UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-16512
American Income Partners III-B Limited Partnership
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2968859
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 North Washington Street, Fifth Floor, Boston, MA 02114
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
Securities registered pursuant to Section 12(b) of the Act None
Title of each class Name of each exchange on which registered
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Securities registered pursuant to Section 12(g) of the Act:
1,127,330 Units Representing Limited Partnership Interest
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(Title of Class)
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(Title of Class)
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 nonaffiliates of
the registrant. Not applicable Securities are nonvoting for this purpose. Refer
to Item 12 for further information.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to security holders
for the year ended December 31, 1996 (Part I and II)
AMERICAN INCOME PARTNERS III-B LIMITED PARTNERSHIP
FORM 10-K
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 5
ITEM 3. LEGAL PROCEEDINGS 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 5
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S SECURITIES AND
RELATED SECURITY HOLDER MATTERS 6
ITEM 6. SELECTED FINANCIAL DATA 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 8
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP 9
ITEM 11. EXECUTIVE COMPENSATION 11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K 16-18
PART I
ITEM 1. BUSINESS.
(a) General Development of Business
AMERICAN INCOME PARTNERS III-B LIMITED PARTNERSHIP (the Partnership) was
organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the Uniform Act) on June 29, 1987, for the purpose of
acquiring and leasing to third parties a diversified portfolio of capital
equipment. Partners' capital initially consisted of contributions of $1,000
from the Managing General Partner (AFG Leasing Incorporated) and $100 from
the Initial Limited Partner (AFG Assignor Corporation). On September 29,
1987, the Partnership issued 1,127,330 units, representing assignments of
limited partnership interests (the Units) to 2,125 investors. Unitholders
and Limited Partners (other than the Initial Limited Partner) are
collectively referred to as Recognized Owners. On December 31, 1996, the
General Partners of the Partnership caused the Partnership's Amended and
Restated Agreement and Certificate of Limited Partnership (the Restated
Agreement, as amended) to be canceled by filing a Certificate of
Cancellation with the Massachusetts Secretary under the Uniform Act.
Accordingly, the Partnership was dissolved on December 31, 1996.
The Partnership originally had five General Partners: AFG Leasing
Incorporated, a Massachusetts corporation and wholly owned subsidiary of
American Finance Group (AFG), a Massachusetts general partnership, which
subsequently became Equis Financial Group Limited Partnership (collectively
referred to herein as AFG), Kestutis J. Makaitis, Daniel J. Roggemann,
Martin F. Laughlin and Geoffrey A. MacDonald (collectively the General
Partners). Messrs. Makaitis, Roggemann, and Laughlin subsequently elected
to withdraw as Individual General Partners. In connection with the
Partnership's wind-up and dissolution, the General Partner interest of AFG
Leasing Incorporated was merged with and into AFG Leasing IV Incorporated
effective October 17, 1996. Accordingly, AFG Leasing IV Incorporated became
the Managing General Partner of the Partnership commencing October 17,
1996. AFG Leasing IV Incorporated is a Massachusetts corporation
established in 1987 and a wholly-owned subsidiary of AFG and is also the
general partner or managing general partner of certain affiliated
partnerships sponsored by AFG.
(b) Financial Information About Industry Segments
The Partnership was engaged in only one industry segment: the business of
acquiring capital equipment and leasing the equipment to creditworthy
lessees on a full payout or operating lease basis. (Full payout leases are
those in which aggregate noncancellable rents exceed the Purchase Price of
the leased equipment. Operating leases are those in which the aggregate
noncancellable rental payments are less than the Purchase Price of the
leased equipment.) Industry segment data is not applicable.
3
(c) Narrative Description of Business
The Partnership was organized to acquire a diversified portfolio of capital
equipment subject to various full payout and operating leases and to lease
the equipment to third parties as income-producing investments. More
specifically, the Partnership's primary investment objectives were to
acquire and lease equipment which would:
1. Generate quarterly cash distributions;
2. Preserve and protect invested capital; and.
3. Maintain substantial residual value for ultimate sale.
The Partnership had the additional objective of providing certain federal
income tax benefits.
