News Column

ICON LEASING FUND TWELVE, LLC - 10-Q - Manager's Discussion and Analysis of Financial Condition and Results of Operations

August 12, 2014

The following is a discussion of our current financial position and results of operations. This discussion should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2013. This discussion should also be read in conjunction with the disclosures below regarding "Forward-Looking Statements" and the "Risk Factors" set forth in Item 1A of Part II of this Quarterly Report on Form 10-Q.



As used in this Quarterly Report on Form 10-Q, references to "we," "us," "our" or similar terms include ICON Leasing Fund Twelve, LLC and its consolidated subsidiaries.

Forward-Looking Statements Certain statements within this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). These statements are being made pursuant to the PSLRA, with the intention of obtaining the benefits of the "safe harbor" provisions of the PSLRA, and, other than as required by law, we assume no obligation to update or supplement such statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words such as "may," "would," "could," "anticipate," "believe," "estimate," "expect," "continue," "further," "plan," "seek," "intend," "predict" or "project" and variations of these words or comparable words or phrases of similar meaning. These forward-looking statements reflect our current beliefs and expectations with respect to future events. They are based on assumptions and are subject to risks and uncertainties and other factors outside of our control that may cause actual results to differ materially from those projected. We undertake no obligation to update publicly or review any forward-looking statement, whether as a result of new information, future developments or otherwise.



Overview

We operate as an equipment leasing and finance program in which the capital our members invested was pooled together to make investments, pay fees and establish a small reserve. We primarily acquire equipment subject to lease, purchase equipment and lease it to third-party end users or finance equipment for third parties and, to a lesser degree, acquire ownership rights to items of leased equipment at lease expiration. Some of our equipment leases are acquired for cash and are expected to provide current cash flow, which we refer to as "income" leases. For our other equipment leases, we finance the majority of the purchase price through borrowings from third parties. We refer to these leases as "growth" leases. These growth leases generate little or no current cash flow because substantially all of the rental payments we receive from the lessee are used to service the indebtedness associated with acquiring or financing the lease. For these leases, we anticipate that the future value of the leased equipment will exceed the cash portion of the purchase price.



Our Manager manages and controls our business affairs, including, but not limited to, our equipment leases and other financing transactions, under the terms of our LLC Agreement.

Our offering period ended on April 30, 2009 and our operating period commenced on May 1, 2009. During our offering period, we raised total equity of $347,686,947. Our operating period ended on April 30, 2014 and our liquidation period commenced on May 1, 2014.During our liquidation period, we will sell our assets and/or let our investments mature in the ordinary course of business. If our Manager believes it would benefit our members to reinvest the proceeds received from investments in additional investments during the liquidation period, our Manager may do so.



Recent Significant Transactions

We engaged in the following significant transactions since December 31, 2013:

Telecommunications Equipment On March 31, 2014, upon the expiration of the lease, Broadview purchased telecommunications equipment from us for $293,090. No gain or loss was recorded as a result of this transaction. Marine Vessels 18



