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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the year ended December 31, 1997
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ______________
Commission file number 0-16845
Fidelity Leasing Income Fund IV, L.P.
________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 23-2441780
________________________________________________________________________
(State of Organization) (I.R.S. Employer Identification No.)
3 North Columbus Blvd., Philadelphia, Pennsylvania 19106
________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(215) 574-1636
________________________________________________________________________
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
None Not applicable
Securities registered pursuant to Section 12 (g) of the Act:
Limited Partnership Interests
Title of Class
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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____
The number of outstanding limited partnership units of the Registrant at
December 31, 1997 is 41,379.
There is no public market for these securities.
The index of Exhibits is located on page 9.
1
PART I
Item 1. BUSINESS
Fidelity Leasing Income Fund IV, L.P. (the "Fund"), a Delaware limited
partnership, was organized in 1986 and acquires equipment, primarily
computer equipment, including printers, tape storage devices, data
communications equipment, computer terminals, technical workstations as
well as networking equipment, which is leased to third parties on a short-
term basis. The Fund's principal objective is to generate leasing revenues
for distribution. The Fund manages the equipment, releasing or disposing
of equipment as it comes off lease in order to achieve its principal
objective. The Fund does not borrow funds to purchase equipment.
The Fund generally acquires equipment subject to a lease. Purchases
of equipment for lease are typically made through equipment leasing
brokers, under a sale-leaseback arrangement directly from lessees owning
equipment, from the manufacturer either pursuant to a purchase agreement
relating to significant quantities of equipment or on an ad hoc basis to
meet the needs of a particular lessee.
The equipment leasing industry is highly competitive. The Fund
competes with leasing companies, equipment manufacturers and distributors,
and entities similar to the Fund (including similar programs sponsored by
the General Partner), some of which have greater financial resources than
the Fund. Other leasing companies and equipment manufacturers and
distributors may be in a position to offer equipment to prospective lessees
on financial terms which are more favorable than those which the Fund can
offer. They may also be in a position to offer trade-in-privileges,
maintenance contracts and other services which the Fund may not be able to
offer. Equipment manufacturers and distributors may offer to sell
equipment on terms and conditions (such as liberal financing terms and
exchange privileges) which will afford benefits to the purchaser similar to
those obtained through leases. As a result of the advantages which certain
of its competitors may have, the Fund may find it necessary to lease its
equipment on a less favorable basis than certain of its competitors.
The computer equipment industry is extremely competitive as well.
Competitive factors include pricing, technological innovation and methods
of financing. Certain manufacturer-lessors maintain advantages through
patent protection, where applicable, and through product protection by the
use of a policy which combines service and hardware benefits with payment
for such benefits accomplished through a single periodic charge.
A brief description of the types of equipment in which the Fund has
invested as of December 31, 1997, together with information concerning the
users of such equipment is contained in Item 2, following.
The Fund does not have any employees. All persons who work on the
Fund are employees of the General Partner.
2
Item 2. PROPERTIES
The following schedules detail the type and aggregate purchase price
of the various types of equipment acquired and leased by the Fund as of
December 31, 1997, along with the percentage of total equipment represented
by each type of equipment, a breakdown of equipment usage by industrial
classification and the average initial term of leases:
Purchase Price Percentage of
Type of Equipment Acquired of Equipment Total Equipment
Communication Controllers $ 972,759 16.63%
Disk Storage Systems 1,711,398 29.26
Network Communications 233,864 4.00
Printers 340,516 5.82
Tape Storage Systems 1,191,851 20.38
Technical Workstations and
Terminals 1,382,515 23.64
Other 15,959 .27
__________ ______
Totals $5,848,862 100.00%
========== ======
Breakdown of Equipment Usage
By Industrial Classification
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Computer/Data Processing $1,021,152 17.46%
Diversified Financial/Banking/
Insurance 3,509,818 60.01
Manufacturing/Refining 803,163 13.73
Retailing/Consumer Goods 511,641 8.75
Utilities 3,088 .05
__________ ______
Totals $5,848,862 100.00%
========== ======
Average Initial Term of Leases (in months): 30
All of the above equipment is currently leased under operating leases.
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
3
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
(a) The Fund's limited partnership units are not publicly
traded. There is no market for the Fund's limited
partnership units and it is unlikely that any
will develop.