The Closing Date of the Offering of Units of the Partnership was September
29, 1987. The initial purchase of equipment and the associated lease
commitments occurred on September 29, 1987. The Partnership completed the
disposition of its entire equipment portfolio on September 30, 1996 and the
dissolution of the Partnership occurred on December 31, 1996.
The Partnership had no employees; however, it entered into a Management
Agreement with AFG (the Manager). The Manager's role, among other things,
was to (i) evaluate, select, negotiate, and consummate the acquisition of
equipment, (ii) manage the leasing, re-leasing, financing, and refinancing
of equipment, and (iii) arrange the resale of equipment. The Manager was
compensated for such services as described in the Restated Agreement, as
amended, Item 13 herein, and in Note 4 to the financial statements included
in Item 14, herein.
The Partnership's investment in equipment was subject to various risks,
including physical deterioration, technological obsolescence and defaults
by lessees. A principal business risk of owning and leasing equipment is
the possibility that aggregate lease revenues and equipment sale proceeds
will be insufficient to provide an acceptable rate of return on invested
capital after payment of all debt service costs and operating expenses.
Consequently, the success of the Partnership was largely dependent upon the
ability of the Managing General Partner and its Affiliates to forecast
technological advances, the ability of the lessees to fulfill their lease
obligations and the quality and marketability of the equipment at the time
of sale.
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1996, 1995 and 1994 is
incorporated herein by reference to Note 2 to the financial statements in
the 1996 Annual Report. Refer to Item 14(a)(3) for lease agreements filed
with the Securities and Exchange Commission.
Equis Financial Group Limited Partnership (Equis) is a Massachusetts
partnership formerly known as American Finance Group (AFG). AFG was
established in 1988 as a Massachusetts general partnership and succeeded
American Finance Group, Inc., a Massachusetts corporation organized in
1980. Equis and its subsidiaries (collectively, the Company) are engaged in
various aspects of the equipment leasing business, including Equis' role as
Equipment Manager or Advisor to the Partnership and several other
Direct-Participation equipment leasing programs sponsored or co-sponsored
by AFG (the Other Investment Programs). The Company arranges to broker or
originate equipment leases, acts as remarketing agent and asset manager,
and provides leasing support services, such as billing, collecting and
asset tracking.
4
The general partner of Equis, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by
Gary D. Engle, its President and Chief Executive Officer. Equis Corporation
also owns a controlling 1% general partner interest in Equis' 99% limited
partner, GDE Acquisition Limited Partnership (GDE LP). Equis Corporation
and GDE LP were established in December 1994 by Mr. Engle for the sole
purpose of acquiring the business of AFG.
In January 1996, the Company sold certain assets of AFG relating primarily
to the business of originating new leases, and the name "American Finance
Group," and its acronym to a third party (the Buyer). AFG changed its name
to Equis Financial Group Limited Partnership after the sale was concluded.
Pursuant to terms of the sale agreements, Equis agreed not to compete with
the Buyer's lease origination business for a period of five years; however,
Equis is permitted to originate certain equipment leases, principally those
involving noninvestment grade lessees and ocean-going vessels, which are
not in competition with the Buyer. In addition, the sale agreements
specifically reserved to Equis the rights to continue using the name
American Finance Group and its acronym in connection with the Partnership
and the Other Investment Programs and to continue managing all assets owned
by the Partnership and the Other Investment Programs, including the right
to satisfy all required equipment acquisitions utilizing either brokers or
the Buyer. Geoffrey A. MacDonald, Chairman of Equis Corporation and Gary D.
Engle agreed not to compete with the sold business on terms and conditions
similar to those for the Company.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
Not applicable.
ITEM 2. PROPERTIES.
None.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Partnership is a
party or which involve any of its equipment or leases.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
5
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S SECURITIES AND RELATED SECURITY HOLDER
MATTERS.
(a) Market Information
There was no public market for the resale of the Units.
(b) Approximate Number of Security Holders
At December 31, 1996, there were no recordholders of Units in the
Partnership.
