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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 (Fee Required)
For the year ended December 31, 1996
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the transition period from _______________ to ______________
Commission file number 0-18497
Fidelity Leasing Income Fund VI, L.P.
_________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 23-2540929
_________________________________________________________________
(State of Organization) (I.R.S. Employer Identification No.)
7 E. Skippack Pike, Suite 275, Ambler, Pennsylvania 19002
_________________________________________________________________
(Address of principal executive offices) (Zip Code)
(215) 619-2800
_________________________________________________________________
(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, 1996 is 75,294.
There is no public market for these securities.
The index of Exhibits is located on page 11.
1
PART I
Item 1. BUSINESS
Fidelity Leasing Income Fund VI, L.P. (the "Fund"), a
Delaware limited partnership, was organized in 1989 and acquires
equipment, primarily computer equipment, including printers, tape
and disk storage devices, data communications equipment, computer
terminals, technical workstations as well as networking equip-
ment, 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 will 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 and more experience in
the equipment leasing business than the General Partner. 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, 1996, 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, 1996, 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 $ 816,204 5.27%
Disk Storage Systems 6,364,230 41.07
Network Communications 68,879 0.44
Printers 959,898 6.19
Tape Storage Systems 1,663,602 10.73
Terminals, Work Stations
and Display Stations 5,549,423 35.81
Other 75,596 0.49
___________ ______
Totals $15,497,832 100.00%
=========== ======
Breakdown of Equipment Usage
By Industrial Classification
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Computer/Data Processing $ 421,828 2.72%
Diversified Financial/Insurance 7,049,792 45.49
Manufacturing/Refining 3,684,364 23.77
Retailing/Consumer Goods 3,315,934 21.40
Telephone/Telecommunications 1,025,914 6.62
___________ ______
Totals $15,497,832 100.00%
=========== ======
Average Initial Term of Leases (in months): 34
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, 1996
Limited Partnership Interests 2,661
General Partnership Interest 1
Item 6. SELECTED FINANCIAL DATA
For the Years Ended December 31,
1996 1995 1994 1993 1992
Total Income $4,740,607 $6,094,886 $6,442,059 $ 9,658,742 $10,026,031
Net Income 169,828 597,297 457,015 1,244,058 89,596
Distributions to
Partners 668,800 4,343,818 5,063,003 6,697,405 5,500,267
Net Income per
Equivalent Limited
Partnership Unit 5.49 15.94 9.35 21.24 .50
Weighted Average
Number of Equivalent
Limited Partnership
Units Outstanding
During the Period 29,822 35,186 43,506 55,444 68,991
December 31,
1996 1995 1994 1993 1992
Total Assets $9,435,898 $10,458,128 $15,155,942 $20,022,169 $26,104,262
Equipment under
Operating Leases
and Equipment Held
for Sale or Lease
(Net) 5,973,803 6,252,018 6,251,331 10,669,609 17,390,167
Net Investment in
Direct Financing
Leases 503,093 687,606 969,434 1,143,180 -
Limited Partnership
Units 75,294 79,156 80,537 82,626 87,387
Limited Partners 2,661 2,745 2,780 2,828 2,961
4
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Fidelity Leasing Income Fund VI, L.P. had revenues of $4,740,607,
$6,094,886 and $6,442,059 for the years ended December 31, 1996, 1995
and 1994, respectively. Rental income from the leasing of computer
peripheral equipment accounted for 85%, 84% and 93% of total income in
1996, 1995 and 1994, respectively. The decrease in total revenues in
1996 and 1995 is primarily attributable to the decrease in rental
income. In 1996, rental income decreased by approximately $2,244,000
due to renewals of leases at lower rates and lease terminations or
sales of equipment. This decrease, however, was mitigated by an
increase of $1,141,000 in rental income generated from equipment
purchased in 1996 as well as rental income realized on 1995 equipment
purchases for which a full year of rent was earned in 1996 and only a
partial year was earned in 1995. Rental income decreased in 1995 by
approximately $1,519,000 because of equipment which came off lease and
was re-leased at lower rental rates or sold. This decrease was
reduced by an increase of $682,000 in rental income generated from
equipment purchased in 1995 as well as rental income generated from
1994 equipment purchases for which a full year of rental income was
earned in 1995 and only a partial year was earned in 1994. The Fund
recognized a net gain on sale of equipment of $513,405 in 1996 as
compared to $559,213 in 1995 and a loss on sale of equipment of
$48,733 in 1994 which also accounts for the decrease in total revenues
in 1996 and reduced the overall decrease in revenues in 1995. In
addition, interest income decreased in 1996 and 1995 because of lower
cash balances available for investment by the Fund and, in 1996, lower
interest rates earned on short-term investments.
