UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998 Commission File No. 33-18859
Wellesley Lease Income Limited Partnership IV
(Exact Name of Registrant as Specified in its Charter)
Massachusetts 04-2985041
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
One Financial Center, 21st Floor, Boston, MA 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 482-8000
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Securities registered pursuant to Section 12(b) of the Act None
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Securities registered pursuant to Section 12(g) of the Act Units of Limited
Partnership Interests
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 1999: Not applicable, since securities are
non-voting.
Documents incorporated by reference: None.
Exhibit Index on Page: 36
Page 1 of 37
Corporate organization as discussed in Part I, Item 1 Business is as follows:
TLP Holding LLC ("Holding") controls TLP Leasing Programs, Inc. ("TLP"), TLP
Management Services, Inc. ("TLPMS"), and TLP Securities, Inc. TLP controls TLP
Columbia Management Corp. ("TCMC") which serves as General Partner to the
Columbia Lease Income Funds. Torchmark Corporation ("Torchmark") controls
TMK/United, Inc. which controls Waddell and Reed Financial Services, Inc.
("Waddell and Reed").
Through various dealer-manager arrangements, TLP, TLPMS, and Waddell and Reed
serve as corporate general partners to the Wellesley Leasing Partnership
("Wellesley General Partner") and the Hanover Leasing Partnership. The Wellesley
General Partner is the general partner for the Wellesley Lease Income Limited
Partnerships. Hanover Leasing Partnership serves as the General Partner for
Hanover Lease Income Limited Partnership with BOT Financial Corporation serving
as agent.
Part I
Item 1. Business.
Wellesley Lease Income Limited Partnership IV (the "Partnership") is a limited
partnership organized under the provisions of the Massachusetts Uniform Limited
Partnership Act on November 9, 1987. As of December 31, 1998, the Partnership
consisted of a General Partner and 1,667 Limited Partners owning 27,226 Units of
Limited Partnership Interests of $500 each (the "Units"), except that employees
of the Corporate General Partners of the General Partner and employees and
securities representatives of its affiliates purchased 148 Units for a net price
of $460 per Unit, and the Partnership incurred no obligation to pay any sales
commissions with respect to such sales. The Units were sold commencing March 3,
1988, pursuant to a Registration Statement on Form S-1 under the Securities Act
of 1933. As set forth more fully at Item 10. Directors and Executive Officers of
the Partnership. of this Report, the General Partner is Wellesley Leasing
Partnership, and the General Partner has three Corporate General Partners (the
"Corporate General Partners"): TLP Leasing Programs, Inc. ("TLP") and TLP
Management Services Corporation ("TLPMS"), formerly CIS Management Services
Corporation ("CISMS"), both Massachusetts corporations and Waddell & Reed
Financial Services, Inc. ("Waddell & Reed", formerly TUP Services, Inc.,
"TUPS"), a Missouri corporation.
The Partnership was organized to engage in the business of acquiring
income-producing computer peripheral equipment for investment purposes,
principally International Business Machines, Incorporated ("IBM") equipment. The
Partnership's principal objectives are as follows:
1. To acquire and lease equipment, primarily through operating leases,
to generate income during its entire useful life;
2. To provide quarterly distributions of cash to the Limited Partners
from leasing revenues and from the proceeds of sales or other
disposition of Partnership equipment; and
3. To reinvest a portion of lease revenues and a substantial portion of
cash from sales and refinancings in additional equipment during the
first seven years of the Partnership's operations.
The Partnership was formed primarily for investment purposes and not as a "tax
shelter".
The Partnership shall terminate on December 31, 2012, unless sooner dissolved or
terminated as provided in Section 11 of the Amended Agreement of Limited
Partnership.
The Partnership has had a total of five closings. The closings occurred on May
18, 1988, July 11, 1988, September 16, 1988, October 31, 1988, and December 1,
1988 with 9,104, 5,545, 5,657, 3,640 and 3,280 units, respectively. Equipment
purchased through December 31, 1998 is $33,688,384. At the end of 1998, there
are 83 leases in place with 78 lessees. The acquisition of these leases and
equipment is described more fully in Item 2. Properties. of this report and
notes 3 and 4 to the financial statements included in Item 8. Financial
Statements and Supplementary Data.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP and
TLPMS from CMI Holding Co. and CMI Corporation, respectively. Under the new
ownership, TLP and TLPMS will continue to operate in the same manner of business
as described below.
Under the Partnership Agreement, the General Partner, Wellesley Leasing
Partnership, is solely responsible for the operation of the Partnership and its
equipment. As discussed above, the General Partner has three Corporate General
Partners: TLP, TLPMS and Waddell & Reed. TLP was formed in December 1982 and is
a wholly-owned subsidiary of TLP Holding LLC ("Holding"). TLPMS was formed in
May 1985 as CISMS, and is a wholly-owned subsidiary of Holding and an affiliate
of TLP. Holding is primarily engaged in management services and equipment
leasing. Waddell & Reed (formerly TUPS) was formed in May 1986 and is an
affiliate of Waddell & Reed, Inc., which was one of the Soliciting Brokers for
this offering. Both Waddell & Reed and Waddell & Reed, Inc. are wholly-owned
subsidiaries of TMK/United Inc., which itself is an indirect 85% owned
subsidiary of Torchmark Corporation ("Torchmark").
The General Partnership Agreement between TLP and TLPMS (the "General
Partnership Agreement"), provides that TLPMS will propose to the Partnership
equipment acquisitions, leasing, financing and re-financing transactions and
sale transactions, for approval by the Executive Committee, and will oversee the
operation, management and use of the Partnership's equipment, and that TLP will
oversee the marketing of the Units and all administrative functions of the
Partnership and, together with Waddell & Reed, will supply substantially all of
the General Partner's capital resources. All of the Partnership's equipment to
date has been acquired, and all dispositions of Partnership equipment have been
made, through TLPMS, using the personnel and resources of Holding and several
outside equipment lease brokers the General Partner believes would be most
advantageous for the Partnership.
The Partnership's investment policy provides for the acquisition of diversified
types of computer equipment and the leasing of such equipment to others on a
short-term basis under operating leases. The Partnership generally purchases
equipment for which a lease exists, or is entered into at the time of the
Partnership's acquisition of the equipment. This equipment is recorded and
depreciated at the Partnership cost (purchase price plus the acquisition fee).
If at any time the General Partner deems the equipment to be obsolete or related
maintenance and storage costs to be in excess of its fair market value, the
equipment is scrapped or sold at the current fair market value, which ever is
most advantageous for the Partnership.
Pursuant to its leasing policies, the General Partner performs a credit analysis
of potential lessees to determine their creditworthiness. The General Partner
leases all of its equipment to third parties by means of operating leases with
fixed base lease rates. Rents are payable monthly or quarterly. Operating leases
generally do not have terms greater than five years in duration and the
aggregate noncancelable rental payments during the term of the lease (on a net
present value basis), are not sufficient to permit the lessor to recover the
purchase price of the equipment.