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On March 21, 2014, ICON Siva, through two indirect subsidiaries, entered into memoranda of agreement to purchase the SIVA Vessels from Siva Global for an aggregate purchase price of $41,600,000. The SIVA Coral and the SIVA Pearl were delivered on March 28, 2014 and April 8, 2014, respectively. The SIVA Vessels were bareboat chartered to an affiliate of Siva Global for a period of eight years upon the delivery of each respective vessel. The SIVA Vessels were each acquired for approximately $3,550,000 in cash, $12,400,000 of financing through the Loan from DVB and $4,750,000 of financing through a subordinated, non-interest-bearing seller's credit. On April 1, 2014, two containership vessels, the Aegean Express and the Arabian Express, were returned to us in accordance with the terms of the leases. Upon redelivery, the bareboat charters were terminated and we assumed the underlying time charters for the Aegean Express and the Arabian Express, which were scheduled to expire on June 9, 2014 and August 14, 2014, respectively. Subsequently, the time charter for the Aegean Express was extended through November 9, 2014 and we are in the process of finalizing the extension of the time charter for the Arabian Express through January 10, 2015. Upon such redelivery, we assumed operational responsibility of the vessels. Simultaneously, we contracted with Fleet Ship to manage the vessels on our behalf. Accordingly, these vessels have been reclassified to Vessels on our consolidated balance sheets. On April 3, 2014, Leighton, in accordance with the terms of three bareboat charters scheduled to expire between 2017 and 2018, exercised its option and purchased the Leighton Vessels from us for an aggregate price of $155,220,900, including payment of swap-related expenses of $720,900. As a result of the termination of the leases and the sale of the Leighton Vessels, we recognized additional finance income of approximately $57,248,000. A portion of the aggregate purchase price due from the exercise of the purchase option was used to satisfy the Leighton seller's credits of $47,421,000 related to our original purchase of the Leighton Vessels as well as to satisfy our non-recourse debt obligations with Standard Chartered of approximately $38,426,000. On April 14, 2014 and May 21, 2014, upon expiration of the leases with AET, a joint venture owned 25% by us and 75% by Fund Fourteen sold the Eagle Otome and the Eagle Subaru to third-party purchasers for an aggregate price of approximately $14,822,000. As a result, the joint venture recognized an aggregate gain on sale of assets of approximately $2,200,000. Our share of such gain was approximately $550,000, which is included within income from investment in joint ventures on our consolidated statements of comprehensive income. On June 12, 2014, a joint venture owned 75% by us, 12.5% by Fund Fourteen and 12.5% by Fund Fifteen purchased an offshore supply vessel from Pacific Crest for $40,000,000. Simultaneously, the vessel was bareboat chartered to Pacific Crest for ten years. The vessel was acquired for approximately $12,000,000 in cash, $26,000,000 of financing through a senior secured loan from DVB and $2,000,000 of financing through a subordinated, non-interest-bearing seller's credit. The senior secured loan bears interest at a rate of 5.04% per year and has a term of 7 years. Trucks and Trailers On March 28, 2014, a joint venture owned 60% by us, 27.5% by Fund Fifteen and 12.5% by Fund Sixteen purchased trucks, trailers and other equipment from subsidiaries of D&T for $12,200,000. Simultaneously, the trucks, trailers and other equipment were leased to D&T and its subsidiaries for 57 months.



Mining Equipment

On September 12, 2013, a joint venture owned by us, Fund Eleven and Fund Sixteen purchased mining equipment for approximately $15,107,000. The equipment is subject to a 24-month lease with Murray, which expires on September 30, 2015. On December 1, 2013 and February 1, 2014, Fund Sixteen contributed capital of approximately $934,000 and $1,726,000, respectively, to the joint venture, inclusive of acquisition fees. Subsequent to Fund Sixteen's second capital contribution, the joint venture is owned 13.2% by us, 67% by Fund Eleven and 19.8% by Fund Sixteen. As a result, we received corresponding returns of capital. On March 4, 2014, a joint venture owned 60% by us, 15% by Fund Fourteen, 15% by Fund Fifteen and 10% by Fund Sixteen purchased mining equipment from an affiliate of Blackhawk. Simultaneously, the mining equipment was leased to Blackhawk and its affiliates for four years. The aggregate purchase price for the mining equipment of approximately $25,359,000 was funded by approximately $17,859,000 in cash and $7,500,000 of non-recourse long-term debt with People's Capital. The loan bears interest at a rate of 6.5% per year and matures on February 1, 2018. Notes Receivable 19