Expenses were $4,570,779, $5,497,589 and $5,985,044 for the years
ended December 31, 1996, 1995 and 1994, respectively. Depreciation
and amortization comprised 76%, 71% and 84% of total expenses in 1996,
1995 and 1994, respectively. The decrease in expenses in 1996 and
1995 was partially attributable to the decrease in depreciation
expense due to equipment which came off lease, terminated or was sold.
Additionally, the decrease in the write-down of equipment to net
realizable value in 1996 also contributed to the overall decrease in
total expenses in 1996. The increase in this expense in 1995, however,
reduced the amount of the decrease in total expenses from 1994.
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 1996, 1995 and 1994, approximately
$419,000, $877,000 and $242,000, respectively, was charged to write-
down of equipment to net realizable value. 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. Any future losses are dependent upon
unanticipated technological developments affecting the computer
equipment industry in subsequent years. Furthermore, general and
administrative expenses to related party decreased in 1996 and
increased in 1995 because of the fluctuation in general and
5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
administrative expenses incurred to the General Partner
during these years which affected the overall decrease in total
expenses in 1996 and 1995. The decrease in management fee to related
party, resulting from the decrease in rental income in 1996 and 1995,
also contributed to the decrease in overall expenses during these
years.
The Fund's net income was $169,828, $597,297 and $457,015 for
the years ended December 31, 1996, 1995 and 1994, respectively. The
earnings per equivalent limited partnership unit, after earnings
allocated to the General Partner, were $5.49, $15.94 and $9.35 for
the years ended December 31, 1996, 1995 and 1994, respectively. The
weighted average number of equivalent limited partnership units
outstanding were 29,822, 35,186 and 43,506 for 1996, 1995 and 1994,
respectively.
The Fund generated funds from operations, for the purpose of
determining cash available for distribution, of $3,568,697, $4,803,454
and $5,746,894 and distributed 15%, 73% and 73% of these amounts to
partners in 1996, 1995 and 1994, respectively, and 2%, 3% and 15% of
these amounts to partners in January and February 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 the fourth quarter of 1995, the General Partner
revised its policy regarding cash distributions so that the distribu-
tions more accurately reflect the net income of the Fund over the most
recent twelve months.
Analysis of Financial Condition
The Fund continues to purchase computer equipment for lease with
cash available from operations which is not distributed to partners.
During the years ended December 31, 1996, 1995 and 1994, the Fund
purchased $3,934,480, $5,430,211 and $1,983,990 respectively, of
equipment.
Subsequent to December 31, 1996, the Fund purchased $2,024,611 of
equipment subject to an operating lease with an initial lease term
of 36 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.
6
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
In February 1996, the Board of Directors resolved to change the
name of the General Partner from Fidelity Leasing Corporation to
F.L. Partnership Management, Inc. (FLPMI). F.L. Partnership
Management, Inc. 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 40, 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. Senior
Vice President and Chief Financial Officer of Paine Webber
Properties from 1990 to 1991.
MICHAEL L. STAINES, age 47, Director and Secretary of FLPMI since
September 1995 and Senior Vice President and Secretary of Resource
America, Inc. since 1989.
SCOTT F. SCHAEFFER, age 34, 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 41, Vice President and General Counsel of
FLPMI since 1992.
MARIANNE T. SCHUSTER, age 38, Vice President and Controller of
FLPMI since 1984.