At the termination of the lease, the General Partner arranges for the equipment
to be re-leased (either to the same lessee or a new lessee) if it determines
that re-leasing is in the Partnership's best interests. Generally, equipment is
re-leased at least once and possibly several times during the Partnership's
life, unless it is determined that the equipment is not marketable and therefore
may be sold. The General Partner provides, or arranges for the installation,
removal, maintenance and modification of the Partnership's equipment. Also, the
General Partner will purchase and maintain, or cause to be purchased and
maintained, appropriate insurance coverage to protect the interests of the
Partnership.
At December 31, 1998, the Partnership owned various computer equipment with an
original cost basis of $2,046,773. Listed below is a breakdown of the various
types of computer equipment owned:
Computer peripherals $ 1,005,298
Processors & upgrades 587,276
Telecommunications 46,317
Other 407,882
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$ 2,046,773
===============
Of the leases in place at December 31, 1998, the average lease term is 58 months
and the average monthly lease rate as a percentage of original equipment cost is
2.22%.
The Partnership's investments in computer peripheral equipment are and will
continue to be subject to various risk factors. The principal business risk
associated with ownership of the equipment is the inability to keep it fully
leased at rentals which, after payment of operating expenses and debt service on
Partnership borrowings, provide, together with any anticipated sales proceeds or
salvage value, an acceptable rate of return. Other risk factors include:
1. Technological and economic equipment obsolescence, physical
deterioration, malfunction, and risks attendant upon defaults by
lessees and credit losses.
2. Residual Values of Equipment. The Partnership's return on its
investment in equipment will depend in part upon the continuing value
of such equipment which in turn, depends upon, among other things: (1)
the quality of the equipment; (2) the condition of the equipment; (3)
the timing of the equipment's acquisition; (4) the cost of comparable
new equipment; (5) the technological obsolescence of the equipment; (6)
the General Partner's ability to forecast technological changes which
may reduce the value of the equipment; and (7) market factors.
3. Competition from Full Payout Lessors. In connection with operating
leases, the Partnership will encounter considerable competition from
those offering full payout leases, which are written for a longer term
and a lower rate than the Partnership's operating leases.
4. Competition from Manufacturers. Leases offered by the Partnership will
compete with operating leases and full payout leases offered by
equipment manufacturers in their own lease programs. In addition to
attractive financial terms, manufacturers may also provide certain
ancillary services which the Partnership cannot offer directly, such as
maintenance service (including possible equipment substitution rights),
warranty services and trade-in privileges.
5. Other Competition. There are numerous other potential investors,
including limited partnerships organized and managed similarly to the
Partnership, seeking to purchase equipment subject to either operating
leases or full payout leases, many of which will have greater financial
resources than the Partnership and more experience than the General
Partner. The Partnership will compete in the computer leasing
marketplace with many non-manufacturing firms, including other
equipment dealers, brokers and leasing companies, as well as with
financial institutions.
6. Changes in Marketing Policies. IBM's current marketing policy of
offering accrual discounts (i.e., applying lease payments as a credit
toward the purchase of equipment) and volume discounts enables certain
customers to obtain IBM equipment at a cost lower than its fair market
value. In the case of accrual discounts, lessees of IBM equipment who
have earned a purchase credit toward that equipment can purchase the
equipment from IBM and arrange a cost-effective sale and leaseback
arrangement with TLP or the Partnership. The sale price to the
Partnership will typically be less than the fair market value of the
equipment. The Partnership may be able to participate in volume
discounts through purchases arranged by lessees of TLP. The
Partnership's lower equipment costs in turn should enable the
Partnership to offer lower lease rates to customers and help offset
the risk of early obsolescence. If IBM were to eliminate these
policies, raise its prices, lower its lease rates, or become more
active as a lessor, the Partnership might find it more difficult to
compete successfully as a lessor of IBM equipment.
7. Defaults by Lessees. Default by a lessee may cause equipment to be
returned to the Partnership at a time when the General Partner may be
unable to promptly arrange for its re-leasing (at the rental rate
previously received or otherwise) or sale (with or without a loss),
thus resulting in the loss of anticipated revenues and the inability
to recover the Partnership's investment and repay related debt. Any
related debt may be secured by the returned equipment and, in some
cases, by the Partnership's other equipment. If the debt is not paid
in a timely manner, the lender may foreclose and assume ownership of
all equipment securing the debt, resulting in economic loss and
adverse tax consequences to the Partnership's partners. Three lessees,
Carr Separations, Incorporated, Cybersmith, Incorporated, and Jumbo
Sports, Incorporated, lease equipment in excess of 10% of total rental
income for the year ended December 31, 1998. The related rental
payments comprise 28.46%, 14.88% and 20.95%, respectively, of total
rental income for the year ended December 31, 1998. Carr Separations,
Incorporated, Cybersmith, Incorporated, and Jumbo Sports, Incorporated
lease equipment comprising 17.27%, 14.56% and 20.00%, respectively, of
the total equipment portfolio at December 31, 1998.
8. Changes in Technology. The General Partner intends to offer lease rates
to the Partnership's lessees which take into account the risk of
technological advances which may reduce the value of such equipment
owned by the Partnership. However, the introduction of an entirely new
technology could lead to a radical reduction in the fair market value
of certain equipment and make such equipment difficult to re-lease.
The Partnership considers itself to be engaged in only one industry segment, the
business of investing primarily in IBM computer peripheral equipment and leasing
the equipment to major national corporations on an operating lease basis, and
therefore, industry segment information has not been provided.
Item 2. Properties.
At December 31, 1998, the Partnership owned computer equipment with a
depreciated cost basis of $2,046,773. All purchases of computer equipment are
subject to a 3% acquisition fee paid to the General Partner.
Item 3. Legal Proceedings:
There are no material pending legal proceedings that the Partnership is a party
or of which any of its equipment or leases is the subject.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
CMI Holding Co. and all the common stock of TLP Management Services Corporation
("TLPMS", formerly CIS Management Services Corporation "CISMS") from CMI
Corporation. Under the new ownership, it is expected that TLP and TLPMS will
continue to operate in the same manner of business as each has in the past.
On January 13, 1989 (the "Petition Date"), Continental Information Systems
Corporation ("Continental"), CIS Corporation ("CIS"), CMI Holding Co. ("CMI
Holding"), CMI Corporation ("CMI") and certain of its affiliates (collectively,
the "Debtors"), voluntarily petitioned for relief under Chapter 11 of the United
States Bankruptcy Code ("Chapter 11"), and thereafter continued in the
management and operation of their businesses and property as Debtors In
Possession until October 25, 1989, when the United States Bankruptcy Court (the
"Court") confirmed the appointment of James P. Hassett as Chapter 11 trustee
(the "Trustee") of the Debtors. CMI Holding is the former parent of TLP and CMI
is the former parent of TLPMS. TLP and TLPMS, neither of which filed under
Chapter 11, are the two Corporate General Partners of Wellesley Leasing
Partnership, the General Partner of the Partnership. Both before and after the
Petition Date, CIS and CMI have acted as agents for the Partnership in selling,
leasing and remarketing Partnership equipment. CMI Holding became a wholly-owned
subsidiary of CIS pursuant to a Court ordered settlement on July 20, 1993.