(c) Dividend History and Restrictions
Pursuant to Article VI of the Restated Agreement, as amended, the
Partnership's Distributable Cash From Operations and Distributable Cash
From Sales or Refinancings were determined and distributed to the Partners
quarterly.
Distributions in 1996 and 1995 were as follows:
GENERAL RECOGNIZED
TOTAL PARTNERS OWNERS
Total 1996 distributions $ 3,720,755 $ 37,208 $ 3,683,547
Total 1995 distributions 1,281,056 12,811 1,268,245
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Total $ 5,001,811 $ 50,019 $ 4,951,792
=========== =========== ===========
Distributions payable were $213,508 at December 31, 1995. There were no
distributions payable at December 31, 1996.
Distributable Cash From Operations means the net cash provided by the
Partnership's normal operations after general expenses and current
liabilities of the Partnership are paid, reduced by any reserves for
working capital and contingent liabilities to be funded from such cash, to
the extent deemed reasonable by the Managing General Partner, and increased
by any portion of such reserves deemed by the Managing General Partner not
to be required for Partnership operations and reduced by all accrued and
unpaid Equipment Management Fees and, after Payout, further reduced by all
accrued and unpaid Subordinated Remarketing Fees. Distributable Cash From
Operations does not include any Distributable Cash From Sales or
Refinancings.
Distributable Cash From Sales or Refinancings means Cash From Sales or
Refinancings as reduced by (i)(a) amounts realized from any loss or
destruction of equipment which the Managing General Partner determines
shall be reinvested in similar equipment for the remainder of the original
lease term of the lost or destroyed equipment, or in isolated instances, in
other equipment, if the Managing General Partner determines that investment
of such proceeds will significantly improve the diversity of the
Partnership's equipment portfolio, and subject in either case to
satisfaction of all existing indebtedness
6
secured by such equipment to the extent deemed necessary or appropriate by
the Managing General Partner, and (b) the proceeds from the sale of an
interest in equipment pursuant to any agreement governing a joint venture
which the Managing General Partner determines will be invested in
additional equipment or interests in equipment and which ultimately are so
reinvested and (ii) any accrued and unpaid Equipment Management Fees and,
after Payout, any accrued and unpaid Subordinated Remarketing Fees.
Cash From Sales or Refinancings means cash received by the Partnership from
sale or refinancing transactions, as reduced by (i)(a) all debts and
liabilities of the Partnership required to be paid as a result of sale or
refinancing transactions, whether or not then due and payable (including
any liabilities on an item of equipment sold which are not assumed by the
buyer and any remarketing fees required to be paid to persons not
affiliated with the General Partners, but not including any Subordinated
Remarketing Fees whether or not then due and payable) and (b) any reserves
for working capital and contingent liabilities funded from such cash to the
extent deemed reasonable by the Managing General Partner and (ii) increased
by any portion of such reserves deemed by the Managing General Partner not
to be required for Partnership operations. In the event the Partnership
accepts a note in connection with any sale or refinancing transaction, all
payments subsequently received in cash by the Partnership with respect to
such note shall be included in Cash From Sales or Refinancings, regardless
of the treatment of such payments by the Partnership for tax or accounting
purposes. If the Partnership receives purchase money obligations in payment
for equipment sold, which are secured by liens on such equipment, the
amount of such obligations shall not be included in Cash From Sales or
Refinancings until the obligations are fully satisfied.
Each distribution of Distributable Cash From Operations and Distributable
Cash From Sales or Refinancings of the Partnership shall be made 99% to the
Recognized Owners and 1% to the General Partners until Payout and 85% to
the Recognized Owners and 15% to the General Partners after Payout.
Payout is defined as the first time when the aggregate amount of all
distributions to the Recognized Owners of Distributable Cash From
Operations and Distributable Cash From Sales or Refinancings equals the
aggregate amount of the Recognized Owners' original capital contributions
plus a cumulative annual return of 10% (compounded quarterly and calculated
beginning with the last day of the month of the Partnership's Closing Date)
on their aggregate unreturned capital contributions. For purposes of this
definition, capital contributions shall be deemed to have been returned
only to the extent that distributions of cash to the Recognized Owners
exceed the amount required to satisfy the cumulative annual return of 10%
(compounded quarterly) on the Recognized Owners' aggregate unreturned
capital contributions, such calculation to be based on the aggregate
unreturned capital contributions outstanding on the first day of each
fiscal quarter. The Partnership did not achieve Payout.
Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings (Distributions) were distributed within 60 days after the
completion of each quarter of the year, beginning with the first full
fiscal quarter following the Partnership's Closing Date. The Partnership
has distributed $29,716,408 to the Recognized Owners and $300,166 to the
General Partners since inception. Substantially all of the distributions to
the Recognized Owners represent a return of capital.
7
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated herein by reference to the section entitled Selected Financial Data
in the 1996 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Incorporated herein by reference to the section entitled Management's Discussion
and Analysis of Financial Condition and Results of Operations in the 1996 Annual
Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated herein by reference to the financial statements and supplementary
data included in the 1996 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
8
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
(a-b) Identification of Directors and Executive Officers
The Partnership has had no Directors or Officers. As indicated in Item 1 of
this report, AFG Leasing IV Incorporated was the Managing General Partner
of the Partnership. Under the Restated Agreement, as amended, the Managing
General Partner was responsible for the operation of the Partnership's
properties and the Recognized Owners have had no right to participate in
the control of such operations. The names, titles and ages of the Directors
and Executive Officers of the Managing General Partner of the Partnership
as of March 15, 1997 were as follows:
DIRECTORS AND EXECUTIVE OFFICERS OF THE
MANAGING GENERAL PARTNER OF THE PARTNERSHIP (SEE ITEM 13)
NAME TITLE AGE TERM
Geoffrey A. MacDonald Chairman, and a member of the 48 Until a
Executive Committee of Equis successor is
and President and a Director of duly elected
the Managing General Partner and qualified
Gary D. Engle President and Chief Executive 48
Officer and a member of the
Executive Committee of Equis
Gary M. Romano Executive Vice President and 37
Chief Operating Officer of Equis
and Clerk of the Managing
General Partner
Michael J. Butterfield Vice President, Finance and 37
Treasurer of Equis and Treasurer
of the Managing General Partner
James F. Livesey Vice President, Aircraft and 47
Vessels of Equis
Sandra L. Simonsen Senior Vice President, 46
Information Systems of Equis
Gail D. Ofgant Vice President, Lease Operations 31
of Equis
(c) Identification of Certain Significant Persons
None.
9
(d) Family Relationship
No family relationship exists among any of the foregoing Partners,
Directors or Executive Officers.
(e) Business Experience
Mr. MacDonald, age 48, is a co-founder of Equis' predecessor, AFG, Chairman
and a member of the Executive Committee of Equis and President and a
Director of the Managing General Partner. Mr. MacDonald served as a
co-founder, Director and Senior Vice President of AFG's predecessor
corporation from 1980 to 1988. Mr. MacDonald is Vice President of American
Finance Group Securities Corp. and a limited partner in Atlantic
Acquisition Limited Partnership (AALP). Prior to co-founding AFG's
predecessor, Mr. MacDonald held various executive and management positions
in the leasing and pharmaceutical industries. Mr. MacDonald holds an M.B.A.
from Boston College and a B.A. degree from the University of Massachusetts
(Amherst).
Mr. Engle, age 48, is President, Chief Executive Officer and a member of
the Executive Committee of Equis and President of AFG Realty Corporation.
Mr. Engle is Vice President, and a Director of certain of Equis'
affiliates. On December 16, 1994, Mr. Engle acquired control of AFG, the
Managing General Partner and each of AFG's subsidiaries. Mr. Engle controls
the general partner of AALP and is also a limited partner in AALP. From
1987 to 1990, Mr. Engle was a principal and co-founder of Cobb Partners
Development, Inc., a real estate and mortgage banking company. From 1980 to
1987, Mr. Engle was Senior Vice President and Chief Financial Officer of
Arvida Disney Company, a large-scale community development company owned by
Walt Disney Company. Prior to 1980, Mr. Engle served in various management
consulting and institutional brokerage capacities. Mr. Engle has an M.B.A.
from Harvard University and a B.S. degree from the University of
Massachusetts (Amherst).
