5. Investments in equipment and leases, net:

The Company’s investment in leases consists of the following (in thousands):



		Balance December 31, 2011		Reclassifications & Additions / Dispositions		Depreciation/ Amortization Expense or Amortization of Leases		Balance December 31, 2012
Net investment in operating leases	$	7,867	$	(568)	$	(1,069)	$	6,230
Net investment in direct financing leases		256		(4)		(152)		100
Assets held for sale or lease, net		153		496		(20)		629
Total	$	8,276	$	(76)	$	(1,241)	$	6,959

Impairment of investments in leases and assets held for sale or lease:

Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. Impairment losses are recorded as an adjustment to the net investment in operating leases. No impairment losses were recorded during 2012 and 2011.

The Company utilizes a straight line depreciation method over the term of the equipment lease for equipment on operating leases currently in its portfolio. Depreciation expense on the Company’s equipment totaled $1.1 million and $1.3 million for the respective years ended December 31, 2012 and 2011.

All of the remaining property on lease was acquired during the years 1999 through 2001.

Operating leases:

Property on operating leases consists of the following (in thousands):



		Balance December 31, 2011		Additions		Reclassifications or Dispositions		Balance December 31, 2012
Containers	$	19,678	$	-	$	(298)	$	19,380
Transportation, rail		16,316		-		(3,191)		13,125
Marine vessel		4,793		-		-		4,793
Other		640		-		-		640
		41,427		-		(3,489)		37,938
Less accumulated depreciation		(33,560)		(1,069)		2,921		(31,708)
Total	$	7,867	$	(1,069)	$	(568)	$	6,230

The average estimated residual value for assets on operating leases was 10% of the assets’ original cost at both December 31, 2012 and 2011, respectively.

The Company earns revenues from its containers, marine vessel and certain other assets based on utilization of such assets or through fixed term leases. Contingent rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of Operating Lease Revenues, and totaled $2.3 million and $2.5 million for the years ended December 31, 2012 and 2011, respectively.

As of December 31, 2012 and 2011, the Company had no operating leases in non-accrual status.

5. Investments in equipment and leases, net (continued):

Direct financing leases:

As of December 31, 2012, the investment in direct financing leases primarily consists of railcars and manufacturing equipment. At December 31, 2011, such investment consisted of railcars as well as construction and manufacturing equipment.

The components of the Company’s investment in direct financing leases as of December 31, 2012 and 2011 are as follows (in thousands):



		2012		2011
Total minimum lease payments receivable	$	48	$	248
Estimated residual values of leased equipment (unguaranteed)		52		54
Investment in direct financing leases		100		302
Less unearned income		-		(46)
Net investment in direct financing leases	$	100	$	256

As of December 31, 2012, unearned income related to the Fund’s investment in direct financing leases was nominal. There were no net investments in direct financing leases in nonaccrual status as of December 31, 2012 and 2011.

At December 31, 2012, the aggregate amount of future lease payments is as follows (in thousands):



		Operating Leases		Direct Financing Leases		Total
Year ending December 31, 2013	$	1,373	$	48.00	$	1,421
2014		980		-		980
2015		465		-		465
2016		179		-		179
2017		179		-		179
Thereafter		75		-		75
	$	3,251	$	48.00	$	3,299