As of the Petition Date, there were a number of unsettled transactions between
CIS and CMI and the Partnership and other affiliated partnerships (the
Partnership and such other partnerships are herein collectively referred to as
the "Partnerships"), including outstanding accounts receivable and accounts
payable between each of the Partnerships and CIS and CMI and their affiliates,
sales of equipment and related leases from CIS and CMI to each of the
Partnerships for which not all documentation had been completed as of the
Petition Date, and sales of equipment and related leases from which CIS had
failed to remove prior third-party liens. In addition, accounts receivable and
accounts payable continued to accrue and be paid between each of the
Partnerships and CIS and CMI and their affiliates subsequent to the Petition
Date.
On February 28, 1992, the Court granted an order implementing a settlement of
the outstanding issues between each of the Partnerships and the Debtors. The
settlement occurred on March 13, 1992. In the order the Court approved a set-off
on a partnership-by-partnership basis of pre-petition amounts owed by each
affected Debtor to each Partnership to the extent of pre-petition amounts owed
by that Partnership to that Debtor. As a result of the set-off, the Partnership
had a net unsecured pre-petition claim of $37,470 against CMI as of December 31,
1993 which had been fully reserved.
On November 29, 1994, the Court confirmed the Trustee's proposed Joint Plan of
Reorganization ("the Plan") dated October 4, 1994, and the Debtors emerged from
Chapter 11 bankruptcy protection on December 21, 1994. In accordance with the
Plan projections, 100% of each CMI claim would be paid in full, of which 75%
would be cash and 25% would be common stock of the reorganized Continental
Information Systems Corporation ("CISC"), based on a per share price of $4.29.
On December 27, 1994, the Partnership received the first distribution from the
Trustee (now Trustee of the Liquidating Estate of CIS Corporation, et al) with
respect to the net unsecured pre-petition claim described above. The
distribution consisted of cash proceeds of $22,808 and 1,844 shares of common
stock in CISC. During the second quarter of 1995, the stock of CISC began
trading, thereby providing an objective valuation method for establishing the
cost basis of $2.50 per share, which approximated fair value at June 30, 1995. A
charge off was made in 1995 in relation to the difference between the Trustee's
original prescribed value of the CISC stock at $4.29 per share and the cost
basis established by the Partnership. On July 20, 1995, the Partnership received
the second and final distribution from the Trustee, consisting of cash proceeds
of $5,294 and 341 shares of CISC. Following the Trustee's second distribution
and the charge off made during the year, the Partnership's net unsecured
pre-petition claim was settled and there are no other outstanding receivable
balances.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Part II
Item 5. Market for the Partnership's Securities and Related Security Holder
Matters.
(a) Market Information
The Partnership's outstanding securities consist of Limited Partnership
Interests in Units of $500 each. As of December 31, 1998, 27,226 Units had been
sold to the public at a price of $500 per Unit (except for 148 Units which were
sold for a net price of $460 per Unit to employees of the Corporate General
Partners of the General Partner and employees and securities representatives of
its affiliates).
There is no public market for the Units, and it is not anticipated that such a
public market will develop.
(b) Approximate Number of Security Holders
Number of Unit Number of Units
holders on Record as of
Title of Class as of 12/31/98 12/31/98
Units of
Limited
Partnership
Interests 1,656 27,226
(c) Dividend History and Restrictions
During the fiscal period ended December 31, 1988, the Partnership had five
closings with 27,226 Units. Pursuant to Section 8 of the Limited Partnership
Agreement, the Partnership's "Distributable Cash From Operations" for each year
will be determined and then distributed to the Partners. Upon reaching the end
of its reinvestment period (the seventh anniversary of the Partnership's final
closing date), the Partnership will also distribute to the Partners
"Distributable Cash From Sales or Refinancings", if any. The Partnership
distributed $340,498, $544,521 and $442,423 to the Limited Partners and $14,609,
$14,538 and $23,285 to the General Partners in 1998, 1997 and 1996,
respectively. The cumulative cash distributions to the Limited Partners through
December 31, 1998 are $12,525,954 as compared with the Limited Partners' net
contributed capital of $12,148,459.
"Cash From Operations" and "Cash From Sales or Refinancing" means the net cash
provided by the Partnership's normal operations or as a result of any sales,
refinancings or other dispositions of equipment, respectively, after the general
expenses and current liabilities of the Partnership (other than the equipment
management fee) are paid, as reduced by any reserves for working capital and
contingent liabilities to the extent deemed reasonable by the General Partner,
and as increased by any portion of such reserves then deemed by the General
Partner not to be required for Partnership operations. "Distributable Cash From
Operations" and "Distributable Cash From Sales or Refinancings" means Cash From
Operations or Cash From Sales or Refinancings, respectively, reduced by amounts
which the General Partner determines shall be reinvested (through the seventh
anniversary of the Partnership's final closing date) in additional Equipment and
by payments of all accrued but unpaid equipment management fees.
For rendering services in connection with the normal operations of the
Partnership, the Partnership will pay to the General Partner a Partnership
management fee equal to 7% of the monthly rental billings collected.
Each distribution of Distributable Cash From Operations of the Partnership shall
be allocated 95% to the Limited Partners and 5% to the General Partner. Any
Distributable Cash From Sales or Refinancings from gains and losses shall be
allocated 99% to the Limited Partners and 1% to the General Partner until
"Payout" has occurred. "Payout" means the time when the aggregate amount of all
distributions to the Limited Partners of Distributable Cash From Operations and
of Distributable Cash From Sales or Refinancings equals the aggregate amount of
the Limited Partners' original invested capital plus a cumulative 10% annual
return (compounded daily) on their aggregate unreturned invested capital
(calculated from the beginning of the first full fiscal quarter following the
Partnership's closing date). Including the distribution for the fourth quarter
of 1998 made February 26, 1998, cumulative distributions to date are $458.38 per
unit. This cumulative distribution per unit amount represents 92% of the initial
investment. After Payout has occurred, any Distributable Cash From Sales or
Refinancings will be distributed 15% (plus an additional 1% for each 1% by which
the total of all Limited Partners' original Capital Contributions actually paid
or allocated to the Partnership's investment in equipment exceeds the greater of
(i) 80% of the gross proceeds of the Partnership's offering of Units, reduced by
0.0625% for each 1% of leverage encumbering Partnership equipment, or (ii) 75%
of the gross proceeds of such offering) to the General Partner, and the
remainder to the Limited Partners. It is not anticipated that Payout will occur
as of the liquidation of this Partnership.
Distributable Cash, if any, will be distributed within 60 days after the
completion of each of the first three fiscal quarters of each Partnership fiscal
year, and within 120 days after the completion of each fiscal year, beginning
after the first full fiscal quarter following the Partnership's closing date.