Mr. Romano, age 37, is Executive Vice President and Chief Operating Officer
of Equis and certain of its affiliates and Clerk of the Managing General
Partner. Mr. Romano joined AFG in November 1989 and was appointed Executive
Vice President and Chief Operating Officer in April 1996. Prior to joining
AFG, Mr. Romano was Assistant Controller for a privately-held real estate
company which he joined in 1987. Mr. Romano held audit staff and manager
positions at Ernst & Whinney from 1982 to 1986. Mr. Romano is a C.P.A. and
holds a B.S. degree from Boston College.
Mr. Butterfield, age 37, is Vice President, Finance and Treasurer of Equis
and Treasurer of the Managing General Partner. Mr. Butterfield joined AFG
in June 1992 and was appointed Vice President, Finance and Treasurer in
April 1996. Prior to joining AFG, Mr. Butterfield was an Audit Manager with
Ernst & Young LLP, which he joined in 1987. Mr. Butterfield was employed in
public accounting and industry positions in New Zealand and London (U.K.)
prior to coming to the United States in 1987. Mr. Butterfield attained his
Associate Chartered Accountant (A.C.A.) professional qualification in New
Zealand and has completed his C.P.A. requirements in the United States. He
holds a Bachelor of Commerce degree from the University of Otago, Dunedin,
New Zealand.
Mr. Livesey, age 47, is Vice President, Aircraft and Vessels of Equis. Mr.
Livesey joined AFG in October 1989, and was promoted to Vice President in
January 1992. Prior to joining AFG, Mr. Livesey held sales and marketing
positions with two privately-held equipment leasing firms. Mr. Livesey
holds an M.B.A. from Boston College and B.A. degree from Stonehill College.
10
Ms. Simonsen, age 46, joined AFG in February 1990 and was promoted to
Senior Vice President, Information Systems of Equis in April 1996. Prior to
joining AFG, Ms. Simonsen was Vice President, Information Systems with
Investors Mortgage Insurance Company which she joined in 1973. Ms. Simonsen
provided systems consulting for a subsidiary of American International
Group and authored a software program published by IBM. Ms. Simonsen holds
a B.A. degree from Wilson College.
Ms. Ofgant, age 31, is Vice President, Lease Operations of Equis and
certain of its affiliates. Ms. Ofgant joined AFG in June 1989, and was
promoted to Manager, Lease Operations in April 1994. In April 1996, Ms.
Ofgant was appointed Vice President, Lease Operations. Prior to joining
AFG, Ms. Ofgant was employed by Security Pacific National Trust Company.
Ms. Ofgant holds a B.S. degree in Finance from Providence College.
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
See Item 10 (a-b) above.
ITEM 11. EXECUTIVE COMPENSATION.
(a) Cash Compensation
The Partnership had no employees. However, under the terms of the Restated
Agreement, as amended, the Partnership was obligated to pay all costs of
personnel employed full or part-time by the Partnership, including officers
or employees of the Managing General Partner or its Affiliates. The
Partnership did not pay any options, warrants or rights to the officers or
employees of the Managing General Partner or its Affiliates.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Although the Partnership had no employees, as discussed in Item 11(a),
pursuant to section 10.4 of the Restated Agreement, as amended, the
Partnership incurred a monthly charge for personnel costs of the Manager
for persons engaged in providing administrative services to the
Partnership. A description of the remuneration paid by the Partnership to
the Manager for such services is included in Item 13, herein and in Note 4
to the financial statements included in Item 14, herein.
(d) Compensation of Directors
None.
