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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, 1998
/ / 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, 1998 is 41,379.
There is no public market for these securities.
The index of Exhibits is located on page 10
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, 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 leasein 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, 1998, 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, aggregate purchase price and
percentage of the various types of equipment leased by the Fund under the
operating and direct financing lease methods as of December 31, 1998:
Operating Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Communication Controllers $ 972,759 25.43%
Network Communications 233,864 6.11
Printers 27,484 0.72
Tape Storage Systems 876,493 22.91
Technical Workstations and Terminals 1,246,578 32.59
Other 468,315 12.24
__________ ______
Totals $3,825,493 100.00%
========== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Electron Microscopes $ 484,167 42.95%
PCB Assembly Equipment 355,177 31.51
Tape Storage Systems 52,815 4.69
Technical Workstations & Terminals 228,462 20.27
Other 6,536 0.58
__________ ______
Totals $1,127,157 100.00%
========== ======
The following schedules detail the type of business, aggregate purchase
price and percentage of equipment usage by industrial classification for
equipment leased by the Fund under the operating and direct financing methods
as of December 31, 1998:
Operating Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Diversified Financial/Banking/Insurance $1,834,495 47.96%
Education 139,211 3.64
Computer/Data Processing 740,671 19.36
Manufacturing/Refining 1,074,378 28.08
Retailing/Consumer Goods 32,123 0.84
Utilities 4,615 0.12
__________ ______
Totals $3,825,493 100.00%
========== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Diversified Financial/Banking/Insurance $ 287,813 25.53%
Manufacturing/Refining 839,344 74.47
__________ ______
Totals $1,127,157 100.00%
========== ======
Average Initial Term of Leases (in months): 27
3
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
4
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, 1998
Limited Partnership Interests 1,557
General Partnership Interest 1
Item 6. SELECTED FINANCIAL DATA
For the Years Ended December 31,
1998 1997 1996 1995 1994
Total Income $1,312,608 $1,465,537 $1,723,227 $2,374,015 $2,689,758
Net Income 266,144 445,584 539,379 738,436 765,397
Distributions to
Partners 325,000 400,000 878,707 2,261,160 2,556,427
Net Income per
Equivalent Limited
Partnership Unit 25.51 42.54 23.17 56.98 47.84
Weighted Average Number
of Equivalent Limited
Partnership Units
Outstanding During
the Year 10,023 10,145 10,433 12,305 15,527
December 31
1998 1997 1996 1995 1994
Total Assets $2,324,899 $2,460,916 $2,389,398 $2,786,915 $4,418,545
Equipment under
Operating Leases
and Equipment Held
for Sale or Lease
(Net) 591,749 993,149 1,397,793 1,891,816 1,816,440
Net Investment in
Direct Financing
Leases 1,046,488 - - - -
Limited Partnership
Units 41,379 41,379 41,379 41,983 42,565
Limited Partners 1,557 1,551 1,551 1,565 1,573
5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The Fund had revenues of $1,312,608, $1,465,537 and $1,723,227 for the
years ended December 31, 1998, 1997 and 1996, respectively. The decrease
in revenues between 1998, 1997 and 1996 is partially caused by the decrease
in rental income generated from equipment under operating leases. Rental
income from the leasing of equipment accounted for 91%, 96% and 88% of total
income in 1998, 1997 and 1996, respectively. In 1998, rental income decreased
by approximately $572,000 because of equipment which came off lease and was
sold. This decrease, however, was mitigated by approximately $154,000 of
rental income generated from equipment under operating leases purchased during
1998, as well as rental income from 1997 equipment purchases for which a full
year of rental income was earned in 1998 and only a partial year was earned in
1997. Additionally, the Fund entered into a transaction in which it collected
the remaining rents owed of approximately $202,000 for one of its leases in the
fourth quarter of 1998, which also mitigates the total decrease in rental
income in 1998. In 1997, rental income decreased by approximately $387,000
because of equipment which came off lease and was released at lower rental
rates or sold. This decrease, however, was reduced by approximately $280,000
of rental income generated from equipment purchased in 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. The Fund
invested in $1,127,000 of direct financing leases during the year ended
December 31, 1998, which generated $37,000 of earned income during the year.
There were no investments in direct financing leases in 1997 and 1996. The
increase in this account also served to mitigate the overall decrease in
revenues in 1998. Additionally, the Fund recorded a net gain of $24,727 on
the sale of equipment for the twelve months ended December 31, 1998, compared
to $-0- for the twelve months ended December 31, 1997 and $149,687 for the
twelve months ended December 31, 1996. The fluctuation in this account
reduced the overall decrease in revenues in 1998 and contributed to the
overall decrease in revenues in 1997.