(b) Number of Equity Security Holders:
Number of Partners
Title of Class as of December 31, 1997
Limited Partnership Interests 1,551
General Partnership Interest 1
Item 6. SELECTED FINANCIAL DATA
For the Years Ended December 31,
1997 1996 1995 1994 1993
Total Income $1,465,537 $1,723,227 $2,374,015 $2,689,758 $3,657,867
Net Income 445,584 539,379 738,436 765,397 739,957
Distributions to
Partners 400,000 878,707 2,261,160 2,556,427 4,351,379
Net Income per
Equivalent Limited
Partnership Unit 42.54 23.17 56.98 47.84 32.84
Weighted Average Number
of Equivalent Limited
Partnership Units
Outstanding During
the Year 10,145 10,433 12,305 15,527 21,215
December 31
1997 1996 1995 1994 1993
Total Assets $2,460,916 $2,389,398 $2,786,915 $4,418,545 $6,449,162
Equipment under
Operating Leases
and Equipment Held
for Sale or Lease
(Net) 993,149 1,397,793 1,891,816 1,816,440 2,449,146
Limited Partnerships
Units 41,379 41,379 41,983 42,565 43,389
Limited Partners 1,551 1,551 1,565 1,573 1,595
4
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The Fund had revenues of $1,465,537, $1,723,227, and $2,374,015 for
the years ended December 31, 1997, 1996 and 1995, respectively. The
decrease in revenues between 1997, 1996 and 1995 is partially caused by the
decrease in rental income generated from equipment under operating leases.
Rental income from the leasing of computer equipment accounted for 96% of
total income in 1997, and 88% of total income in both 1996 and 1995. In
1997, rental income decreased by approximately $387,000 because of
equipment which came off lease and was re-leased at lower rental rates or
sold. This decrease, however, was mitigated by approximately $280,000 of
rental income generated from equipment under operating leases purchased
during 1997, as well as rental income from 1996 equipment purchases for
which a full year of rental income was earned in 1997 and only a partial
year was earned in 1996. In 1996, rental income decreased by approximately
$705,000 because of equipment which came off lease and was re-leased at
lower rental rates or sold. This decrease, however, was reduced by
approximately $126,000 of rental income generated from equipment purchased
in 1996 as well as rental income from 1995 equipment purchases for which a
full year of rental income was earned in 1996 and only a partial year was
earned in 1995. Additionally, the Fund did not record a net gain on sale
of equipment for the twelve months ended December 31, 1997 but did
recognize $149,687 and $182,063 of net gain on sale of equipment for the
twelve months ended December 31, 1996 and 1995, respectively. The
decrease in net gain on sale of equipment contributed to the decrease in
total revenues for 1997 and 1996.
Expenses were $1,019,953, $1,183,848, and $1,635,579 for the years
ended December 31, 1997, 1996 and 1995, respectively. Depreciation expense
comprised 78%, 66% and 75% of total expenses in 1997, 1996 and 1995,
respectively. The decrease in write-down of equipment to net realizable
value was the primary cause of the decrease in total expenses in 1997 but
in 1996, the decrease in depreciation expense was the predominant reason
for the decrease in total expenses. Depreciation expense increased in 1997
because of new equipment purchased during the year. However, depreciation
expense decreased in 1996 as a result of equipment which came off lease
and was terminated or sold. Currently, the Fund's practice is to review
the recoverability of its undepreciated costs of rental equipment
quarterly. The Fund's policy, as part of this review, is to analyze such
factors as re-leasing of equipment, technological developments and
information provided in third party publications. In 1997, 1996 and 1995,
approximately $38,000, $157,000 and $94,000, respectively, was charged to
write-down of equipment to net realizable value which contributed to the
overall decrease in total expenses in 1997 and reduced the overall decrease
in total expenses in 1996. In accordance with Generally Accepted
Accounting Principles, the Fund writes down its rental equipment to its
estimated net realizable value when the amounts are reasonably estimated
and only recognizes gains upon actual sales of its equipment. Any future
losses are dependent upon unanticipated technological developments
affecting the computer equipment industry in subsequent years.