11
(e) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the General Partners
or the Managing General Partner or its Affiliates which would have resulted
from their resignation, retirement or any other termination.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
By virtue of its organization as a limited partnership, the Partnership had
outstanding no securities possessing traditional voting rights. However, as
provided in Section 11.2(a) of the Restated Agreement, as amended (subject to
Sections 11.2(b) and 11.3), a majority interest of the Recognized Owners had
voting rights with respect to:
1. Amendment of the Restated Agreement;
2. Termination of the Partnership;
3. Removal of the General Partners; and
4. Approval or disapproval of the sale of all, or substantially all, of the
assets of the Partnership (except in the orderly liquidation of the
Partnership upon its termination and dissolution).
The ownership and organization of AFG is described in Item 1 of this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Managing General Partner of the Partnership is AFG Leasing IV Incorporated,
an affiliate of AFG.
(a) Transactions with Management and Others
All operating expenses incurred by the Partnership were paid by AFG on
behalf of the Partnership and AFG was reimbursed at its actual cost for
such expenditures. Fees and other costs incurred during each of the three
years in the period ended December 31, 1996, which were paid or accrued by
the Partnership to AFG or its Affiliates, are as follows:
1996 1995 1994
Equipment management fees $ 45,250 $ 49,411 $ 92,431
Administrative charges 29,270 21,000 12,000
Reimbursable operating expenses
due to third parties 150,083 98,188 146,185
--------- --------- ---------
Total $ 224,603 $ 168,599 $ 250,616
========= ========= =========
As provided under the terms of the Management Agreement, AFG was
compensated for its services to the Partnership. Such services included all
aspects of acquisition, management and sale of equipment. For acquisition
services, AFG was compensated by an amount equal to 4.75% of Equipment Base
Price paid by the Partnership. For management services, AFG was compensated
by an amount equal to the lesser of (i) 5% of gross lease rental revenue or
(ii) fees which the Managing General Partner
12
reasonably believed to be competitive for similar services for similar
equipment. Both of these fees were subject to certain limitations defined
in the Management Agreement. As Payout was not achieved, AFG received no
compensation for services connected to the sale of equipment, under its
subordinated remarketing agreement.
Administrative charges represent amounts owed to AFG, pursuant to Section
10.4 of the Restated Agreement, as amended, for persons employed by AFG who
were engaged in providing administrative services to the Partnership.
Reimbursable operating expenses due to third parties represent costs paid
by AFG on behalf of the Partnership which were reimbursed to AFG.
All equipment was acquired from AFG, one of its affiliates, including other
equipment leasing programs sponsored by AFG, or from third-party sellers.
The Partnership's Purchase Price was determined by the method described in
Note 2 to the financial statements, included in Item 14, herein.
All rents and proceeds from the sale of equipment were paid directly to
either AFG or to a lender. AFG temporarily deposited collected funds in a
separate interest-bearing escrow account prior to remittance to the
Partnership.
On August 18, 1995, Atlantic Acquisition Limited Partnership (AALP), a
newly formed Massachusetts limited partnership owned and controlled by
certain principals of AFG, commenced a voluntary cash Tender Offer (the
Offer) for up to approximately 45% of the outstanding units of limited
partner interest in this Partnership and 20 affiliated partnerships
sponsored and managed by AFG. The Offer was subsequently amended and
supplemented in order to provide additional disclosure to unitholders;
increase the offer price; reduce the number of units sought to
approximately 35% of the outstanding units; and extend the expiration date
of the Offer to October 20, 1995. Following commencement of the Offer,
certain legal actions were initiated by interested persons against AALP,
each of the general partners (4 in total) of the 21 affected programs, and
various other affiliates and related parties. One action, a class action
brought in the United States District Court for the District of
Massachusetts (the Court) on behalf of the unitholders (limited partners),
sought to enjoin the Offer and obtain unspecified monetary damages. A
settlement of this litigation was approved by the Court on November 15,
1995. The Plaintiffs filed an appeal in this matter. On November 26, 1996,
the United States Court of Appeals for the First Circuit handed down a
decision affirming the Court's approval of the settlement. A second class
action, brought in the Superior Court of the Commonwealth of Massachusetts
(the Superior Court) seeking to enjoin the Offer, obtain unspecified
monetary damages, and intervene in the first class action, was dismissed by
the Superior Court. The Recognized Owners of the Partnership tendered
100,180 units or 8.89% of the total outstanding units of the Partnership to
AALP. In September 1996, AALP sold these units to Equis for $326,860.