Expenses were $1,046,464, $1,019,953 and $1,183,848 for the years ended
December 31, 1998, 1997 and 1996, respectively. Depreciation expense comprised
59%, 78% and 66% of total expenses in 1998, 1997 and 1996, respectively. The
variation in write-down of equipment to net realizable value was the primary
cause of the change in total expenses in 1998 and in 1997. 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. In 1998, 1997 and 1996,
approximately $251,000, $38,000 and $157,000, respectively, was charged to
write-down of equipment to net realizable value. The increase in this account
for the twelve months ended December 31, 1998 and the decrease in this account
for the twelve months ended December 31, 1997 contributed to the overall
increase in expenses in 1998 and the overall decrease in expenses in 1997.
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 techno-
logical developments affecting the type of equipment in the portfolio in sub-
sequent years. The change in depreciation expense also accounts for the change
in total expenses in 1998, 1997 and 1996. In 1998, depreciation expense
6
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
decreased because of equipment sold which lowered the overall increase in
expenses from 1997. In 1997, depreciation expense increased because of equip-
ment purchased which reduced the overall decrease in expenses from 1996.
The Fund's net income was $266,144, $445,584 and $539,379 for the years
ended December 31, 1998, 1997 and 1996, respectively. The earnings per equi-
valent limited partnership unit, after earnings allocated to the General
Partner, were $25.51, $42.54 and $23.17 for the years ended December 31, 1998,
1997 and 1996, respectively. The weighted average number of equivalent
limited partnership units outstanding were 10,023, 10,145 and 10,433 for 1998,
1997 and 1996, respectively.
The Fund generated cash from operations of $1,106,229, $1,293,395 and
$1,324,116 for the purpose of determining cash available for distribution and
declared distributions of $300,000, $400,000 and $810,707 to partners for the
years ended December 31, 1998, 1997 and 1996, 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 equipment for lease with cash
available from operations which is not distributed to partners. During the
years ended December 31, 1998, 1997 and 1996, the Fund purchased equipment of
$559,110, $457,785 and $450,749, respectively. The Fund also invested in
$1,127,157 of direct financing leases during 1998.
In January 1999, the Fund financed $121,961 of equipment under a direct
financing lease with an initial lease term of 24 months.
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.
7
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.
(Resource America). The Directors and Executive Officers of FLPMI are:
FREDDIE M. KOTEK, age 43, Chairman of the Board of Directors, President,
and Chief Executive Officer of FLPMI since September 1995 and Senior Vice
President of Resource America since 1995. President of Resource Leasing,
Inc. since September 1995. Executive Vice President of Resource
Properties, Inc. (a wholly owned subsidiary of Resource America) since
1993.
MICHAEL L. STAINES, age 49, Director and Secretary of FLPMI since
September 1995. Director of Resource America since 1994 and Senior Vice
President of Resource America since 1989.
SCOTT F. SCHAEFFER, age 36, Director of FLPMI since September 1995. Vice
Chairman of the Board of Resource America since 1998 and Executive Vice
President of Resource America since 1997. Prior thereto, Senior Vice
President of Resource America since 1995. Vice President-Real Estate of
Resource America and President of Resource Properties, Inc. (a wholly
owned subsidiary of Resource America) since 1992.
Others:
STEPHEN P. CASO, age 43, Vice President and General Counsel of FLPMI
since 1992.
MARIANNE T. SCHUSTER, age 40, Vice President and Controller of FLPMI
since 1984.
KRISTIN L. CHRISTMAN, age 31, Portfolio Manager of FLPMI since December
1995 and Equipment Brokerage Manager since 1993.
8
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, 1998:
Name of Individual or Capacities in
Number in Group Which Served Compensation
F.L. Partnership
Management, Inc. General Partner $66,690(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, 1998, 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 distri-
butions 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 sub-
sequent date, result in a change in control of the Fund.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1998, the Fund was charged $66,690 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,
1998, the General Partner received $11,375 of cash distributions.
The Fund incurred $67,846 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 1998.
9
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
(27) Financial Data Schedule
(28) not applicable
* Incorporated by reference.
10
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 23, 1999
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
Freddie M. Kotek and President of F.L. Partnership 3-23-99
Management, Inc.