Each such distribution will be described in a statement sent to the Limited
Partners.
Item 6. Selected Financial Data.
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results. This information should
be read in conjunction with the financial statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included in Items 8. and 7., respectively of this report.
For the Years Ended December 31,
1998 1997 1996 1995 1994
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Operating Data
Rental Income $ 558,990 $ 1,014,193 $ 1,617,165 $ 1,697,214 $ 2,759,929
Interest Income 3,620 11,518 6,844 23,035 30,708
Net Income (Loss) 120,144 494,730 463,920 (347,598) (614,313)
Net Income (Loss) Per Limited
Partnership Unit 3.88 17.64 12.12 (12.64) (24.02)
Distributions to Partners 355,107 559,059 465,708 1,218,003 1,719,537
Distributions Per Limited
Partnership Unit 12.50 20.00 16.25 42.50 60.00
Balance Sheet Data
Cash and Cash Equivalents $ 118,463 $ 166,324 $ 36,022 $ 336,360 $ 843,110
Computer Equipment at Cost 2,046,773 2,974,475 5,084,339 7,388,216 8,169,287
Total Assets 414,182 859,826 1,385,036 2,239,549 3,064,038
Long-term Debt 66,109 276,379 591,174 960,503 668,195
Partners' Equity 292,690 527,653 591,832 592,951 2,159,371
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The Partnership had five closings as of December 31, 1988. These closings
occurred on May 18, 1988, July 11, 1988, September 16, 1988, October 31, 1988
and December 1, 1988. Total subscriptions received from these closings were
$4,548,920, $2,771,260, $2,828,500, $1,818,600 and $1,639,800, respectively,
representing 27,226 Units of Limited Partnership Interest. Included in these
amounts were proceeds from the sale of 148 Units at a price net of sales
commissions for employees of an affiliate of the General Partner, who were
allowed to purchase units at a net price of $460 per unit.
Results of Operations
The following discussion relates to Partnership's operations for the year ended
December 31, 1998, in comparison to the years ended December 31, 1997 and 1996.
The Partnership realized net income of $120,144, $494,730 and $463,920 for the
years ended December 31, 1998, 1997 and 1996, respectively. Rental income
decreased $455,203 or 45% and $602,972 or 37% in 1998 and 1997, respectively.
The decrease in rental income each year is primarily due to lower rental rates
obtained on equipment lease extensions and remarketings after the initial lease
term expires and a net reduction in the overall size of the equipment portfolio.
In 1997, other income is the result of a settled bankruptcy claim. Interest
income decreased in the current year as a result of higher average short-term
investment balances held during 1998, versus the prior year in which interest
income increased due to the higher average short-term balances held. The
decrease in net gain on sale of equipment each year can be attributed to the
overall decrease in the sales of equipment carrying low net book values.
Total costs and expenses decreased $267,702 or 37% and $464,673 or 39% in 1998
and 1997, respectively, compared to prior periods. The decrease in costs and
expenses each year is primarily the result of lower depreciation expense. The
decrease in depreciation expense each year is due to a large portion of the
equipment portfolio becoming fully depreciated and a reduction in the overall
equipment portfolio. Included in depreciation expense in 1998, 1997 and 1996 is
a reversal of a provision for $250,000, $25,000 and $275,000, respectively, to
properly reflect the equipment portfolio's net realizable value for each year.
Interest expense decreased due to the continued paydown of long-term debt. Such
debt was used to finance equipment lease transactions. Management fees decreased
in the current year as a result of the decrease in rental income. General and
administrative expenses remained relatively flat between 1998 and 1997. The
reversal of provision for doubtful accounts in the current year due to continued
successful collection efforts on delinquent accounts.
The Partnership recorded a net income per Limited Partnership Unit of $3.88,
$17.64 and $12.12 for the years ended December 31, 1998, 1997 and 1996,
respectively. The allocation for the year ended December 31, 1997 includes a
cost recovery allocation of profit and loss among the General and Limited
Partners. This cost recovery allocation is required to maintain capital accounts
consistent with the distribution provisions of the Partnership Agreement. In
certain periods, the cost recovery of profit and loss may result in an
allocation of net loss to the Limited Partners in instances when the
Partnership's operations were profitable for the period.
Liquidity and Capital Resources
For the year ended December 31, 1998, rental revenue generated from operating
leases and sales proceeds generated from equipment sales were the primary
sources of funds for the Partnership. As equipment leases terminate, the General
Partner determines if the equipment will be extended to the same lessee,
remarketed to another lessee, or sold. This decision is made upon analyzing
which option generates the most favorable result.
Rental income has continued to decrease due to two factors. First, lower rates
are obtained on the remarketing of existing equipment upon expiration of the
original leases. Typically the remarketed rates are lower due to the decrease in
useful life of the equipment. Second, the increasing change of technology in the
computer industry usually decreases the demand for older equipment, thus
increasing the possibility of obsolescence. Both of these factors together will
cause remarketed rates to be lower than original rates and will cause certain
leases to terminate upon expiration. This decrease however, should not affect
the Partnership's ability to meet its future cash requirements, including
long-term debt obligations. To the extent that future cash flows should be
insufficient to meet the Partnership's operating expenses and liabilities,
additional funds could be obtained through the sale of equipment, or through a
reduction in the rate of cash distributions. Future rental revenues amount to
$225,792 and are to be received over the next three years (for further
discussion, refer to note 4 to the financial statements).
The Partnership's investing activities for the year resulted in equipment sales
with a net depreciated cost basis of $84,104, generating $95,135 in proceeds.
The Partnership will not purchase equipment in the future as the Partnership has
reached the end of its reinvestment period.
The Partnership's financing activities resulted in a paydown on long-term debt
during 1998 of $210,270. The Partnership will payoff its remaining long-term
debt of $66,109 by 1999. Total debt assumed by the Partnership from inception is
$14,500,441, for a total leverage of 43%.
Cash distributions paid in the first quarter of 1999 are currently at an annual
level of 2% per Limited Partnership Unit, or $2.50 per Limited Partnership Unit.
During 1998, the Partnership distributed a total of $12.50 per Limited
Partnership Unit, of which $3.88 per Unit represents income and $8.62 per Unit
represents a return of capital. For the quarter ended December 31, 1998, the
Partnership declared a cash distribution of $73,361, of which $5,296 was
distributed to the General Partner and $68,065 was distributed to the Limited
Partners. The distribution subsequently occurred on February 26, 1999. The
Partnership expects to continue paying distributions at or near this level in
the future. The effects of inflation have not been significant to the
Partnership and are not expected to have any material impact in future periods.
Year 2000 Compliance
The year 2000 compliance issue concerns the inability of computerized
information systems to accurately calculate, store or use a date after 1999.
This could result in computer system failures or miscalculations causing
disruptions of operations. The Year 2000 issue affects almost all companies and
organizations.