KRISTIN L. CHRISTMAN, age 29, 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, 1996:
Name of Individual or Capacities in
Number in Group Which Served Compensation
F.L. Partnership
Management, Inc. General Partner $206,765(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, 1996, 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 1989, 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 1% of cash distributions
until the Limited Partners have received an amount
equal to the purchase price of their Units plus a 12%
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, 1996, the Fund was
charged $206,765 of management fees by the General Partner. The
General Partner will continue to receive 5% or 2% 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 for which rental payments during the
initial term are at least sufficient to recover the purchase
price of the equipment, including acquisition fees. This
management fee is paid monthly only if and when the Limited
9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(Continued)
Partners have received distributions for the period from
January 1, 1990 through the end of the most recent quarter equal
to a return for such period at a rate of 12% per year on the
aggregate amount paid for their units.
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 12% cumulative compounded
Priority Return. Based on current estimates, it is not expected
that the Fund will be required to pay this sales fee to the
General Partner. As a result, $269,982 of sales fee accrued by
the Fund in prior periods was recognized into income as part of
the net gain on sale of equipment during the year ended
December 31, 1996.
The General Partner also receives 1% of cash distributions
until the Limited Partners have received an amount equal to the
purchase price of their Units plus a 12% compounded Priority
Return. Thereafter, the General Partner will receive 10% of cash
distributions. During the year ended December 31, 1996, the
General Partner received $6,688 of cash distributions.
The Fund incurred $260,883 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
1996.
10
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.
11
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 VI, 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, 1997
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 3-26-97
Freddie M. Kotek and President of F.L. Partnership
Management, Inc. (Principal Executive
Officer)
Michael L. Staines
___________________________ Director of F.L. Partnership 3-26-97
Michael L. Staines Management, Inc.
Marianne T. Schuster
___________________________ Vice President and Controller 3-26-97
Marianne T. Schuster of F.L. Partnership Management, Inc.
(Principal Financial Officer)
12
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Certified Public Accountants F-2
Balance Sheets as of December 31, 1996 and 1995 F-3
Statements of Operations for the years ended F-4
December 31, 1996, 1995 and 1994
Statements of Partners' Capital for the years F-5
ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended F-6
December 31, 1996, 1995 and 1994
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 VI, L.P.
We have audited the accompanying balance sheets of Fidelity
Leasing Income Fund VI, L.P. as of December 31, 1996 and 1995, and
the related statements of operations, changes in partners' capital
and cash flows for each of the three years in the period ended
December 31, 1996. 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 VI, L.P. as of December 31, 1996 and
1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
Grant Thornton, LLP
Philadelphia, Pennsylvania
February 10, 1997
F-2
FIDELITY LEASING INCOME FUND VI, L.P.
BALANCE SHEETS
ASSETS
December 31,
1996 1995
Cash and cash equivalents $2,783,827 $ 2,920,100
Investment securities held to maturity - 499,740
Accounts receivable 33,835 33,021
Interest receivable - 13,376
Due from related parties 141,340 52,267
Equipment under operating leases
(net of accumulated depreciation
of $9,529,793 and $13,650,877,
respectively) 5,968,039 6,242,594
Net investment in direct financing leases 503,093 687,606
Equipment held for sale or lease 5,764 9,424
__________ ___________
Total assets $9,435,898 $10,458,128
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 284,933 $ 87,814
Accounts payable - equipment 19,788 -
Accounts payable and
accrued expenses 55,307 74,688
Due to related parties 41,183 288,153
__________ ___________
Total liabilities 401,211 450,655
Partners' capital 9,034,687 10,007,473
__________ ___________
Total liabilities and
partners' capital $9,435,898 $10,458,128
========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
FIDELITY LEASING INCOME FUND VI, L.P.
STATEMENTS OF OPERATIONS
For the years ended December 31,
1996 1995 1994
Income:
Rentals $4,047,597 $5,150,170 $5,987,027
Earned income on direct
financing leases 53,395 78,814 95,212
Interest 116,695 292,400 353,956
Gain on sale of equipment, net 513,405 559,213 -
Other 9,515 14,289 5,864
__________ __________ __________
4,740,607 6,094,886 6,442,059
__________ __________ __________
Expenses:
Depreciation and amortization 3,493,500 3,888,155 4,999,097
Write-down of equipment to net
realizable value 418,774 877,215 242,049
General and administrative 190,857 107,497 163,078
General and administrative
to related party 260,883 364,237 232,828
Management fee to related party 206,765 260,485 299,259
Loss on sale of equipment, net - - 48,733
__________ __________ __________
4,570,779 5,497,589 5,985,044
__________ __________ __________
Net income $ 169,828 $ 597,297 $ 457,015
========== ========== ==========
Net income per equivalent
limited partnership unit $ 5.49 $ 15.94 $ 9.35
========== ========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during
the year 29,822 35,186 43,506
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
FIDELITY LEASING INCOME FUND VI, L.P.