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On January 31, 2014, the INOVA Borrowers satisfied their obligation in connection with three term loans scheduled to mature on August 1, 2014 by making a prepayment of approximately $1,672,000. No material gain or loss was recorded as a result of this transaction. On March 18, 2014, Green Field satisfied its obligation in connection with a superpriority, secured term loan scheduled to mature on August 26, 2014 by making a prepayment of approximately $7,458,000, comprised of all outstanding principal and accrued interest. No material gain or loss was recorded as a result of this transaction. On April 15, 2014, we sold all of our interest in two term loans with Ocean Navigation scheduled to mature in July and September 2016 to Garanti Bank for $9,600,000. As a result, we wrote off the remaining initial direct costs associated with the notes receivable of approximately $455,000 as a charge against finance income. On June 6, 2014, NTS satisfied their obligations in connection with a term loan scheduled to mature on July 1, 2017 by making a prepayment of approximately $2,701,000, comprised of the outstanding principal, accrued interest and a prepayment fee of approximately $103,000. The prepayment fee was recognized as additional finance income. On June 17, 2014, we and Fund Fourteen entered into a secured term loan credit facility agreement with SeaChange to provide a credit facility of up to $7,000,000, of which our total commitment is $6,300,000. The facility will be used to partially finance SeaChange's acquisition and conversion of a containership vessel. As of June 30, 2014, we have funded $4,050,000 of our total commitment. The facility bears interest at 13.25% per year and is for a period of 42 months. The facility is secured by, among other things, a first priority security interest in and earnings from the vessel and the equity interests of SeaChange. During the three months ended June 30, 2014, substantially all material conditions to closing were satisfied with respect to a commitment to provide a senior secured term loan credit facility to TMA of up to $29,000,000, of which our portion is expected to be $21,750,000. On July 14, 2014, we, Fund Fourteen, Fund Fifteen and TMA executed the credit facility agreement. The facility will be used by TMA to acquire and refinance two platform supply vessels. The loan will bear interest at LIBOR plus a margin of between 13% and 17% and will be for a period of five years. The loan will be secured by, among other things, a first priority security interest in and earnings from each of the vessels. We expect to fund our commitment under the facility during the three month period ending September 30, 2014. Acquisition Fees



We incurred acquisition fees to our Manager of $2,272,500 and $3,884,570 during the three and six months ended June 30, 2014.

Subsequent Events

On July 2, 2014, SAE satisfied its obligation related to a secured term loan scheduled to mature on November 28, 2016 by making a prepayment of approximately $4,592,000, comprised of all outstanding principal, accrued interest and a prepayment fee.

On July 7, 2014, Cenveo made a partial prepayment of approximately $1,112,000, which includes a prepayment fee, related to a secured term loan. Simultaneously, we partially paid down our non-recourse long-term debt with NXT secured by our interest in the secured term loan to and collateral from Cenveo by making a payment of approximately $703,000.



Recent Accounting Pronouncements

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will become effective for us on January 1, 2017. We are currently in the process of evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements. We do not believe any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our consolidated financial statements.



Results of Operations for the Three Months Ended June 30, 2014 (the "2014 Quarter") and 2013 (the "2013 Quarter")

Financing Transactions

The following tables set forth the types of assets securing the financing transactions in our portfolio:

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Table of Contents June 30, 2014 December 31, 2013 Net Percentage of Net Percentage of Carrying Total Net Carrying Total Net Asset Type Value Carrying Value Value Carrying Value Tanker vessel $ 38,588,836 34% $ - - Mining equipment 24,064,662 22% - - Transportation 11,654,097 11% - - Printing equipment 10,059,241 9% 10,961,912 7% Coal drag line 6,620,434 6% 7,495,844 5% Seismic imaging equipment 4,156,469 4% 4,128,632 3% Tube manufacturing equipment 4,120,689 4% 4,152,432 3% Marine - container vessel 3,955,500 4% - - Lubricant manufacturing equipment 2,720,636 3% 2,737,695 2% Aircraft engines 1,639,821 2% 1,687,232 1% On-shore oil field services equipment 462,176 1% 8,017,099 6% Offshore oil field services equipment - - 93,951,371 63% Marine - crude oil tanker - - 10,102,586 7% Telecommunications equipment - - 3,168,851 2% Analog seismic system equipment - - 1,878,037 1% $ 108,042,561 100% $ 148,281,691 100% The net carrying value of our financing transactions includes the balances of our net investment in notes receivable and our net investment in finance leases, which are included in our consolidated balance sheets.