The Fund's net income was $445,584, $539,379 and $738,436 for the
years ended December 31, 1997, 1996 and 1995, respectively. The earnings
per equivalent limited partnership unit, after earnings allocated to
the General Partner, were $42.54, $23.17 and $56.98 for the years ended
December 31, 1997, 1996 and 1995, respectively. The weighted average
number of equivalent limited partnership units outstanding were 10,145,
10,433 and 12,305 for 1997, 1996 and 1995, respectively.
5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
The Fund generated cash from operations of $1,293,395, $1,324,116 and
$1,871,187 for the purpose of determining cash available for distribution
and declared distributions of $400,000, $810,707 and $1,865,582 to partners
for the years ended December 31, 1997, 1996 and 1995, respectively. For
financial statement purposes, the Fund records cash distributions to
partners on a cash basis in the period in which they are paid. During
1996, the General Partner revised its policy regarding distributions so
that the distributions more accurately reflect the net income of the Fund
over the most recent twelve months.
Analysis of Financial Condition
The Fund will continue to purchase computer equipment for lease with
cash available from operations which is not distributed to partners.
During the years ended December 31, 1997, 1996 and 1995, the Fund purchased
equipment of $457,785, $450,749 and $1,533,346, respectively.
In February and March 1998, the Fund purchased $126,079 and $283,560
of equipment subject to an operating lease and a direct financing lease,
respectively with initial lease terms of 58 and 60 months, respectively.
The cash position of the Fund is reviewed daily and cash is invested
on a short-term basis.
The Fund's cash from operations is expected to continue to be adequate
to cover all operating expenses and contingencies during the next fiscal
year.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted as a separate section of this
report commencing on page F-1.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
6
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
F.L. Partnership Management, Inc. (FLPMI) is a wholly owned
subsidiary of Resource Leasing, Inc., a wholly owned subsidiary of
Resource America, Inc. The Directors and Executive Officers of FLPMI are:
FREDDIE M. KOTEK, age 41, Chairman of the Board of Directors,
President and Chief Executive Officer of FLPMI since September 1995
and Senior Vice President of Resource America, Inc. since 1995.
President of Resource Leasing, Inc. since September 1995.
Executive Vice President of Resource Properties, Inc. (a wholly owned
subsidiary of Resource America, Inc.) since 1993. First Vice
President of Royal Alliance Associates from 1991 to 1993. Senior
Vice President and Chief Financial Officer of Paine Webber Properties
from 1990 to 1991.
MICHAEL L. STAINES, age 48, Director and Secretary of FLPMI since
September 1995 and Senior Vice President and Secretary of Resource
America, Inc. since 1989.
SCOTT F. SCHAEFFER, age 35, Director of FLPMI since September 1995 and
Senior Vice President of Resource America, Inc. since 1995. Vice
President-Real Estate of Resource America, Inc. and President of
Resource Properties, Inc. (a wholly owned subsidiary of Resource
America, Inc.) since 1992. Vice President of the Dover Group, Ltd.
(a real estate investment company) from 1985 to 1992.
Others:
STEPHEN P. CASO, age 42, Vice President and General Counsel of FLPMI
since 1992.
MARIANNE T. SCHUSTER, age 39, Vice President and Controller of FLPMI
since 1984.
KRISTIN L. CHRISTMAN, age 30, Portfolio Manager of FLPMI since December
1995 and Equipment Brokerage Manager since 1993.
7
Item 11. EXECUTIVE COMPENSATION
The following table sets forth information relating to the aggregate
compensation earned by the General Partner of the Fund during the year
ended December 31, 1997:
Name of Individual or Capacities in
Number in Group Which Served Compensation
F.L. Partnership
Management, Inc. General Partner $82,217 (1)
=======
(1) This amount does not include the General Partner's share of
cash distributions made to all partners.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) As of December 31, 1997, there was no person or group known
to the Fund that owned more than 5% of the Fund's outstanding
securities either beneficially or of record.
(b) In 1986, the General Partner contributed $1,000 to the
capital of the Fund but it does not own any of the Fund's
outstanding securities. No individual director or officer of
F.L. Partnership Management, Inc. nor such directors or officers as a
group, owns more than one percent of the Fund's outstanding
securities. The General Partner owns a general partnership
interest which entitles it to receive 3.5% of cash distributions
until the Limited Partners have received an amount equal to the
purchase price of their Units plus a 10% compounded Priority
Return; thereafter 10%. The General Partner will also share in
net income equal to the greater of its cash distributions or 1%
of net income or to the extent there are losses, 1% of such
losses.
