAPHIC INFORMATION
The aircraft was off-lease in 1999, and from the period ended January 1,
2000 through March 31, 2000 (dissolution). The plane was stored in Malaysia
prior to its sale.
5. INCOME TAXES
The TIC was not subject to income taxes, as any income or loss is included
in the tax returns of the individual partners owning the Partnerships.
Accordingly, no provision for income taxes was made in the financial
statements of the TIC.
As of March 31, 2000, there were no temporary differences between the
financial statements carrying value of assets and the income tax basis.
6. CONCENTRATION OF RISK
Financial instruments, which potentially subjected the TIC to
concentrations of credit risk consisted principally of lease receivables.
This aircraft in the TIC was off-lease during all of 1999 up until the sale
in March 2000. All the revenues earned in the three months ended March 31,
2000 were from the gain on sale of the aircraft to Aegro Capital.