(Principal Executive Officer)
Michael L. Staines
____________________________ Director of F.L. Partnership
Michael L. Staines Management, Inc. 3-23-99
Marianne T. Schuster
____________________________ Vice President and Controller
Marianne T. Schuster of F.L. Partnership Management, Inc. 3-23-99
(Principal Financial Officer)
11
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Certified Public Accountants F-2
Balance Sheets as of December 31, 1998 and 1997 F-3
Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 F-4
Statements of Partners' Capital for the years ended
December 31, 1998, 1997 and 1996 F-5
Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 F-6
Notes to Financial Statements F-7 - F-12
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, 1998 and 1997, and the related state-
ments of operations, partners' capital and cash flows for each of the three
years in the period ending December 31, 1998. 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
basisfor 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, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Grant Thornton LLP
Philadelphia, Pennsylvania
February 12, 1999
F-2
FIDELITY LEASING INCOME FUND IV, L.P.
BALANCE SHEETS
ASSETS
December 31,
1998 1997
Cash and cash equivalents $ 556,543 $1,383,229
Accounts receivable 63,126 78,201
Due from related parties 66,993 6,337
Net investment in direct financing leases 1,046,488 -
Equipment under operating leases
(net of accumulated depreciation
of $3,265,367 and $5,000,834,
respectively) 560,126 848,028
Equipment held for sale or lease 31,623 145,121
__________ __________
Total assets $2,324,899 $2,460,916
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 27,867 $ 106,994
Accounts payable and
accrued expenses 12,608 17,905
Due to related parties 17,871 10,608
_________ _________
Total liabilities 58,346 135,507
Partners' capital 2,266,553 2,325,409
__________ __________
Total liabilities and
partners' capital $2,324,899 $2,460,916
========== ==========
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,
1998 1997 1996
Income:
Rentals $1,188,283 $1,403,860 $1,510,547
Earned income on direct
financing leases 37,206 - -
Interest 47,571 58,962 31,365
Gain on sale of equipment, net 24,727 - 149,687
Other 14,821 2,715 31,628
__________ __________ __________
1,312,608 1,465,537 1,723,227
__________ __________ __________
Expenses:
Depreciation 613,376 792,301 777,204
Write-down of equipment
to net realizable value 251,436 38,218 157,220
General and administrative 47,116 28,737 87,196
General and administrative to
related party 67,846 61,188 73,610
Management fee to related party 66,690 82,217 88,618
Loss on sale of equipment, net _ 17,292 -
__________ __________ __________
1,046,464 1,019,953 1,183,848
__________ __________ __________
Net Income $ 266,144 $ 445,584 $ 539,379
========== ========== ==========
Net income per equivalent
limited partnership unit $ 25.51 $ 42.54 $ 23.17
========== ========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during the year 10,023 10,145 10,433
========== ========== ==========
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, 1998, 1997 and 1996
General Limited Partners
Partner Units Amount Total
_______ ___________________ _____
Balance, January 1, 1996 $ 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
Cash distributions (11,375) - (313,625) (325,000)
Net income 10,500 - 255,644 266,144
________ ______ __________ __________
Balance, December 31, 1998 $ 3,624 41,379 $2,262,929 $2,266,553
======== ====== ========== ==========
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,
1998 1997 1996
Cash flows from operating activities:
Net income $ 266,144 $ 445,584 $ 539,379
__________ __________ __________
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 613,376 792,301 777,204
Write-down of equipment to
net realizable value 251,436 38,218 157,220
(Gain) loss on sale of
equipment, net (24,727) 17,292 (149,687)
(Increase) decrease in
accounts receivable 15,075 (32,436) 31,509
(Increase) decrease in due
from related parties (60,656) 23,731 (5,523)
Increase (decrease) in lease
rents paid in advance (79,127) 16,262 34,271
Increase (decrease) in
other, net 1,966 9,672 (54,855)
__________ __________ __________
717,343 865,040 790,139
__________ __________ __________
Net cash provided by
operating activities 983,487 1,310,624 1,329,518
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment (559,110) (457,785) (450,749)
Investment in direct financing leases (1,127,157) - -
Proceeds from direct financing
leases, net of earned income 80,669 - -
Proceeds from sale of equipment 120,425 14,618 160,035
__________ __________ __________
Net cash used in investing
activities (1,485,173) (443,167) (290,714)
__________ __________ __________
Cash flows from financing activities:
Distributions (325,000) (400,000) (878,707)
Redemptions of capital - - (33,954)
__________ __________ __________
Net cash used in financing
activities (325,000) (400,000) (912,661)
__________ __________ __________
Increase (decrease) in cash
and cash equivalents (826,686) 467,457 126,143
Cash and cash equivalents,
beginning of year 1,383,229 915,772 789,629
__________ __________ __________
Cash and cash equivalents,
end of year $ 556,543 $1,383,229 $ 915,772
========== ========== ==========
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 communications equipment,
computer terminals, technical workstations and networking equipment, as well
as other electronic 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 concentra-
tions of credit risk consist principally of temporary cash investments. The
Fund places its temporary investments in bank repurchase agreements and jumbo
savings accounts.