(c) There are no arrangements known to the Fund that would, at
any subsequent date, result in a change in control of the Fund.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1997, the Fund was charged $82,217
of management fees by the General Partner. The General Partner will
continue to receive 6% or 3% of rental payments on equipment under
operating leases or full pay-out leases, respectively for administrative
and management services performed on behalf of the Fund. Full pay-out
leases are noncancellable leases with terms in excess of 42 months and for
which rental payments during the initial term are at least sufficient to
recover the purchase price of the equipment, including acquisition fees.
The General Partner also receives 3.5% of cash distributions until the
Limited Partners have received an amount equal to the purchase price of
their Units plus a 10% compounded Priority Return. Thereafter, the General
Partner will receive 10% of cash distributions. During the year ended
December 31, 1997, the General Partner received $14,000 of cash
distributions.
The Fund incurred $61,188 of reimbursable costs to the General
Partner and its parent company for services and materials provided in
connection with the administration of the Fund during 1997.
8
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2). The response to this portion of Item 14 is
submitted as a separate section of this report commencing on page F-1.
(a) (3) and (c) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
Exhibit Numbers Description Page Number
3(a) & (4) Amended and Restated Agreement *
of Limited Partnership
(9) not applicable
(10) not applicable
(11) not applicable
(12) not applicable
(13) not applicable
(18) not applicable
(19) not applicable
(22) not applicable
(23) not applicable
(24) not applicable
(25) not applicable
(28) not applicable
* Incorporated by reference.
9
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.
FIDELITY LEASING INCOME FUND IV, L.P.
A Delaware limited partnership
By: F.L. PARTNERSHIP MANAGEMENT, INC.
Freddie M. Kotek
By: ___________________________
Freddie M. Kotek, Chairman
and President
Dated March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this annual report has been signed below by the following persons, on
behalf of the Registrant and in the capacities and on the date indicated:
Signature Title Date
Freddie M. Kotek
____________________________ Chairman of the Board of Directors 3-26-98
Freddie M. Kotek and President of F.L. Partnership
Management, Inc. (Principal Executive
Officer)
Michael L. Staines
____________________________ Director of F.L. Partnership 3-26-98
Marianne T. Schuster
____________________________ Vice President and Controller 3-26-98
Marianne T. Schuster of F.L. Partnership Management,
Inc. (Principal Financial Officer)
10
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Certified Public Accountants F-2
Balance Sheets as of December 31, 1997 and 1996 F-3
Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 F-4
Statements of Partners' Capital for the years ended
December 31, 1997, 1996 and 1995 F-5
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 F-6
Notes to Financial Statements F-7 - F-11
All schedules have been omitted because the required information is not
applicable or is included in the Financial Statements or Notes thereto.
F-1
Report of Independent Certified Public Accountants
The Partners
Fidelity Leasing Income Fund IV, L.P.
We have audited the accompanying balance sheets of Fidelity
Leasing Income Fund IV, L.P. as of December 31, 1997 and 1996, and
the related statements of operations, changes in partners' capital
and cash flows for each of the three years in the period ending
December 31, 1997. These financial statements are the responsibility
of the Fund's management. Our responsibility is to express an opinion
on these financial statements 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 Fidelity
Leasing Income Fund IV, L.P. as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years
in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
Grant Thornton LLP
Philadelphia, Pennsylvania
February 17, 1998
F-2
FIDELITY LEASING INCOME FUND IV, L.P.
BALANCE SHEETS
ASSETS
December 31,
1997 1996
Cash and cash equivalents $1,383,229 $ 915,772
Accounts receivable 78,201 45,765
Due from related parties 6,337 30,068
Equipment under operating leases
(net of accumulated depreciation
of $5,000,834 and $5,034,585,
respectively) 848,028 1,397,793
Equipment held for sale or lease 145,121 -
__________ __________
Total assets $2,460,916 $2,389,398
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 106,994 $ 90,732
Accounts payable and
accrued expenses 17,905 9,891
Due to related parties 10,608 8,950
__________ __________
Total liabilities 135,507 109,573
Partners' capital 2,325,409 2,279,825
__________ __________
Total liabilities and
partners' capital $2,460,916 $2,389,398
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
FIDELITY LEASING INCOME FUND IV, L.P.
