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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 0-20131
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.)
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 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 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
owing 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.
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
Electron Microscopes $ 775,384 17.65%
Network Communications 25,760 0.59
Printers 89,166 2.03
Tape Storage Systems 765,128 17.42
Technical Workstations and Terminals 2,308,589 52.55
Other 428,767 9.76
__________ ______
Totals $4,392,794 100.00%
========== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Electron Microscopes $2,301,149 66.14%
Mini-systems 129,332 3.72
PCB Assembly Equipment 964,081 27.71
Printers 84,546 2.43
__________ ______
Totals $3,479,108 100.00%
========== ======
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
Computers/Data Processing $ 411,845 9.38%
Diversified Financial/Banking/Insurance 1,180,520 26.87
Manufacturing/Refining 2,491,218 56.71
Retailing/Consumer Goods 26,026 0.59
Telephone/Telecommunications 283,185 6.45
__________ ______
Totals $4,392,794 100.00%
========== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Diversified Financial/Banking/Insurance $ 129,332 3.72%
Manufacturing/Refining 3,349,776 96.28
__________ ______
Totals $3,479,108 100.00%
========== ======
Average Initial Term of Leases (in months): 32
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 2,670
General Partnership Interest 1
Item 6. SELECTED FINANCIAL DATA
For the Years Ended December 31,
1998 1997 1996 1995 1994
Total Income $6,764,079 $4,765,095 $4,740,607 $ 6,094,886 $ 6,442,059
Net Income 245,744 423,226 169,828 597,297 457,015
Distributions to Partners 300,000 300,011 668,800 4,343,818 5,063,003
Net Income per
Equivalent Limited
Partnership Unit 8.18 14.22 5.49 15.94 9.35
Weighted Average Number
of Equivalent Limited
Partnership Units
Outstanding During
the Year 29,663 29,471 29,822 35,186 43,506
December 31,
1998 1997 1996 1995 1994
Total Assets $9,392,891 $9,845,711 $9,435,898 $10,458,128 $15,155,942
Equipment under
Operating Leases and
Equipment Held for
Sale or Lease (Net) 2,744,228 5,186,967 5,973,803 6,252,018 6,251,331
Net Investment in
Direct Financing Leases 3,545,522 126,057 503,093 687,606 969,434
Limited Partnership
Units 75,294 75,294 75,294 79,156 80,537
Limited Partners 2,670 2,665 2,661 2,745 2,780
5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Results of Operations
Fidelity Leasing Income Fund VI, L.P. had revenues of $6,764,079,
$4,765,095 and $4,740,607 for the years ended December 31, 1998, 1997 and
1996, respectively. Rental income from the leasing of equipment accounted for
94%, 93% and 85% of total revenues in 1998, 1997 and 1996, respectively. The
increase in total revenues in 1998 and 1997 is primarily attributable to the
increase in rental income. Rental income increased in 1998 by approximately
$893,000 because of equipment purchases made during the year as well as rental
income generated 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 several transactions in which it collected
the remaining rents owed of approximately $3,401,000 on certain leases. The
increase in rental income in 1998 was reduced by a decrease of $2,404,000
resulting from equipment which came off lease and was sold. In 1997, rental
income increased by approximately $1,506,000 due to purchases of equipment for
lease in 1997, as well as rental income realized on 1996 purchases for which
a full year of rent was earned in 1997 but only a partial year was earned in
1996. This increase, however, was reduced by a decrease of $1,118,000 in
rental income caused by equipment which was terminated or sold in 1997. The
Fund also invested in approximately $3.8 million of direct financing leases
during 1998 compared to $129,000 in 1997. As a result, the earned income
recognized on direct financing leases increased in 1998 which also contri-
buted to the overall increase in revenues. Furthermore, the Fund recognized
a net gain on sale of equipment of $180,509, $146,387 and $513,405 for the
years ended December 31, 1998, 1997 and 1996, respectively. The variation
in this account contributed to the increase in total revenues in 1998 and
lowered the increase in total revenues in 1997. Interest income decreased
from 1997 because of lower cash balances available for investment by the Fund
in 1998. In 1997, however, interest income increased from 1996 because of
larger cash balances invested by the Fund
Expenses were $6,518,335, $4,341,869 and $4,570,779 for the years ended
December 31, 1998, 1997 and 1996, respectively. Depreciation expense
comprised 83%, 78% and 76% of total expenses in 1998, 1997 and 1996,
respectively. The increase in expenses in 1998 is primarily attributable to
the increase in depreciation expense resulting from equipment purchased under
operating leases since December 1997 as well as depreciation on 1997 equipment
purchases for which a full year of depreciation was realized in 1998 but only
a partial year of depreciation was recorded in 1997. The Fund also recorded
additional depreciation of $3,391,000 on equipment discussed above for which
the Fund entered into several transactions to collect the remaining rents on
certain of its leases. In 1997, the decrease in depreciation expense, due to
equipment which came off lease, terminated or sold, partially contributed to
the decrease in total expenses. The fluctuation in write-down of equipment
to net realizable also contributed to the change in total expenses in both
1998 and 1997. Currently, the Fund's practice is to review the recovera-
bility 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 $399,000, $376,000 and
$419,000, respectively, was charged to write-down of equipment to net real-
izable value which also accounts for a portion of the increase in total
expenses in 1998 and the decrease in total expenses in 1997. In accordance
with Generally Accepted Accounting Principles, the Fund writes down its rental
6
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
equipment to its estimated net realizable value when the amounts are reason-
ably estimated and only recognizes gains upon actual sale of its rental equip-
ment. Any future losses are dependent upon unanticipated technological devel-
opments affecting the types of equipment in the portfolio in subsequent years.