TLP has planned for the Year 2000 Compliance since late in 1996. TLP has
inventoried, classified, changed, upgraded, and/or modified its infrastructure,
hardware, mission-critical software and non-critical software to be compliant
with the year 2000 requirements. All hardware and software has either been
tested, if applicable, or certification has been received from the vendor to be
Year 2000 compliant. All the hardware tested positively for "Basic Input/Output
System" updates. Any future hardware or software purchased by TLP must be Year
2000 compliant prior to the actual purchase.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
The Partners of Wellesley Lease Income Limited Partnership IV:
We have audited the accompanying balance sheets of Wellesley Lease Income
Limited Partnership IV (a Massachusetts Limited Partnership) as of December 31,
1998 and 1997, and the related statements of operations, partners' equity
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1998. In connection with our audits of the financial statements, we
have also audited the accompanying financial statement schedule II for each of
the years in the three-year period ended December 31, 1998. These financial
statements and this financial statement schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and this financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wellesley Lease Income Limited
Partnership IV as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 26, 1999
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Balance Sheets
December 31, 1998 and 1997
Assets
1998 1997
---------------- ----------------
Investment property, at cost:
Computer equipment $ 2,046,773 $ 2,974,475
Less accumulated depreciation 1,756,522 2,341,847
---------------- ----------------
Investment property, net 290,251 632,628
Cash and cash equivalents 118,463 166,324
Rents receivable, net 3,609 22,796
Account receivable - affiliates - 2,456
Other assets 14,249 35,622
---------------- ----------------
Total assets $ 426,572 $ 859,826
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt $ 66,109 $ 210,270
Accounts payable and accrued expenses - affiliates 25,775 12,017
Accounts payable and accrued expenses 36,968 38,799
Unearned rental revenue 5,030 4,978
Long-term debt, less current portion - 66,109
---------------- ----------------
Total liabilities 133,882 332,173
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 639,846 625,237
Cumulative cash distributions (640,846) (626,237)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (27,226 units):
Capital contribution, net of offering costs 12,148,459 12,148,459
Cumulative net income 670,185 564,650
Cumulative cash distributions (12,525,954) (12,185,456)
---------------- ----------------
292,690 527,653
---------------- ----------------
Total partners' equity 292,690 527,653
---------------- ----------------
Total liabilities and partners' equity $ 426,572 $ 859,826
================ ================
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Operations
Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
--------------- -------------- --------------
Revenue:
Rental income $ 558,990 $ 1,014,193 $ 1,617,165
Other income - 62,763 -
Interest income 3,620 11,518 6,844
Net loss on sale of marketable securities - (117) (947)
Net gain on sale of equipment 11,031 127,572 26,730
--------------- -------------- --------------
Total revenue 573,641 1,215,929 1,649,792
--------------- -------------- --------------
Costs and expenses:
Depreciation 258,271 507,531 804,769
Interest 13,752 36,907 82,349
General and administrative 189,792 213,639 275,686
(Reversal of) provision for doubtful accounts (8,318) (36,878) 23,068
--------------- -------------- --------------
Total costs and expenses 453,497 721,199 1,185,872
--------------- -------------- --------------
Net income $ 120,144 $ 494,730 $ 463,920
=============== ============== ==============
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Partners' Equity (Deficit)
Years Ended December 31, 1998, 1997 and 1996
General Limited
Partner Partners Total
Equity (deficit) at
December 31, 1995 $ (110,674) $ 703,625 $ 592,951
Net income 133,952 329,968 463,920
Cash distributions (23,285) (442,423) (465,708)
Reduction of unrealized losses on
marketable securities 7 662 669
----------------- ---------------- ------------------
Equity at
December 31, 1996 - 591,832 591,832
Net income 14,537 480,193 494,730
Cash distributions (14,538) (544,521) (559,059)
Reduction of unrealized losses on
marketable securities 1 149 150
----------------- ---------------- ------------------
Equity at
December 31, 1997 - 527,653 527,653
Net income 14,609 105,535 120,144
Cash distributions (14,609) (340,498) (355,107)
----------------- ---------------- ------------------
Equity at
December 31, 1998 $ - $ 292,690 $ 292,690
================= ================ ==================
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Cash flows from operating activities:
Net income $ 120,144 $ 494,730 $ 463,920
-------------- -------------- ---------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 258,271 507,531 804,769
(Reversal of) provision for doubtful accounts (8,318) (36,878) 23,068
Net gain on sale of equipment (11,031) (127,572) (26,730)
Net loss on sale of marketable securities - 117 947
Net decrease in current assets 63,726 47,746 90,078
Net decrease in current liabilities (411) (146,236) (484,065)
-------------- -------------- ---------------
Total adjustments 302,237 244,708 408,067
-------------- -------------- ---------------
Net cash provided by operating activities 422,381 739,438 871,987
-------------- -------------- ---------------
Cash flows from investing activities:
Purchase of investment property - - (506,622)
Proceeds from sale of investment property 95,135 264,085 165,568
Proceeds from sale of marketable securities - 633 3,766
-------------- -------------- ---------------
Net cash provided by (used in)
investing activities 95,135 264,718 (337,288)
-------------- -------------- ---------------
Cash flows from financing activities:
Proceeds from borrowings on notes payable - - 223,600
Principal payments on notes payable - - (223,600)
Proceeds from borrowings on long-term debt - 230,336 189,942
Principal payments on long-term debt (210,270) (545,131) (559,271)
Cash distributions to partners (355,107) (559,059) (465,708)
-------------- -------------- ---------------
Net cash used in financing activities (565,377) (873,854) (835,037)
-------------- -------------- ---------------
Net (decrease) increase in cash and cash equivalents (47,861) 130,302 (300,338)
Cash and cash equivalents at beginning of year 166,324 36,022 336,360
-------------- -------------- ---------------
Cash and cash equivalents at end of year $ 118,463 $ 166,324 $ 36,022
============== ============== ===============
Supplemental cash flow information:
Interest paid during the year $ 13,752 $ 36,907 $ 73,371
============== ============== ===============
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
December 31, 1998, 1997 and 1996
(1) Organization and Partnership Matters
The Partnership was organized under the Massachusetts Uniform Limited
Partnership Act on November 9, 1987. In exchange for a capital contribution of
$1,000, the Partnership has issued all of its General Partner interests to
Wellesley Leasing Partnership, a Massachusetts General Partnership.
The Amended Agreement of Limited Partnership authorizes the issuance of up to
150,000 Limited Partnership units at a gross price per unit of $500, and up to
50 additional units to affiliates.
The Partnership has entered into a Sales Agent Agreement with TLP Securities
Corporation ("TLP Securities"), an affiliate of the General Partner, which acted
as a Dealer/Manager for the offering of Limited Partnership Interests. On March
3, 1988, pursuant to the Dealer/Manager agreement, the Partnership began the
marketing and sale of the units. The Partnership has had a total of five
closings. The closings occurred on May 18, 1988, with 9,104 units, July 11,
1988, with 5,545 units, September 16, 1988, with 5,657 units, October 31, 1988,
with 3,640 units and December 31, 1988, with 3,280 units.