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1996, 1995 and 1994
General Limited Partners
Partner Units Amount Total
_______ __________________ _____
Balance, January 1, 1994 $ 9,600 82,626 $19,002,535 $19,012,135
Redemptions - (2,089) (448,699) (448,699)
Cash distributions (50,629) - (5,012,374) (5,063,003)
Net income 50,409 - 406,606 457,015
_______ ______ ___________ ___________
Balance, December 31, 1994 9,380 80,537 13,948,068 13,957,448
Redemptions - (1,381) (203,454) (203,454)
Cash distributions (43,433) - (4,300,385) (4,343,818)
Net income 36,491 - 560,806 597,297
_______ ______ ___________ ___________
Balance, December 31, 1995 2,438 79,156 10,005,035 10,007,473
Redemptions - (3,862) (473,814) (473,814)
Cash distributions (6,688) - (662,112) (668,800)
Net income 6,000 - 163,828 169,828
_______ ______ ___________ ___________
Balance, December 31, 1996 $ 1,750 75,294 $ 9,032,937 $ 9,034,687
======= ====== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
FIDELITY LEASING INCOME FUND VI, L.P.
STATEMENTS OF CASH FLOWS
For the years ended December 31,
1996 1995 1994
Cash flows from operating activities:
Net income $ 169,828 $ 597,297 $ 457,015
__________ __________ ___________
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,493,500 3,888,155 4,999,097
Write-down of equipment to net realizable value 418,774 877,215 242,049
Proceeds from direct financing leases,
net of earned income 184,513 281,828 173,746
(Gain) loss on sale of equipment net (513,405) (559,213) 48,733
(Increase) decrease in due from related parties (89,073) (25,216) 286,254
Increase (decrease) in lease rents paid in
advance 197,119 (130,386) (132,754)
Increase (decrease) in accounts payable-
equipment 19,788 (518,100) 518,100
Increase (decrease) in due to related parties (246,970) (10,227) (173,363)
Increase (decrease) in other, net ( 6,819) 28,485 36,855
__________ __________ __________
3,457,427 3,832,541 5,998,717
__________ __________ __________
Net cash provided by operating activities 3,627,255 4,429,838 6,455,732
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment (3,934,480) (5,430,211) (1,983,990)
Purchase of investment securities
held to maturity - (749,993) (5,429,915)
Maturity of investment securities
held to maturity 499,740 2,485,354 5,176,491
Proceeds from sale of equipment 813,826 1,223,367 1,113,889
__________ __________ __________
Net cash used in investing activities (2,620,914) (2,471,483) (1,123,525)
__________ __________ __________
Cash flows from financing activities:
Distributions (668,800) (4,343,818) (5,063,003)
Redemptions of capital (473,814) (203,454) (448,699)
__________ __________ __________
Net cash used in financing activities (1,142,614) (4,547,272) (5,511,702)
__________ __________ __________
Decrease in cash and cash equivalents (136,273) (2,588,917) (179,495)
Cash and cash equivalents, beginning of year 2,920,100 5,509,017 5,688,512
__________ __________ __________
Cash and cash equivalents, end of year $2,783,827 $2,920,100 $5,509,017
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Fidelity Leasing Income Fund VI, L.P. (the "Fund") was formed in
January 1989. 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 and disk storage devices, data communications 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
Investment Securities Held to Maturity
The Fund adopted Statement of Financial Accounting Standard (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
on January 1, 1994. This new standard requires investments in
securities to be classified in one of three categories: held to
maturity, trading and available for sale. Debt securities that the
Fund has the positive intent and ability to hold to maturity are
classified as held to maturity and are reported at amortized cost. As
the Fund does not engage in security trading, the balance, if any, of
its debt securities and equity securities are classified as available
for sale. Net unrealized gains and losses for securities available for
sale are required to be recognized as a separate component of partners'
capital and excluded from the determination of net income. The Fund
adopted this new standard for the year ended December 31, 1994 with no
resulting financial statement impact on the Fund.
