TAP Trust
(A Trust)
Financial Statements
INDEPENDENT AUDITORS' REPORT
The Owners
TAP Trust
We have audited the accompanying balance sheet of the TAP Trust as of December
31, 1999, and the statements of income, changes in owners' equity, and cash
flows for the year 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 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, the TAP Trust was liquidated
in 1999, as the aircraft and aircraft equipment in the TAP Trust has been sold.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the TAP Trust as of December
31, 1999, and the results of its operations and its cash flows for the year
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States of America. The accompanying 1998 financial
statements were not audited by us, and accordingly, we express no opinion or any
other form of assurance on them.
SAN FRANCISCO, CALIFORNIA
June 9, 2000
TAP TRUST
(A Trust)
Balance Sheets
December 31,
(in thousands of dollars)
1999
------------------
Assets
Aircraft and aircraft equipment held for lease, at cost $ --
Less accumulated depreciation --
------------------
Net equipment --
Prepaid expenses --
------------------
Total assets $ --
==================
Liabilities and owners' equity
Liabilities:
Accounts payable and accrued expenses $ --
Due to affiliates --
-------------------
Total liabilities -
Owners' equity --
-------------------
Total liabilities and owners' equity $ --
===================
See accompanying auditors' report and notes to financial statements.
TAP TRUST
(A TRUST)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
(in thousands of dollars)
1999 1998
----------------
(unaudited)
-----------------------------------
Revenues
Lease revenue $ -- $ 4,680
Interest and other income 2
Gain on sale of aircraft and aircraft equipment 9,525 --
-----------------------------------
Total revenues 9,527 4,680
-----------------------------------
Expenses
Depreciation and amortization expense 411 3,876
Management fees to affiliate -- 234
Repairs and maintenance 12 37
Insurance expense 13 50
Administrative expenses to affiliates 15 78
Administrative expenses 37 95
-----------------------------------
Total expenses 488 4,370
-----------------------------------
Net income $ 9,039 $ 310
===================================
See accompanying auditors' report and notes to financial statements.
TAP TRUST
(A TRUST)
STATEMENTS OF CHANGES IN OWNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(in thousands of dollars)
Owners' equity at December 31, 1997 $ 23,872
Net income 310
Distributions paid (12,039 )
----------------
Owners' equity at December 31, 1998 (unaudited) 12,143
Net income 9,039
Distributions paid (21,182 )
----------------
Owners' equity at December 31, 1999 --
==========================================================================
See accompanying auditors' report and notes to financial statements.
TAP TRUST
(A TRUST)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(in thousands of dollars)
1999 1998
(unaudited)
------------------------------------
Operating activities
Net income $ 9,039 $ 310
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 411 3,876
Gain on sale of aircraft and aircraft equipment (9,525) --
Changes in operating assets and liabilities:
Accounts receivable -- 8,237
Prepaid expenses 5 2
Accounts payable and accrued expenses (14) 7
Due to affiliates (20) (393)
-------------------------------------
Net cash (used in) provided by operating activities (104) 12,039
-------------------------------------
Investing activities
Proceeds from sale of aircraft and aircraft equipment 21,286 --
-------------------------------------
Net cash provided by investing activities 21,286 --
-------------------------------------
Financing activities
Distributions paid (21,182) (12,039)
-------------------------------------
Net cash used in financing activities (21,182) (12,039)
-------------------------------------
Net decrease in cash and cash equivalents -- (2)
Cash and cash equivalents at beginning of year -- 2
-------------------------------------
Cash and cash equivalents at end of year $ -- $ --
=====================================
See accompanying auditors' report and notes to financial statements.
TAP TRUST
(A TRUST)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
In August 1995, PLM Equipment Growth Fund III (EGF III), PLM Equipment Growth
Fund V (EGF V), PLM Equipment Growth & Income Fund VII (EGF VII), California
limited partnership's, and Professional Lease Management Income Fund I (Fund I),
a Delaware Limited Liability Company, (the Owners) entered into a Trust
Agreement (the Trust) with PLM Transportation Equipment Corp.(TEC), a
wholly-owned subsidiary of PLM International, Inc., by the terms of which TEC is
owner trustee for the benefit of the Owners as equal co-beneficiaries. The Trust
was established for the purpose of purchasing three Boeing 737-200 commercial
aircraft and aircraft equipment spare parts (aircraft equipment). The Trust had
no employees nor operations other than the operation of the aircraft equipment.