During the 2014 Quarter and the 2013 Quarter, certain customers generated significant portions (defined as 10% or more) of our total finance income as follows:

Percentage of Total Finance Income Customer Asset Type 2014 Quarter 2013 Quarter Leighton Holdings Limited Offshore oil field services equipment 96% 59% Atlas Pipeline Mid-Continent, LLC Gas compressors - 13% 96% 72% Interest income from our net investment in notes receivable and finance income from our net investment in finance leases are included in finance income in our consolidated statements of comprehensive income. The foregoing percentages are only as of a stated period and are not expected to be comparable in future periods. Further, these percentages are only representative of the percentage of the carrying value of such assets or finance income as of each stated period, and as such are not indicative of the concentration of any asset type or customer by the amount of equity invested or our investment portfolio as a whole.



Operating Lease Transactions

The following tables set forth the types of equipment subject to operating leases in our portfolio:

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Table of Contents June 30, 2014 December 31, 2013 Net Percentage of Net Percentage of Carrying Total Net Carrying Total Net Asset Type Value Carrying Value Value Carrying Value



Offshore oil field services equipment $ 74,099,236 100%

$ 35,135,234 64%

Marine - container vessels - - 20,071,331 36% $ 74,099,236 100% $ 55,206,565 100% The net carrying value of our operating lease transactions includes the balance of our leased equipment at cost, which is included in our consolidated balance sheets.



During the 2014 Quarter and the 2013 Quarter, certain customers generated significant portions (defined as 10% or more) of our total rental income as follows:

Percentage of Total Rental Income

Customer Asset Type 2014



Quarter 2013 Quarter

Swiber Holdings Limited Offshore oil field services equipment 90%

24% Vroon Group B.V. Marine - container vessels - 18% AET Inc. Limited Marine - crude oil tanker - 58% 90% 100% The foregoing percentages are only as of a stated period and are not expected to be comparable in future periods. Further, these percentages are only representative of the percentage of the carrying value of such assets or rental income as of each stated period, and as such are not indicative of the concentration of any asset type or customer by the amount of equity invested or our investment portfolio as a whole. Revenue and other income for the 2014 Quarter and the 2013 Quarter is summarized as follows: Three Months Ended June 30, 2014 2013 Change Finance income $ 58,463,355$ 4,638,049$ 53,825,306 Rental income 2,609,028 9,619,488 (7,010,460) Time charter revenue 1,460,867 - 1,460,867 Income from investment in joint ventures 1,204,994



1,158,083 46,911

(Loss) gain on lease termination (18,800)



2,887,375 (2,906,175)

Loss on sale of assets, net - (2,690,288) 2,690,288 Total revenue and other income $ 63,719,444$ 15,612,707$ 48,106,737 Total revenue and other income for the 2014 Quarter increased $48,106,737, or 308.1%, as compared to the 2013 Quarter. The increase was due to an increase in finance income primarily related to the sale of the Leighton Vessels during the 2014 Quarter and an increase in time charter revenue related to the Aegean Express and the Arabian Express as we commenced operating such vessels in April 2014. The increase was partially offset by a decrease in rental income, which was primarily due to the termination of five operating leases subsequent to the 2013 Quarter.