Pursuant to the terms of the Amended Agreement of Limited Partnership,
Distributable Cash From Operations and Profits for federal income tax and
financial reporting purposes from normal operations of the Partnership shall be
allocated 95% to the Limited Partners and 5% to the General Partner. Further,
gains on sales of equipment occurring after the reinvestment period end shall be
allocated first to eliminate negative capital accounts, if any, and second 99%
to the Limited Partners and 1% to the General Partner until "Payout". "Payout"
means the time when the aggregate amount of all distributions to the Limited
Partners of Distributable Cash From Operations and of Distributable Cash From
Sales or Refinancings equals the aggregate amount of the Limited Partners'
original invested capital plus a cumulative 10% annual return (compounded daily)
on their aggregate unreturned invested capital (calculated from the beginning of
the first full fiscal quarter following the Partnership's closing date). Losses
for federal income tax and financial reporting purposes from normal operations
and any Distributable Cash From Sales or Refinancings from gains and losses
shall be allocated 99% to the Limited Partners and 1% to the General Partner
until Payout has occurred, and 85% to the Limited Partners and 15% to the
General Partner thereafter. In addition, special cost recovery allocations may
be required to reflect the differing initial capital contributions of the
General Partner and the Limited Partners. The Partnership's books and records
are in accordance with the terms of the Amended Agreement of Limited
Partnership. Including the distribution for the fourth quarter of 1998 made
February 26, 1999, cumulative distributions to date are $458.38 per unit. This
cumulative distribution per Unit represents 92% of the initial investment. It is
not anticipated that Payout will occur as of the liquidation of this
Partnership.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(2) Summary of Significant Accounting Policies
General
The Partnership's records are maintained on the accrual basis of accounting so
that revenues are recognized as earned and expenses are recognized as incurred.
Assets and liabilities are those of the Partnership and do not include any
assets and liabilities of the individual partners. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Depreciation on investment property purchased prior to January 1, 1993 is
provided using a straight-line basis, generally over a five year period. For
equipment purchased on or after January 1, 1993, depreciation is provided using
a straight-line basis, over a four year period. The Partnership's policy is to
periodically review the estimated fair market value of its equipment to assess
the recoverability of its undepreciated cost. In accordance with this policy,
the Partnership records a charge to depreciation expense in instances when the
net book value of equipment exceeds its net realizable value. Included in
depreciation expense in 1998, 1997 and 1996 is a reversal of a provision for
$250,000, $25,000 and $275,000, respectively, to properly reflect the equipment
portfolio's net realizable value. Routine maintenance and repairs are expensed
as incurred. Major betterments and enhancements are capitalized and depreciated
in accordance with the Partnership's depreciation policy.
Cash and Cash Equivalents
The Partnership considers cash and short-term investments with original
maturities of three months or less to be cash and cash equivalents.
Allowance for Doubtful Accounts
The financial statements include allowances for estimated losses on receivable
balances. The allowances for doubtful accounts are based on past write off
experience and an evaluation of potential uncollectible accounts within the
current receivable balances. Receivable balances which are determined to be
uncollectible are charged against the allowance and subsequent recoveries, if
any, are credited to the allowance. At December 31, 1998 and 1997, the allowance
for doubtful accounts included in rents receivable was $4,252 and $25,985,
respectively, and $0 and $0 in sales receivable, respectively.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Income Taxes
No provision for federal income taxes has been made as the liability for such
taxes is that of the Partners rather than that of the Partnership. Taxable
income (loss), as reported on Schedule K-1, Form 1065 "Partner's Share of
Income, Credits, Deductions, etc.", was $10,135, $251,852 and $136,436 in 1998,
1997 and 1996, respectively (see note 6).
(3) Investment Property
At December 31, 1998, the Partnership owned computer equipment with a
depreciated cost basis of $290,251. All purchases of computer equipment are
subject to a 3% acquisition fee paid to the General Partner.
(4) Leases
Description of leasing arrangements:
Operations consist primarily of leasing computer equipment. All equipment leases
are classified as operating leases and expire over the next three years.
Minimum lease payments scheduled to be received in the future under existing
noncancelable operating leases are as follows:
1999 $ 180,761
2000 34,887
2001 10,144
---------------
$ 225,792
===============
The following schedule provides an analysis of the cost of capital equipment by
major classes as of December 31, 1998:
Computer peripherals $ 1,005,298
Processors & upgrades 587,276
Telecommunications 46,317
Other 407,882
---------------
$ 2,046,773
===============
Three lessees, Carr Separations, Incorporated, Cybersmith, Incorporated, and
Jumbo Sports, Incorporated, lease equipment in excess of 10% of total rental
income for the year ended December 31, 1998. The related rental payments
comprise 28.46%, 14.88% and 20.95%, respectively, of total rental income for the
year ended December 31, 1998. Carr Separations, Incorporated, Cybersmith,
Incorporated, and Jumbo Sports, Incorporated lease equipment comprising 17.27%,
14.56% and 20.00%, respectively, of the total equipment portfolio at December
31, 1998.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(5) Related Party Transactions
Fees, commissions and other expenses paid or accrued by the Partnership to the
General Partner or affiliates of the General Partner for the years ended
December 31 are as follows:
1998 1997 1996
---- ---- ----
Equipment acquisition fees $ - $ - $ 14,756
Management fees 44,656 64,791 123,488
Reimbursable expenses paid 139,798 142,774 149,711
------------ ------------ ------------
$ 184,454 $ 207,565 $ 287,955
============ ============ ============
Under the terms of the Partnership Agreement, the General Partner is entitled to
an equipment acquisition fee of 3% of the purchase price paid by the Partnership
for the equipment. The General Partner is also entitled to a management fee
equal to 7% of the monthly rental billings collected. Also, the Partnership
reimburses the General Partner and its affiliates for certain expenses incurred
by them in connection with the operation of the Partnership.
(6) Reconciliation of Financial Statement Net Income (Loss) to Taxable Income
(Loss) to Partners
A reconciliation of financial statement net income (loss) to taxable income
(loss) to partners is as follows for the years ended December 31:
1998 1997 1996
---- ---- ----
Net income per financial statements $ 120,144 $ 494,730 $ 463,920
Provision for doubtful accounts expense for financial
statement purposes (less than) in excess of provision
for doubtful accounts expense for tax purposes (21,733) (36,878) 23,068
Depreciation expense for financial statement purposes
less than depreciation expense for tax purposes (7,325) (97,016) (249,510)
Net gain on sale of equipment for financial statement
purposes in excess of net gain on sale of equipment
for tax purposes (80,951) (108,984) (101,042)
------------- -------------- -------------
Taxable income to partners $ 10,135 $ 251,852 $ 136,436
============= ============== =============
Losses for federal tax purposes from normal operations are allocated 99% to the
Limited Partners and 1% to the General Partner. Profits for federal tax purposes
from normal operations are allocated 95% to the Limited Partners and 5% to the
General Partner. In addition, special cost recovery allocations may be required
to reflect the differing initial capital contribution of the General Partner and
the Limited Partners.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(7) Long-term Debt
Long-term debt at December 31, 1998 consists of one loan for $66,109 from
Liberty Bank, bearing interest at 9.00%. The total outstanding debt balance is
collateralized by equipment with a net book value of $73,985 and assignment of
the related leases.