STATEMENTS OF OPERATIONS
For the years ended December 31,
1997 1996 1995
Income:
Rentals $1,403,860 $1,510,547 $2,089,364
Interest 58,962 31,365 76,520
Gain on sale of equipment, net - 149,687 182,063
Other 2,715 31,628 26,068
__________ __________ __________
1,465,537 1,723,227 2,374,015
__________ __________ __________
Expenses:
Depreciation 792,301 777,204 1,220,643
Write-down of equipment
to net realizable value 38,218 157,220 94,171
General and administrative 28,737 87,196 78,226
General and administrative to
related party 61,188 73,610 119,192
Management fee to related party 82,217 88,618 123,347
Loss on sale of equipment, net 17,292 - -
__________ __________ __________
1,019,953 1,183,848 1,635,579
__________ __________ __________
Net income $ 445,584 $ 539,379 $ 738,436
========== ========== ==========
Net income per equivalent
limited partnership unit $ 42.54 $ 23.17 $ 56.98
========== ========== ==========
Weighted average number of
equivalent limited partnership
units outstanding
during the year 10,145 10,433 12,305
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
FIDELITY LEASING INCOME FUND IV, L.P.
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1997, 1996 and 1995
General Limited Partners
Partner Units Amount Total
_______ ___________________ _____
Balance, January 1, 1995 $ 6,635 42,565 4,188,603 4,195,238
Redemptions - (582) (19,407) (19,407)
Cash distributions (36,997) - (2,224,163) (2,261,160)
Net income 37,241 - 701,195 738,436
________ ______ __________ __________
Balance, December 31, 1995 6,879 41,983 2,646,228 2,653,107
Redemptions - (604) (33,954) (33,954)
Cash distributions (299,982) - (578,725) (878,707)
Net income 297,602 - 241,777 539,379
________ ______ __________ __________
Balance, December 31, 1996 4,499 41,379 2,275,326 2,279,825
Cash distributions (14,000) - (386,000) (400,000)
Net income 14,000 - 431,584 445,584
________ ______ __________ __________
Balance, December 31, 1997 $ 4,499 41,379 $2,320,910 $2,325,409
======== ====== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-5
FIDELITY LEASING INCOME FUND IV, L.P.
STATEMENTS OF CASH FLOWS
For the years ended December 31,
1997 1996 1995
Cash flows from operating activities:
Net income $ 445,584 $ 539,379 $ 738,436
__________ __________ __________
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 792,301 777,204 1,220,643
Write-down of equipment to net realizable value 38,218 157,220 94,171
(Gain) loss on sale of equipment, net 17,292 (149,687) (182,063)
(Increase) decrease in accounts receivable (32,436) 31,509 47,361
(Increase) decrease in due from related parties 23,731 (5,523) (12,462)
Increase (decrease) in lease rents
paid in advance 16,262 34,271 (109,250)
Increase (decrease) in other, net 9,672 (54,855) 24,802
__________ __________ __________
865,040 790,139 1,083,202
__________ __________ __________
Net cash provided by operating activities 1,310,624 1,329,518 1,821,638
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment (457,785) (450,749) (1,533,346)
Proceeds from sale of equipment 14,618 160,035 325,219
__________ __________ __________
Net cash used in investing activities (443,167) (290,714) (1,208,127)
__________ __________ __________
Cash flows from financing activities:
Distributions (400,000) (878,707) (2,261,160)
Redemptions of capital - (33,954) (19,407)
__________ __________ __________
Net cash used in financing activities (400,000) (912,661) (2,280,567)
__________ __________ __________
Increase (decrease) in cash and cash equivalents 467,457 126,143 (1,667,056)
Cash and cash equivalents, beginning of year 915,772 789,629 2,456,685
__________ __________ __________
Cash and cash equivalents, end of year $1,383,229 $ 915,772 $ 789,629
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Fidelity Leasing Income Fund IV, L.P. (the "Fund") was formed in December
1986. The General Partner of the Fund is F.L. Partnership Management, Inc.
("FLPMI") which is a wholly owned subsidiary of Resource Leasing, Inc., a
wholly owned subsidiary of Resource America, Inc. The Fund is managed by
the General Partner. The Fund's limited partnership interests are not
publicly traded. There is no market for the Fund's limited partnership
interests and it is unlikely that any will develop. The Fund acquires
computer equipment including printers, tape storage devices, data communi-
cations equipment, computer terminals, technical workstations as well as
networking equipment which is leased to third parties throughout the United
States on a short-term basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration of Credit Risk
Financial instruments which potentially subject the Fund to concentrations
of credit risk consist principally of temporary cash investments. The Fund
places its temporary investments in bank repurchase agreements.