Expenses for the 2014 Quarter and the 2013 Quarter are summarized as follows:

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Table of Contents Three Months Ended June 30, 2014 2013 Change Management fees $ 599,561$ 988,500$ (388,939) Administrative expense reimbursements 668,467 480,208 188,259 General and administrative 487,545 994,182 (506,637) Interest 1,558,245 2,398,784 (840,539) Depreciation 1,227,615 9,598,966 (8,371,351) Vessel operating 1,369,672 - 1,369,672 Loss on derivative financial instruments 365,467 88,758 276,709 Total expenses $ 6,276,572$ 14,549,398$ (8,272,826) Total expenses for the 2014 Quarter decreased $8,272,826, or 56.9%, as compared to the 2013 Quarter. The decrease in depreciation was primarily due to the sale of three of the Eagle Vessels (as defined below) subsequent to the 2013 Quarter. The decrease was partially offset by vessel operating expenses incurred during the 2014 Quarter related to the Aegean Express and the Arabian Express as we commenced operating such vessels in April 2014.



Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased $692,707, from $308,334 in the 2013 Quarter to $1,001,041 in the 2014 Quarter. The increase was primarily due to a loss recorded during the 2013 Quarter relating to the Eagle Corona, the Eagle Carina, the Eagle Auriga and the Eagle Centaurus (collectively, the "Eagle Vessels") with no comparable loss in the 2014 Quarter.



Net Income Attributable to Fund Twelve

As a result of the foregoing factors, net income attributable to us for the 2014 Quarter and the 2013 Quarter was $56,441,831 and $754,975, respectively. Net income attributable to us per weighted average additional share of limited liability company interests ("Share") outstanding for the 2014 Quarter and the 2013 Quarter was $160.41 and $2.15, respectively.



Results of Operations for the Six Months Ended June 30, 2014 (the "2014 Period") and 2013 (the "2013 Period")

Financing Transactions



During the 2014 Period and the 2013 Period, certain customers generated significant portions (defined as 10% or more) of our total finance income as follows:

Percentage of Total Finance Income Customer Asset Type 2014 Period 2013 Period Leighton Holdings Limited Offshore oil field services equipment 94% 62% Atlas Pipeline Mid-Continent, LLC Gas Compressors - 12% 94% 74% Interest income from our net investment in notes receivable and finance income from our net investment in finance leases are included in finance income in our consolidated statements of comprehensive income. The foregoing percentages are only as of a stated period and are not expected to be comparable in future periods. Further, these percentages are only representative of the percentage of finance income as of each stated period, and as such are not indicative of the concentration of any asset type or customer by the amount of equity invested or our investment portfolio as a whole.



Operating Lease Transactions

During the 2014 Period and the 2013 Period, certain customers generated significant portions (defined as 10% or more) of our total rental income as follows:

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Percentage of Total Rental Income

Customer Asset Type 2014



Period 2013 Period

Swiber Holdings Limited Offshore oil field services equipment 71%

24% Vroon Group B.V. Marine - container vessels 25% 17% AET, Inc. Limited Marine - crude oil tanker - 59% 96% 100% The foregoing percentages are only as of a stated period and are not expected to be comparable in future periods. Further, these percentages are only representative of the percentage of rental income as of each stated period, and as such are not indicative of the concentration of any asset type or customer by the amount of equity invested or our investment portfolio as a whole. Revenue and other income for the 2014 Period and the 2013 Period is summarized as follows: Six Months Ended June 30, 2014 2013 Change Finance income $ 61,938,747$ 8,906,895$ 53,031,852 Rental income 6,640,999 19,731,360 (13,090,361) Time charter revenue 1,460,867 - 1,460,867 Income from investment in joint ventures 1,844,350 1,803,112 41,238 (Loss) gain on lease termination (18,800)



2,887,375 (2,906,175)

Loss on sale of assets, net - (2,690,288) 2,690,288 Total revenue and other income $ 71,866,163$ 30,638,454$ 41,227,709 Total revenue and other income for the 2014 Period increased $41,227,709, or 134.6%, as compared to the 2013 Period. The increase was due to an increase in finance income primarily related to the sale of the Leighton Vessels during the 2014 Period and an increase in time charter revenue related to the Aegean Express and the Arabian Express as we commenced operating such vessels in April 2014. The increase was partially offset by a decrease in rental income, which was primarily due to the termination of five operating leases subsequent to the 2013 Period.