On September 30, 1996, the Partnership sold all of its remaining equipment
assets. The remarketing effort described in Notes 1 and 4 to the financial
statements was undertaken jointly by 15 individual equipment leasing
programs, consisting of the Partnership and 14 affiliated partnerships
(Other Affected Partnerships). Thirteen of the programs, including the
Partnership, sold all of their equipment assets (the Liquidated Programs);
and two programs sold only their proportionate ownership interests in
certain assets owned jointly with one or more of the Liquidated Programs
(collectively, the Sale Assets). Substantially all of the Partnership's
equipment assets of material value represented partial ownership interests
whereby the Partnership owned less than a 100% interest in the equipment it
sold. The remaining interests in such assets were owned by one or more of
the Other Affected Partnerships.
13
On September 30, 1996, the Partnership and each of the Other Affected
Partnerships executed individual purchase and sale agreements with RSL
Finance Limited Partnership II (the Buyer) for all of the Sale Assets,
except for one McDonnell Douglas MD-82 aircraft leased to Northwest
Airlines, Inc. (the NWA Aircraft), hereafter the Sale Assets, as Revised.
The NWA Aircraft, in which the Partnership owned a proportionate interest
of 16%, was purchased by the lessee pursuant to a separate negotiation. The
Partnership realized $993,316 of net sale proceeds for the Sale Assets, as
Revised and $2,083,223 for the NWA Aircraft. The latter included early
termination rental payments of $259,604 from the lessee. At the date of
sale, the Sale Assets, as Revised and the NWA Aircraft had net book values
of $825,284 and $1,885,025, respectively. In aggregate, the Partnership and
the Other Affected Partnerships realized, prior to transaction costs,
$32,997,000 for all of the Sale Assets, as Revised and $13,200,000 for the
NWA Aircraft. Net proceeds from the NWA Aircraft were allocated to the
owners of the NWA Aircraft according to their respective percentage
ownership interests. Net proceeds from the Sale Assets, as Revised were
allocated to the Partnership and to each of the Other Affected Partnerships
based upon an apportionment of the sales price among all equipment
comprising the Sale Assets, as Revised according to each asset's estimated
re-sale value, as determined by an independent appraiser.
The Buyer is a limited partnership established to acquire the Sale Assets,
as Revised, and has no direct affiliation with the Partnership, the Other
Affected Partnerships, the General Partners or AFG. The sole general
partner of the Buyer is RSL Holdings, Inc. (RSL). An affiliate of RSL
purchased a significant limited partnership interest in a
direct-participation equipment leasing program co-sponsored by AFG in 1992.
AFG acquired this interest in 1993 for cash and assumption of indebtedness.
There have been no other business dealings between the Buyer and AFG and
their affiliates.
On October 10, 1996, the Managing General Partner entered into a Cross
Partnership Agreement (the Agreement) with the general partners of certain
of the Other Affected Partnerships participating in the sales transactions
described above. Pursuant to the Agreement, the Partnership and each of the
other partnerships agreed to set aside a contingency reserve for future
liabilities. The Agreement provides that obligations of any individual
partnership which are not associated with the sales transactions will
directly reduce that partnership's reserve balance, whereas costs
pertaining to the sales transactions will be allocated against the reserve
balances of the Partnership and each of the other partnerships on a
proportionate basis. If the reserve balance of the Partnership is depleted
to zero, the reserve balances contributed by the other partnerships will be
debited on a proportionate basis to cover the deficit. If the reserve
balances of any one of the other partnerships is depleted to zero, the
reserve balance of the Partnership and any other partnerships having a
positive reserve balance shall be debited on a proportionate basis to cover
the deficit. Upon termination of the Agreement, any remaining monies will
be distributed to the partners of those partnerships with positive reserve
balances. At December 31, 1996, the Partnership had a contingency reserve
balance of $360,236. To the extent that this contingency reserve is not
necessary to satisfy any unforeseen liabilities of the Partnership, it will
be remitted to the Partners.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Partnership
None.