Maturities of long-term debt are as follows:
1999 $ 66,109
--------------
$ 66,109
==============
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Schedule II - Valuation and Qualifying Accounts and Reserves
Additions charged
Balance at to (recoveries Balance
beginning credited from) at end
Classification of year costs and expenses Charge-offs of year
Year ended
December 31, 1996 $ 39,795 $ 23,068 $ - $ 62,863
================ ================ ================ =================
Year ended
December 31, 1997 $ 62,863 $ (36,878) $ - $ 25,985
================ ================ ================ =================
Year ended
December 31, 1998 $ 25,985 $ (8,318) $ (13,415) $ 4,252
================ ================ ================ =================
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
December 31, 1998
Lessee
Carr Separation, Incorporated
Chrysler Corporation
Cincinnati Gas & Electric Company
Coulter Corporation
Cybersmith, Incorporated
Dave's Custom Caps
H.J. Meyers Company, Incorporated
Halliburton Company
Hughes Aircraft Company, Incorporated
J. Walter Thompson Company
Jumbo Sports, Incorporated
ON Technology Corporation
Sero Company, Incorporated
The Internet Access Company, Incorporated
Equipment Description Acquisition Price
Computer peripherals $ 1,005,298
Processors & upgrades 587,276
Telecommunications 46,317
Other 407,882
----------------
$ 2,046,773
================
Exhibit 11 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Computation of Net Income per Limited Partnership Unit
Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Net income $ 120,144 $ 494,730 $ 463,920
Gain on sale (11,031) (127,572) (26,730)
Loss on sale - 117 -
Special cost recovery allocation (9,519) - (819)
-------------- ---------------- ----------------
Available income from operations 99,594 367,725 436,371
-------------- ---------------- ----------------
Allocations to General Partner:
Income from operations 4,980 13,262 21,859
Gain on sale 110 1,276 112,101
Special cost recovery allocation 9,519 - (8)
-------------- ---------------- ----------------
Income allocated to General Partner 14,609 14,537 133,952
-------------- ---------------- ----------------
Income allocated to Limited Partners $ 105,535 $ 480,193 $ 329,968
============== ================ ================
Number of Limited Partnership Units 27,226 27,226 27,226
Net income per Limited Partnership Unit $ 3.88 $ 17.64 $ 12.12
============== ================ ================
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Statement Disclosures.
None.
Part III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1. of this
report, the General Partner of the Partnership is Wellesley Leasing Partnership.
Under the Partnership Agreement, the General Partner is solely responsible for
the operation of the Partnership's properties, and the Limited Partners have no
right to participate in the control of such operations. The General Partner has
three Corporate General Partners: TLP and TLPMS, both Massachusetts corporations
and Waddell & Reed, a Missouri corporation. The names and ages of the Directors
and Executive Officers of the Corporate General Partners are as follows:
TLP and TLPMS
Name Title Age
Nicholas C. Bogard Director 52
Arthur P. Beecher Director, President, and Clerk 60
Nancy E. Malone Vice President, Lease Financing 39
Irene V. King Vice President, Satellite Operations 50
James P. Campbell Vice President, Marketing 49
Waddell & Reed
Name Title Age
Keith A. Tucker President, Chief Executive Officer 53
and Director
Robert L. Hechler Vice President, Chief Operations Officer, 61
Treasurer and Director
Henry J. Herrmann Vice President, Chief Investment Officer 55
and Director
Robert J. Williams, Jr. Vice President and National Sales Manager 53
Sharon K. Pappas Vice President, Secretary 39
and General Counsel
(c) Identification of certain significant persons
See Item 10. (a-b)
(d) Family relationship
No family relationship exists between any of the foregoing Directors or
Officers.
(e) Business experience
Nicholas C. Bogard is Director of TLP and TLPMS. Mr. Bogard served as President
and Director of TLP from 1982 - 1992, and served as Director of CS First Boston
from 1992 - 1994. He has been working as an independent consultant since 1994.
Mr. Bogard holds a B.A. from Princeton University and an M.B.A. from Harvard
University.
Arthur P. Beecher is President, Director and Clerk of TLP and TLPMS. Prior to
joining TLP, he was an officer of CSA Financial Corp. of Boston, Massachusetts,
most recently as Vice President, Finance and Administration since 1975. Mr.
Beecher holds a B.S. from Boston University and is a Certified Public
Accountant.
Nancy E. Malone is Vice President, Lease Financing of TLP and TLPMS. Prior to
joining TLP, she was Manager, Lease Financing for 11 years at CSA Financial
Corp. of Boston, Massachusetts. Ms. Malone holds a B.A. from The College of the
Holy Cross.
Irene V. King is Vice President, Satellite Operations for TLP and TLPMS. Prior
to joining TLP in April 1994, she was Director of Public Income Funds at CSA
Financial Corp. of Boston, Massachusetts and was previously Vice President of
Finance at First Alliance Corp. of Wellesley, Massachusetts. Ms. King holds a
B.A. from Barat College of the Sacred Heart, Lake Forest, Illinois.
James P. Campbell is Vice President, Marketing of TLP. Prior to joining TLP, he
was Senior Vice President, Sales, at Chancellor Corporation of Boston,
Massachusetts. He has held Sales Management positions at Hertz Corporation
Truck Leasing and Associates Leasing. Mr. Campbell holds a B.S. in Psychology
from Boston College.
Keith A. Tucker is President, Chief Executive Officer and Director of Waddell &
Reed; Chairman of the Board of Directors of WRIMCO, Waddell & Reed, Inc.,
Waddell & Reed Services Company, Waddell & Reed Asset Management Company and
Torchmark Distributors, Inc., an affiliate of Waddell & Reed, Inc.; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; and President of each of the funds in the United,
Waddell & Reed and TMK/United mutual fund groups. He is also Director of
Southwestern Life Corporation. Prior to joining Torchmark Corporation in 1991,
Mr. Tucker was with Trivest, Inc. and Trivest Securities Corporation in Miami,
Florida since 1987, most recently as the Senior Vice President and President,
respectively. Prior to Trivest, Inc., he was Director of Atlantis Group, Inc.,
a diversified company. Mr. Tucker holds a B.B.A. and a J. D. both from the
University of Texas.
Robert L. Hechler is Vice President, Chief Operations Officer, Director and
Treasurer of Waddell & Reed; Executive Vice President, Principal Financial
Officer, Director and Treasurer of WRIMCO; President, Chief Executive Officer,
Principal Financial Officer, Director and Treasurer of Waddell & Reed, Inc.;
Director and Treasurer of Waddell & Reed Services Company; Vice President,
Treasurer and Director of Torchmark Distributors, Inc.; and Vice President and
Principal Financial Officer of each of the funds in the United, Waddell & Reed
and TMK/United mutual fund groups. He has been employed by Waddell & Reed and
its affiliates since 1977. Mr. Hechler holds a B.S. from the University of
Illinois and an M.B.A. from the University of Chicago.