Expenses for the 2014 Period and the 2013 Period are summarized as follows:

Six Months Ended June 30, 2014 2013 Change Management fees $ 1,138,751$ 1,870,725$ (731,974) Administrative expense reimbursements 1,129,099 908,612 220,487 General and administrative 1,574,065 1,791,602 (217,537) Interest 2,983,221 5,010,573 (2,027,352) Depreciation 3,114,154 19,090,548 (15,976,394) Impairment loss - 1,770,529 (1,770,529) Vessel operating 1,369,672 - 1,369,672 Loss on derivative financial instruments 329,190 18,543 310,647 Total expenses $ 11,638,152$ 30,461,132$ (18,822,980) Total expenses for the 2014 Period decreased $18,822,980, or 61.8%, as compared to the 2013 Period. The decrease in depreciation was primarily due to the sale of three of the Eagle Vessels subsequent to the 2013 Period. The decrease in interest was due to the repayment of our non-recourse long-term debt associated with the sale of multiple vessels and certain equipment subsequent to the 2013 Period, partially offset by four additional borrowings of non-recourse long-term debt during the 2014 Period. The decrease in impairment loss was due to the recognition of impairment losses in connection with the Eagle Vessels during the 2013 Period with no comparable impairment loss during the 2014 Period. These decreases were partially offset by vessel operating expenses incurred during the 2014 Period related to the Aegean Express and the Arabian Express as we commenced operating such vessels in April 2014.



Net Income Attributable to Noncontrolling Interests

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Net income attributable to noncontrolling interests increased $1,163,560, from $458,602 in the 2013 Period to $1,622,162 in the 2014 Period. The increase was primarily due to a loss recorded during the 2013 Period relating to the Eagle Vessels with no comparable loss during the 2014 Period.



Net Income (Loss) Attributable to Fund Twelve

As a result of the foregoing factors, net income (loss) attributable to us for the 2014 Period and the 2013 Period was $58,605,849 and $(281,280), respectively. Net income (loss) attributable to us per weighted average additional Share outstanding for the 2014 Period and the 2013 Period was $166.56 and $(0.80), respectively. Financial Condition



This section discusses the major balance sheet variances at June 30, 2014 compared to December 31, 2013.

Total Assets

Total assets increased $47,686,376, from $244,226,508 at December 31, 2013 to $291,912,884 at June 30, 2014. The increase was primarily due to a gain from the sale of the Leighton Vessels. Additionally, we purchased assets during the 2014 Period with proceeds from our non-recourse long-term debt and contributions from noncontrolling interests. The increase was partially offset by the use of cash to repay our non-recourse long-term debt and distributions paid to our members and noncontrolling interests during the 2014 Period.



Current Assets

Current assets increased $37,705,222, from $39,888,607 at December 31, 2013 to $77,593,829 at June 30, 2014. The increase was primarily due to net proceeds received from the sale of the Leighton Vessels during the 2014 Period, which were previously classified as non-current assets on our consolidated balance sheets. The increase was partially offset by the use of cash to repay our non-recourse long-term debt and distributions paid to our members and noncontrolling interests during the 2014Period.



Total Liabilities

Total liabilities decreased $15,080,077, from $105,533,203 at December 31, 2013 to $90,453,126 at June 30, 2014. The decrease was primarily due the satisfaction of our non-recourse long-term debt and seller's credits related the Leighton Vessels during the 2014 Period, partially offset by additional borrowings of non-recourse long-term debt during the 2014 Period.



Current Liabilities

Current liabilities decreased $30,389,186, from $52,034,596 at December 31, 2013 to $21,645,410 at June 30, 2014. The decrease was primarily due the satisfaction of our non-recourse debt and seller's credits related the Leighton Vessels during the 2014 Period, partially offset by additional borrowings of recourse and non-recourse long-term debt during the 2014 Period.