Concentrations of credit risk with respect to accounts receivables are
limited due to the dispersion of the Fund's lessees over different
industries and geographies.
Impairment of Long-Lived Assets
Effective January 1, 1996, the Fund adopted SFAS No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of." This new standard provides guidance on when to recognize and
how to measure impairment losses of long-lived assets and how to value
long-lived assets to be disposed of. The adoption of SFAS No. 121 had no
impact on the net income of the Fund.
Equipment Held for Sale or Lease
Equipment held for sale or lease is carried at its estimated net realizable
value.
Use of Estimates
In preparing financial statements in conformity with Generally Accepted
Accounting Principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-7
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting for Leases
The Fund's leasing operations consist only of operating leases. The cost
of the leased equipment is recorded as an asset and depreciated on a
straight-line basis over its estimated useful life, up to six years.
Acquisition fees associated with lease placements are allocated to
equipment when purchased and depreciated as part of equipment cost. Rental
income consists primarily of monthly periodic rentals due under the terms
of the leases. Generally, during the remaining terms of existing operating
leases, the Fund will not recover all of the undepreciated cost and related
expenses of its rental equipment and is prepared to remarket the equipment
in future years. Upon sale or other disposition of assets, the cost and
related accumulated depreciation are removed from the accounts and the
resulting gain or loss, if any, is reflected in income.
Income Taxes
Federal and State income tax regulations provide that taxes on the income
or benefits from losses of the Fund are reportable by the partners in their
individual income tax returns. Accordingly, no provision for such taxes
has been made in the accompanying financial statements.
Statements of Cash Flows
For purposes of the statements of cash flows, the Fund considers all highly
liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Net Income per Equivalent Limited Partnership Unit
Net income per equivalent limited partnership unit is computed by dividing
net income allocated to limited partners by the weighted average number of
equivalent limited partnership units outstanding during the year. The
weighted average number of equivalent units outstanding during the year is
computed based on the weighted average monthly limited partners' capital
account balances, converted into equivalent units at $500 per unit.
Significant Fourth Quarter Adjustments
Currently, the Fund's practice is to review the recoverability of its
undepreciated costs of rental equipment quarterly. The Fund's policy,
as part of this review, is to analyze such factors as releasing of
equipment, technological developments and information provided in third
party publications. Based upon this review, the Fund recorded an
adjustment of approximately $12,000 and $40,000 or $1.18 and $3.83
per equivalent limited partnership unit to write down its rental
equipment in the fourth quarter of 1997 and 1996, respectively.
There was no write-down of equipment to net realizable value in the
fourth quarter of 1995.
F-8
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
3. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
Cash distributions (except for the period from January 1, 1992 through
June 30, 1995), if any, are made quarterly as follows: 96.5% to the
Limited Partners and 3.5% to the General Partner, until the Limited
Partners have received an amount equal to the purchase price of their
Units, plus a 10% compounded Priority Return (an amount equal to 10%
compounded annually on the portion of the purchase price not previously
distributed); thereafter, 90% to the Limited Partners and 10% to the
General Partner. During the year ended December 31, 1996, the General
Partner received cash distributions of $278,992 representing a portion of
the 3.5% of cash distributions which the General Partner was entitled to
receive in accordance with the Partnership Agreement for prior periods.
Net Losses are allocated 99% to the Limited Partners and 1% to the General
Partner. The General Partner is allocated Net Income equal to its cash
distributions, but not less than 1% of Net Income, with the balance
allocated to the Limited Partners.
Net Income (Losses) allocated to the Limited Partners are allocated to
individual limited partners based on the ratio of the daily weighted
average partner's net capital account balance (after deducting related
commission expense) to the total daily weighted average of the Limited
Partners' net capital account balances.