Henry J. Herrmann is Vice President, Chief Investment Officer and Director of
Waddell & Reed; Director of Waddell & Reed, Inc.; President, Chief Executive
Officer, Chief Investment Officer and Director of WRIMCO and Waddell & Reed
Asset Management Company; Senior Vice President and Chief Investment Officer of
United Investors Management Company; and Vice President of each of the funds in
the United, Waddell & Reed and TMK/United mutual fund groups. He has been
employed by Waddell & Reed and its affiliates since 1971. Mr. Herrmann holds a
B.S. from New York University.
Robert J. Williams, Jr. is Vice President and National Sales Manager of Waddell
& Reed and Executive Vice President and National Sales Manager of Waddell &
Reed, Inc. He has been employed by Waddell & Reed, Inc. since July 1996. He was
employed with Charles Schwab & Company from November 1991 to July 1995. From
August 1984 to October 1991, he was employed by American Express Financial
Advisors or its affiliates. Mr. Williams holds a B.S. from the University of
Utah and an M.B.A. from California State-Humbolt.
Sharon K. Pappas is Vice President, Secretary and General Counsel of Waddell &
Reed; Senior Vice President, Secretary and General Counsel of WRIMCO and Waddell
& Reed, Inc.; Director, Senior Vice President, Secretary and General Counsel of
Waddell & Reed Services Company; Director, Secretary and General Counsel of
Waddell & Reed Asset Management Company; Vice President, Secretary and General
Counsel of Torchmark Distributors, Inc.; formerly, Assistant General Counsel of
WRIMCO, Waddell & Reed Financial Services, Inc., Waddell & Reed, Inc., Waddell &
Reed Asset Management Company and Waddell & Reed Services Company. She is Vice
President, Secretary and General Counsel of each of the funds in the United,
Waddell & Reed and TMK/United mutual fund groups. Prior to joining Waddell &
Reed and its affiliates in 1989, Ms. Pappas was employed with Stinson, Mag &
Fizzell in Kansas City, Missouri. Ms. Pappas holds a B.S. from Kansas State
University and a J.D. from the University of Kansas.
(f) Involvement in certain legal proceedings
The Partnership is not aware of any legal proceedings against any Director or
Executive Officer of the Corporate General Partners which may be important for
the evaluation of any such person's ability and integrity.
Item 11. Management Remuneration and Transactions.
(a), (b), (c), (d), and (e): The Officers and Directors of the Corporate General
Partners receive no current or proposed direct remuneration in such capacities,
pursuant to any standard arrangements or otherwise, from the Partnership. In
addition, the Partnership has not paid and does not propose to pay any options,
warrants or rights to the Officers and Directors of the Corporate General
Partners. There exists no remuneration plan or arrangement with any Officer or
Director of the Corporate General Partners resulting from the resignation,
retirement or any other termination. See note 5 to the financial statements
included in Item 8. of this report for a description of the remuneration paid by
the Partnership to the General Partner and its affiliates during 1998, 1997 and
1996.
Item 12. Security Ownership of Certain Owners and Management.
By virtue of its organization as a limited partnership, the Partnership has
outstanding no securities possessing traditional voting rights. However, as
provided for in Section 13.2 of the Amended Agreement of Limited Partnership
(subject to Section 13.3), a majority interest of the Limited Partners have
voting rights with respect to:
1. Amendment of the Limited Partnership Agreement;
2. Termination of the Partnership;
3. Removal of the General Partner; and
4. Approval or disapproval of the sale of substantially all the assets of the
Partnership.
No person or group is known by the General Partner to own beneficially more
than 5% of the Partnership's 27,226 outstanding Limited Partnership Units as
of December 31, 1998.
By virtue of its organization as a limited partnership, the Partnership has
no Officers or Directors. See also note 1 to the financial statements included
in Item 8. and Item 10. of this report.
Item 13. Certain Relationships and Related Transactions.
(a), (b), and (c): The General Partner of the Partnership is Wellesley Leasing
Partnership, a Massachusetts general partnership which in turn has three
Corporate General Partners: TLP and TLPMS, both Massachusetts corporations and
Waddell & Reed, a Missouri corporation. The Corporate General Partners'
Directors and Executive Officers are identified in Item 10. of this report. The
Partnership was not involved in any transaction involving any of these Directors
or Officers or any member of the immediate family of these individuals, nor did
any of these persons provide services to the Partnership for which they received
direct or indirect remuneration. Similarly, there exists no business
relationship between the Partnership and any of the Directors or Officers of the
Corporate General Partners, nor were any of the individuals indebted to the
Partnership.
The General Partner is responsible for acquiring, financing, leasing and selling
equipment for the Partnership. TLPMS proposes for the Partnership equipment
acquisitions, leasing transactions, financing and refinancing transactions, and
sale transactions, for approval by the Executive Committee and oversees the
operation, management and use of each Partnership's equipment. TLP oversaw the
marketing of the Units and oversees all administrative functions of the
Partnership and, together with Waddell & Reed, provides substantially all of the
General Partner's capital resources. In consideration of such services and
capital commitments, TLP receives 30%, Waddell & Reed receives 10% and TLPMS
receives 60% of all compensation received by the General Partner in connection
with the formation and operation of the Partnership (including equipment
management fees, acquisition fees, subordinated remarketing fees and the General
Partner's share of Distributable Cash From Sales or Refinancings), except for
Acquisition Fees, as to which TLP receives 15%, Waddell & Reed receives 10% and
TLPMS receives 75%. The General Partner also was reimbursed in an amount equal
to 3% of the gross proceeds of the Partnership's offerings for organizational
and offering expenses; all such expenses in excess of that amount were borne by
TLP. See note 5 to the financial statements included in Item 8 of this report
for a description of payments made by the Partnership to the General Partner.
For information regarding the settlements between the Partnership and the
Liquidating Estate of CIS Corporation, et al, arising out of the emergence from
bankruptcy of CIS and CMI, see Item 3. Legal Proceedings.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K: None.
(a) 1. Financial Statements Page No.
Independent Auditors' Report 16
Balance Sheets at December 31, 1998 and 1997 17
Statements of Operations
Years Ended December 31, 1998, 1997 and 1996 18
Statements of Partners' Equity (Deficit)
Years Ended December 31, 1998, 1997 and 1996 19
Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996 20
Notes to Financial Statements 21 - 25
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and Reserves 26
All other financial statement schedules are omitted because they are
not applicable, the data is not significant, or the required
information is shown elsewhere in this report.
Computer Equipment Portfolio (Unaudited) 27
3. Exhibit Index
11 Statement regarding computation of net income (loss) per Limited Partnership Unit 28
(b) Report on Form 8-K
N/A
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
Date: March 27, 1999
By: Arthur P. Beecher,
President