Equity

Equity increased $62,766,453, from $138,693,305 at December 31, 2013 to $201,459,758 at June 30, 2014. The increase was primarily due to net income during the 2014 Period and contributions received from noncontrolling interests, partially offset by distributions to our members and noncontrolling interests during the 2014 Period.



Liquidity and Capital Resources

Summary At June 30, 2014 and December 31, 2013, we had cash and cash equivalents of $62,684,200 and $13,985,307, respectively. Pursuant to the terms of our offering, we established a cash reserve in the amount of 0.5% of the gross offering proceeds. As of June 30, 2014, the cash reserve was $1,738,435. During our operating period, our main source of cash was typically from operating activities and our main use of cash was in investing and financing activities. During our liquidation period, which commenced on May 1, 2014, we expect our main sources of cash will be from the collection of income and proceeds from the sale of assets held directly by us or indirectly by our joint ventures and our main use of cash will be for distributions to our members. Our liquidity will vary in the future, increasing to the extent cash flows from investments and proceeds from the sale of our investments exceed expenses and decreasing as we enter into new investments, meet our debt obligations, pay 25



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distributions to our members and to the extent that expenses exceed cash flows from operations and proceeds from the sale of our investments.

We anticipate being able to meet our liquidity requirements into the foreseeable future through the expected results of our operating and financing activities, as well as cash received from our investments at maturity. However, our ability to generate cash in the future is subject to general economic, financial, competitive, regulatory and other factors that affect us and our lessees' and borrowers' businesses that are beyond our control. For additional information, see Note 8 to our consolidated financial statements. Cash Flows Operating Activities Cash provided by operating activities decreased $3,753,932, from $14,959,451 in the 2013 Period to $11,205,519 in the 2014 Period. The decrease was primarily due to a decrease in the collection of finance leases as a result of the termination or expiration of eight finance leases, partially offset by entering into three new finance leases, all of which occurred subsequent to the 2013 Period. Investing Activities Cash flows from investing activities increased $77,968,810, from a use of cash of $9,341,797 in the 2013 Period to a source of cash of $68,627,013 in the 2014 Period. The increase was primarily due to net proceeds received from the sale of the Leighton Vessels and principal received on our notes receivable in the 2014 Period. The increase was partially offset by the purchase of equipment during the 2014 Period. Financing Activities Cash used in financing activities increased $6,559,317, from $24,574,315 in the 2013 Period to $31,133,632 in the 2014 Period. The increase was primarily due to increased repayments on our non-recourse long-term debt, partially offset by proceeds from our Facility, non-recourse long-term debt and contributions from noncontrolling interests during the 2014 Period. Non-Recourse Long-Term Debt We had non-recourse long-term debt obligations at June 30, 2014 and December 31, 2013 of $63,599,337 and $55,370,983, respectively. Most of our non-recourse long-term debt obligations consist of notes payable in which the lender has a security interest in the underlying assets and an assignment of the rental payments under the lease, in which case the lender is being paid directly by the lessee. In other cases, we receive the rental payments and pay the lender. If the lessee were to default on the underlying lease resulting in our defaulting on the non-recourse long-term debt, the assets could be returned to the lender in extinguishment of the non-recourse long-term debt. On March 4, 2014, we, through a joint venture owned 60% by us, 15% by Fund Fourteen, 15% by Fund Fifteen and 10% by Fund Sixteen, financed the acquisition of certain mining equipment that is on lease to Blackhawk and its affiliates by entering into a non-recourse loan agreement with People's Capital in the amount of $7,500,000. People's Capital received a first priority security interest in such mining equipment. The loan bears interest at a rate of 6.5% per year and matures on February 1, 2018. We, through a joint venture owned 75% by us, 12.5% by Fund Fourteen and 12.5% by Fund Fifteen, financed the acquisition of the SIVA Vessels by entering into a non-recourse loan agreement with DVB in the amount of $24,800,000. The Loan bears interest at a rate of 6.1225% per year and has a term of eight years.