14
(d) Transactions with Promoters
See Item 13(a) above.
15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements:
Report of Independent Auditors *
Statement of Financial Position at December 31, 1995 *
Statement of Changes in Net Assets in Liquidation for
the Period October 1, 1996 to December 31, 1996 *
Statement of Operations for the Period January 1, 1996
to September 30, 1996 and for the Years Ended December
31, 1995 and 1994 *
Statement of Changes in Partners' Capital for the
Period January 1, 1996 to September 30, 1996 and for
the Years Ended December 31, 1995 and 1994 *
Statement of Cash Flows for the Period January 1, 1996
to September 30, 1996 and for the Years Ended December
31, 1995 and 1994 *
Notes to the Financial Statements *
(2) Financial Statement Schedules:
None required.
(3) Exhibits:
Except as set forth below, all Exhibits to Form 10-K, as set forth in
Item 601 of Regulation S-K, are not applicable.
* Incorporated herein by reference to the appropriate portion of the
1996 Annual Report to security holders for the year ended December 31,
1996. (See Part II).
16
EXHIBIT
NUMBER
4 Amended and Restated Agreement and Certificate of Limited
Partnership included as Exhibit A to the Prospectus which is
included in Registration Statement on Form S-1 (No.
33-11160).
13 The 1996 Annual Report to security holders, a copy of which
is furnished for the information of the Securities and
Exchange Commission. Such Report, except for those portions
thereof which are incorporated herein by reference, is not
deemed filed with the Commission.
23 Consent of Independent Auditors.
99(a) Lease agreement with Northwest Airlines, Inc., was filed in
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991 as Exhibit 28(b) and is incorporated
herein by reference.
99(b) Lease agreement with ING Aviation Lease, was filed in the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995 as Exhibit 99(f) and is incorporated
herein by reference.
99(c) Lease agreement with Contract Transportation Systems Co. was
filed in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995 as Exhibit 99(d) and is
incorporated herein by reference.
99(d) Lease agreement with The Denver and Rio Grade Western
Railroad was filed in the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995 as Exhibit 99(e)
and is incorporated herein by reference.
99(e) Lease agreement with Equicor, Inc. was filed in the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 as Exhibit 28(e) and is incorporated
herein by reference.
(b) Reports on Form 8-K
Report on Form 8-K was filed on October 3, 1996 describing the remarketing
process and terms of sales.
17
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of American Income Partners III-B Limited Partnership of our report dated March
7, 1997, included in the 1996 Annual Report to the Partners of American Income
Partners III-B Limited Partnership.
ERNST & YOUNG LLP
Boston, Massachusetts
March 7, 1997
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on behalf of the registrant and in the capacity and on the
date indicated.
AMERICAN INCOME PARTNERS III-B LIMITED PARTNERSHIP
By: AFG Leasing IV Incorporated,
a Massachusetts corporation and the
Managing General Partner of the Registrant.
By: /s/Geoffrey A. MacDonald By: /s/Gary D. Engle
---------------------------- ----------------------------
Geoffrey A. MacDonald Gary D. Engle
Chairman, and a member of the President and Chief Executive
Executive Committee of Equis and Officer and a member of the
President and a Director of the Executive Committee of Equis
Managing General Partner (Principal Executive Officer)
Date: March 28, 1997 Date: March 28, 1997
------------------------------ --------------------------
By: /s/Gary M. Romano By: /s/Michael J. Butterfield
---------------------------- ----------------------------
Gary M. Romano Michael J. Butterfield
Executive Vice President and Vice President, Finance and
Chief Operating Officer of Equis and Treasurer of Equis and Treasurer
Clerk of the Managing General Partner of the Managing General Partner
(Principal Financial Officer) (Principal Accounting Officer)
Date: March 28, 1997 Date: March 28, 1997
------------------------------ --------------------------
19
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
No annual report has been sent to the Recognized Owners. A report will be
furnished to the Recognized Owners subsequent to the date hereof.
No proxy statement has been or will be sent to the Recognized Owners.
20