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
The Fund reviews its assets to determine if it has any long-lived assets
that are carried on the books for an amount that may not be recoverable. If
it is determined that an asset's estimated future cash flows will not be suf-
ficient to recover its carrying amount, an impairment charge will be recorded.
Equipment Held for Sale or Lease
Equipment held for sale or lease is carried at its estimated net realiz-
able value.
Use of Estimates
In preparing financial statements in conformity with Generally Accepted
Accounting Principles, management is required to make estimates and assump-
tions 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.
Accounting for Leases
The Fund's leasing operations consist of both operating and direct
financing leases. Under the operating method of accounting for leases, the
cost of the leased equipment is recorded as an asset and depreciated on a
F-7
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting for Leases (Continued)
straight-line basis over its estimated useful life, up to six years. Acqui-
sition fees associated with lease placements are allocated to equipment when
purchased and depreciated as part of equipment cost. Rental income consists
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.
Under the direct financing method of accounting for leases, income (the
excess of the aggregate future rentals and estimated additional amounts
recoverable upon expiration of the lease over the related equipment cost) is
recognized over the life of the lease using the interest method.
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 publica-
tions. Based upon this review, the Fund recorded an adjustment of approx-
imately $29,000, $12,000 and $40,000 or $2.89, $1.18 and $3.83 per equivalent
limited partnership unit to write down its rental equipment in the fourth
quarter of 1998, 1997 and 1996, respectively.
F-8
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
3. YEAR 2000 COMPLIANCE
The "Year 2000 Issue" addresses the ability of computer programs to
distinguish between the year 2000 and the year 1900. Computer programs were
written using two digits rather than four digits for the year in a date field.
This could ultimately result in miscalculations or inaccuracies in processing
data.
The Fund is currently in the process of ensuring that all of its systems
are Year 2000 compliant. The Fund's operating system is year 2000 capable.
Additionally, two of the three main software systems are Year 2000 compliant
and in the testing phase. The third software system is expected to be year
2000 capable by July 1999.
The costs incurred to make the software system Year 2000 compliant has
not been material as of December 31, 1998. It is not anticipated that any
remaining costs incurred to complete this project will have a material affect
on the net income of the Fund.
Furthermore, all significant outside suppliers have been contacted to
ensure that their systems will be Year 2000 compliant. All have indicated
that their systems are in compliance or that Year 2000 Compliance programs
will be completed in early 1999. If the Fund determines that any of its
significant external suppliers are not in compliance, the Fund will not be
materially adversely affected and will seek the services of another supplier.
4. 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.
F-9
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. 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 12 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 1998, 1997 and 1996, approxi-
mately $251,000, $38,000 and $157,000, respectively was charged to write-down
of equipment to net realizable value.
The net investment in direct financing leases as of December 31, 1998, is
as follows:
Minimum lease payments to be received $1,233,000
Less unearned income 187,000
Add expected future residuals -
__________
$1,046,000
==========
The future approximate minimum rentals to be received on noncancellable
operating and direct financing leases as of December 31 are as follows:
Direct
Operating Financing
1999 $356,000 $ 277,000
2000 94,000 277,000
2001 88,000 277,000
2002 84,000 277,000
2003 39,000 125,000
________ __________
$661,000 $1,233,000
======== ==========
In addition, in January 1999, the Fund financed $121,961 of equipment
under a direct financing lease with an initial lease term of 24 months. The
future approximate minimum rentals to be received on this direct financing
lease are $65,580 in both 1999 and 2000.
F-10
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. 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 adminis-
rative 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:
1998 1997 1996
Management fee $66,690 $82,217 $88,618
Reimbursable costs 67,846 61,188 73,610
During 1998, 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, 1998 and 1997 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, 1998 and 1997 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.
7. MAJOR CUSTOMERS
For the year ended December 31, 1998, four customers accounted for 34%,
21%, 15% and 12% of the Fund's rental income. For the year ended December 31,
1997, three customers generated 31%, 27% and 15% 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.
F-11
FIDELITY LEASING INCOME FUND IV, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. CASH DISTRIBUTIONS
Below is a summary of the quarterly cash distributions paid to partners
during the years ended December 31:
Month of Distribution 1998 1997 1996
February $100,000 $100,000 $168,000
May 75,000 100,000 336,249
August 75,000 100,000 276,458
November 75,000 100,000 98,000
________ ________ ________
$325,000 $400,000 $878,707
======== ======== ========
In addition, the General Partner declared and paid a cash distribution
of $75,000 in February 1999 for the three months ended December 31, 1998, to
all admitted partners as of December 31, 1998.
F-12
1