On April 3, 2014, a portion of the proceeds from the sale of the Leighton Vessels were used to satisfy our related non-recourse debt obligations with Standard Chartered of approximately $38,426,000.

On May 12, 2014, we satisfied our non-recourse debt obligations in full related to the Aegean Express and the Arabian Express by making a payment in the aggregate amount of approximately $6,000,000 to BNP Paribas.

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We, through a joint venture owned 75% by us, 12.5% by Fund Fourteen and 12.5% by Fund Fifteen, financed the acquisition of an offshore supply vessel from Pacific Crest by entering into a non-recourse loan agreement with DVB in the amount of $26,000,000. The senior secured loan bears interest at a rate of 5.04% per year and has a term of 7 years.



At June 30, 2014, we were in compliance with all covenants related to our non-recourse long-term debt.

Distributions We, at our Manager's discretion, paid monthly distributions to each of our additional members beginning with the first month after each such member's admission and continued to pay distributions until the end of our operating period. We paid distributions of $127,552, $12,627,627 and $2,577,818 to our Manager, additional members and noncontrolling interests, respectively, during the 2014 Period. Distributions paid during our liquidation period will vary, depending on the timing of the sale of our assets and/or the maturity of our investments and our receipt of finance and other income from our investments.



Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At June 30, 2014, we had non-recourse debt obligations. The lender has a security interest in the majority of the assets collateralizing each non-recourse long-term debt instrument and an assignment of the rental payments under the lease associated with the asset. In such cases, the lender is being paid directly by the lessee. In other cases, we receive the rental payments and pay the lender. If the lessee defaults on the lease, the assets could be returned to the lender in extinguishment of the non-recourse debt. At June 30, 2014, our outstanding non-recourse long-term indebtedness was $63,599,337. At June 30, 2014, we had $10,000,000 outstanding under the Facility. In connection with certain investments, we are required to maintain restricted cash balances with certain banks. Our restricted cash of $526,421 and $491,250 is presented within other non-current assets in our consolidated balance sheets at June 30, 2014 and December 31, 2013, respectively. During 2008, a joint venture owned 55% by us and 45% by Fund Eleven purchased and simultaneously leased back semiconductor manufacturing equipment to EAR for approximately $15,730,000. On October 23, 2009, EAR filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On October 21, 2011, the Chapter 11 bankruptcy trustee for EAR filed an adversary complaint against ICON EAR seeking the recovery of the lease payments that the trustee alleges were fraudulently transferred from EAR to ICON EAR. The complaint also sought the recovery of payments made by EAR to ICON EAR during the 90-day period preceding EAR's bankruptcy filing, alleging that those payments constituted a preference under the U.S. Bankruptcy Code. Additionally, the complaint sought the imposition of a constructive trust over certain real property and the proceeds from the sale that ICON EAR received as security in connection with its investment. Our Manager filed an answer to the complaint, which included certain affirmative defenses. Our Manager believes these claims are frivolous and intends to vigorously defend this action. At this time, we are unable to predict the outcome of this action or loss there from, if any. Subsequent to the filing of the bankruptcy petition, EAR disclaimed any right to its equipment and such equipment became the subject of an Illinois State Court proceeding. The equipment was subsequently sold as part of the Illinois State Court proceeding. On March 6, 2012, one of the creditors in the Illinois State Court proceeding won a summary judgment motion filed against ICON EAR that granted dismissal of ICON EAR's claims to the proceeds resulting from the sale of certain EAR equipment. ICON EAR appealed this decision. On September 16, 2013, the lower court's ruling was affirmed by the Illinois Appellate Court. On October 21, 2013, ICON EAR filed a Petition for Leave to Appeal with the Supreme Court of Illinois appealing the decision of the Illinois Appellate Court, which petition was denied on January 29, 2014. The only remaining asset owned by ICON EAR at June 30, 2014 and December 31, 2013 was real property with a carrying value of approximately $290,000 and is included in other non-current assets within our consolidated balance sheets.



Off-Balance Sheet Transactions

None.

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