The Trust estate was owned 16.67% by EGF III and EGF V and 33.33% by EGF VII and
Fund I.
PLM Financial Services Inc., (FSI) is the General Partner of EGF III, EGF V, EGF
VII, and the Manager of Fund I. FSI is a wholly-owned subsidiary of PLM
International, Inc.
The aircraft and aircraft equipment were purchased in August 1995 for $30.0
million. EGF III, EGF V, and EGF VII paid acquisition and lease negotiation fees
of $1.1 million to FSI. No fees were paid by Fund I. The aircraft equipment was
purchased with an existing lease to Transportes Aeros Portugueses with a term
expiring in January 1999. In March 1999, the aircraft and aircraft equipment was
sold for proceeds of $21.3 million resulting in a gain of $9.5 million. The
Trust was liquidated in 1999, as the aircraft equipment has been sold.
These 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. All amounts as of and for the year ended December 31, 1998
are unaudited.
OPERATIONS
The aircraft and aircraft equipment in the Trust 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 Trust for
managing the aircraft equipment (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.
CASH AND CASH EQUIVALENTS
All cash generated from operations is distributed to the owners, accordingly,
the Trust had no cash balance at December 31, 1999.
ACCOUNTING FOR LEASES
The aircraft and aircraft equipment under the Trust was leased under an
operating lease. Under the operating lease method of accounting, the leased
asset is 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".
Lease origination costs were amortized equally over 48 months.
TAP TRUST
(A TRUST)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 8 years. Acquisition fees of $0.9 million, that
were paid to FSI, were capitalized as part of the cost of the equipment and
amortized over the life of the aircraft.
AIRCRAFT AND AIRCRAFT EQUIPMENT
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 aircraft and aircraft
equipment under the Trust at least quarterly, and whenever circumstances
indicated that the carrying value of the aircraft 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 aircraft, a loss
on revaluation would have been recorded. No reductions to the carrying value of
the aircraft were required during 1999 and 1998.
REPAIRS AND MAINTENANCE
Repair and maintenance for the aircraft and aircraft equipment are usually the
obligation of the lessee.
NET INCOME AND CASH DISTRIBUTIONS TO OWNERS
The net income and cash distributions of the Trust were allocated to the Owners.
The net income was generally allocated to the Owners based on their percentage
of ownership in the Trust. Certain depreciable and amortizable amounts are
allocated specifically to EGF III, EGF V, EGF VII, such as depreciation on
acquisition fees and amortization on lease negotiation fees. Cash distributions
were allocated 16.67% to EGF III and EGF V, and 33.33% to EGF VII and Fund I.
COMPREHENSIVE INCOME
The Trust's net income is equal to comprehensive income for the years ended
December 31, 1999 and 1998.
2. GENERAL PARTNER AND TRANSACTIONS WITH AFFILIATES
Under the equipment management agreement, IMI received a monthly management fee
equal to the lessor 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 Trust's management fee expense to affiliate was $0 and $0.2 million during
1999 and 1998, respectively.
The Trust reimbursed FSI $15,000 and $0.1 million during 1999 and 1998,
respectively, for data processing and administrative expenses directly
attributable to the Trust.
TAP TRUST
(A Trust)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
3. EQUIPMENT
Revenues were earned by placing the aircraft and aircraft equipment on an
operating lease.
An existing lease was assumed upon the acquisition with Transportes Aeros
Portugueses and a one year extension was signed through January 1999, upon which
the aircraft went off-lease. In March 1999, the aircraft and aircraft equipment
were sold for proceeds of $21.3 million resulting in a gain of $9.5 million. The
Trust was liquidated in 1999, as the aircraft and aircraft equipment had been
sold.
The aircraft and aircraft equipment lease was being accounted for as an
operating lease.
4. GEOGRAPHIC INFORMATION
The aircraft and aircraft equipment was leased and operated in Europe.
5. INCOME TAXES
The Trust is not subject to income taxes, as any income or loss is included in
the tax return of the individual partners that own the Owners. Accordingly, no
provision for income taxes has been made in the financial statements of the
Trust.
6. CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Trust to concentrations of
credit risk, consisted principally of lease receivables. The aircraft and
aircraft equipment in the Trust was on lease to only one customer during 1999
and 1998. This lessee, Transportes Aeros Portugueses, accounted for all of the
lease revenue.
Casino Express Airlines purchased three commercial aircraft, the aircraft
eingines and aircraft equipment from the Trust and the gain from the sale
accounted for all of the consolidated revenues during 1999.