4. EQUIPMENT LEASED
Equipment on lease consists primarily of computer equipment under
operating leases. A majority of the equipment was manufactured by
IBM. The lessees have agreements with the manufacturer to provide
maintenance for the leased equipment. The Fund's operating leases are for
initial lease terms of 15 to 60 months.
In accordance with Generally Accepted Accounting Principles, the Fund
writes down its rental equipment to its estimated net realizable value when
the amounts are reasonably estimated and only recognizes gains upon actual
sale of its rental equipment. As a result, in 1997, 1996 and 1995,
approximately $38,000, $157,000 and $94,000, respectively was charged to
write-down of equipment to net realizable value.
The future approximate minimum rentals to be received on noncancellable
operating leases as of December 31 are as follows:
1998 $618,000
1999 225,000
________
$843,000
========
F-9
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. EQUIPMENT LEASED (Continued)
In addition, in January and February 1998, the Fund purchased $126,079 and
$283,560 of equipment subject to an operating lease and a direct financing
lease, respectively with initial lease terms of 58 and 60 months,
respectively. The future approximate minimum rentals to be received on the
noncancellable operating lease are $52,780 in 1998, $57,579 in 1999,
$57,579 in 2000, $57,579 in 2001 and $52,780 in 2002. The future
approximate minimum rentals to be received on the direct financing lease
are $61,884 in 1998, $67,510 in 1999, $67,510 in 2000, $67,510 in 2001 and
$5,626 in 2002.
5. RELATED PARTY TRANSACTIONS
The General Partner receives 6% or 3% of rental payments on equipment under
operating leases and full pay-out leases, respectively, for administrative
and management services performed on behalf of the Fund. Full pay-out
leases are noncancellable leases with terms in excess of 42 months and for
which rental payments during the initial term are at least sufficient to
recover the purchase price of the equipment, including acquisition fees.
The General Partner may also receive up to 3% of the proceeds from the sale
of the Fund's equipment for services and activities to be performed in
connection with the disposition of equipment. The payment of this sales
fee is deferred until the Limited Partners have received cash distributions
equal to the purchase price of their units plus a 10% cumulative compounded
Priority Return. Based on current estimates, it is not expected that the
Fund will be required to pay the General Partner a sales fee.
Additionally, the General Partner and its parent company are reimbursed by
the Fund for certain costs of services and materials used by or for the
Fund except those items covered by the above-mentioned fees. Following is
a summary of fees and costs charged by the General Partner and its parent
company during the years ended December 31:
1997 1996 1995
Management fee $82,217 $88,618 $123,347
Reimbursable costs 61,188 73,610 119,192
During 1997, the Fund maintained its checking and investment accounts in
Jefferson Bank, a subsidiary of JeffBanks, Inc. in which the Chairman of
Resource America, Inc. serves as a director.
Amounts due from related parties at December 31, 1997 and 1996 represent
monies due to the Fund from the General Partner and/or other affiliated
funds for rentals and sales proceeds collected and not yet remitted to the
Fund.
Amounts due to related parties at December 31, 1997 and 1996 represent
monies due to the General Partner for the fees and costs mentioned above,
as well as, rentals and sales proceeds collected by the Fund on behalf of
other affiliated funds.
F-10
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. MAJOR CUSTOMERS
For the year ended December 31, 1997, three customers accounted for 31%,
27% and 15% of the Fund's rental income and two customers generated 10%
each of the Fund's rental income. For the year ended December 31, 1996,
four customers accounted for 28%, 21%, 15%, and 13% of the Fund's
rental income. For the year ended December 31, 1995, two customers
accounted for 18% each, one customer accounted for 17% and two customers
generated 13% and 12% of the Fund's rental income.
7. CASH DISTRIBUTIONS
Below is a summary of the quarterly cash distributions paid to partners
during the years ended December 31:
Month of Distribution 1997 1996 1995
February $100,000 $168,000 $ 563,578
May 100,000 336,249 561,230
August 100,000 276,458 560,918
November 100,000 98,000 575,434
________ ________ __________
$400,000 $878,707 $2,261,160
======== ======== ==========
In addition, the General Partner declared and paid a cash distribution of
$100,000 in February 1998 for the three months ended December 31, 1997, to
all admitted partners as of December 31, 1997.
F-11