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.
F-7
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Organization Costs
Organization costs were amortized over a five year period.
Accounting for Leases
The Fund's leasing operations consist primarily of operating leases
whereby 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 plus deferred revenue
recognized. 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.
The Fund does have direct financing leases, as well. Under the
direct financing method, 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.
F-8
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 $109,000, $574,000 and $42,000 or $3.66,
$16.31 and $0.97 per equivalent limited partnership unit to write down
its rental equipment in the fourth quarter of 1996, 1995 and 1994,
respectively.
3. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
Cash distributions, if any, are made monthly as follows: 99% to the
Limited Partners and 1% to the General Partner, until the Limited
Partners have received an amount equal to the purchase price of their
Units, plus a 12% compounded Priority Return (an amount equal to 12%
compounded annually on the portion of the purchase price not previously
distributed); thereafter, 90% to the Limited Partners and 10% to the
General Partner.
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 VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
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 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 1996, 1995
and 1994, approximately $419,000, $877,000 and $242,000, respectively
was charged to write down of equipment to net realizable value. Any
future losses are dependent upon unanticipated technological
developments affecting the computer equipment industry in subsequent
years.
During the year ended December 31, 1996, the Fund leased
equipment under the direct financing method in accordance with
SFAS No. 13. This method provides for recognition of income (the
excess of the aggregate future rentals and estimated additional
amounts recoverable upon expiration of the lease over the related
equipment cost) over the life of the lease using the interest
method.
The net investment in direct financing leases as of December 31, 1996
is as follows:
Net minimum lease payments to be received $556,000
Less unearned income 53,000
Add expected future residuals -
________
$503,000
========
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
1997 $3,213,000 $238,000
1998 1,412,000 238,000
1999 738,000 80,000
__________ ________
$5,363,000 $556,000
========== ========
Subsequent to December 31, 1996, the Fund purchased $2,024,611 of
equipment subject to an operating lease with an initial lease
term of 36 months. The future approximate minimum rentals to be
received on this noncancellable operating lease are $738,286,
$681,495 and $624,704 in 1997, 1998 and 1999, respectively.
F-10
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. RELATED PARTY TRANSACTIONS
The General Partner receives 5% or 2% 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 for which rental payments
during the initial term are at least sufficient to recover the purchase
price of the equipment, including acquisition fees. This management
fee is paid monthly only if and when the Limited Partners have received
distributions for the period from January 1, 1990 through the end of
the most recent quarter equal to a return for such period at a rate of
12% per year on the aggregate amount paid for their units.
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
12% cumulative compounded Priority Return. Based on current estimates,
it is not expected that the Fund will be required to pay this sales fee
to the General Partner. As a result, $269,982 of sales fee accrued by
the Fund in prior periods was recognized into income as part of the net
gain on sale of equipment during the year ended December 31, 1996.
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
or its parent company during the years ended December 31:
1996 1995 1994
Management fee $206,765 $260,485 $299,259
Reimbursable costs 260,883 364,237 232,828
During 1996, 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, 1996 and 1995
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 the Fund.
Amounts due to related parties at December 31, 1996 and 1995 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-11
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. MAJOR CUSTOMERS
For the year ended December 31, 1996, two customers accounted for
approximately 12% and 11% of the Fund's rental income. For the year
ended December 31, 1995, one customer generated approximately 17%
of the Fund's rental income. For the year ended December 31, 1994, one
customer accounted for approximately 14% of the Fund's rental income.
7. CASH DISTRIBUTIONS
Below is a summary of the cash distributions paid to partners during
the years ended December 31:
For the Quarter Ended 1996 1995 1994
March $218,800 $1,256,951 $1,287,311
June 150,000 1,242,919 1,260,857
September 150,000 1,240,099 1,257,735
December 150,000 603,849 1,257,100
________ __________ __________
$668,800 $4,343,818 $5,063,003
======== ========== ==========
In addition, the General Partner declared a cash distribution of
$50,000 in January 1997 and $25,000 in February 1997 for the months
ended November 30 and December 31, 1996, respectively to all admitted
partners as of November 30 and December 31, 1996.
F-12