Furthermore, the increase in management fee to related party also contributed
to the increase in total expenses in 1998 and lowered the decrease in total
expenses in 1997. Management fee to related party increased as a result
of the increase in rents generated from both operating and direct financing
leases in 1998 and 1997.
The Fund's net income was $245,744, $423,226 and $169,828 for the years
ended December 31, 1998, 1997 and 1996, respectively. The earnings per
equivalent limited partnership unit, after earnings allocated to the General
Partner, were $8.18, $14.22 and $5.49 for the years ended December 31, 1998,
1997 and 1996, respectively. The weighted average number of equivalent
limited partnership units outstanding were 29,663, 29,471 and 29,822 for the
years ended December 31, 1998, 1997 and 1996, respectively.
The Fund generated cash from operations, for the purpose of determining
cash available for distribution, of $5,845,993, $4,045,851 and $3,568,697 and
distributed 4%, 6% and 15% of these amounts to partners in 1998, 1997 and
1996, respectively and 1%, 2% and 2% of these amounts to partners in January
and February 1999, 1998 and 1997, 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 1996, the
General Partner revised its policy regarding cash distributions so that they
more accurately reflect the net income of the Fund over the most recent
twelve months.
Analysis of Financial Condition
The Fund continues 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 $3,893,271, $3,169,760
and $3,934,480, respectively, of equipment subject to operating leases. The
Fund also invested in $3,854,083 and $129,332 of direct financing leases
during the twelve months ended December 31, 1998 and 1997, respectively.
There were no investments made in direct financing leases in 1996.
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 twelve month
period.
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. DISAGREEMENTS 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 $327,227(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 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, 1998, the Fund was charged by the
General Partner $327,227 of management fees. 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
of the lease are at least sufficient to recover the purchase price of the
equipment, including acquisition fees. All of the direct financing leases
in which the Fund has invested meet the criteria for a full pay-out lease and
pay a 2% management fee to the General Partner. 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
9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
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.
The General Partner 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, 1998,
the General Partner received $3,000 of cash distributions.
The Fund incurred $257,295 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.
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
(27) Financial Data Schedule
(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, 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 and
Freddie M. Kotek President of F.L. Partnership 3-26-99
Management, Inc.
(Principal Executive Officer)
Michael L. Staines
____________________________ Director of F.L. Partnership
Michael L. Staines Management, Inc 3-26-99
Marianne T. Schuster
____________________________ Vice President and Controller
Marianne T. Schuster of F.L. Partnership Management, Inc.
(Principal Financial Officer) 3-26-99
12
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 VI, L.P.
We have audited the accompanying balance sheets of Fidelity Leasing
Income Fund VI, L.P. as of December 31, 1998 and 1997, and the related
statements of operations, partners' capital and cash flows for each of the
three years in the period ended December 31, 1998. These financial state-
ments 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 signi-
ficant 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, all material respects, the financial position of Fidelity Leasing
Income Fund VI, 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 VI, L.P.
BALANCE SHEETS
ASSETS
December 31,
1998 1997
Cash and cash equivalents $2,892,327 $4,269,825
Accounts receivable 102,663 180,772
Due from related parties 108,151 82,090
Equipment under operating leases
(net of accumulated depreciation
of $2,254,092 and $8,038,840,
respectively) 2,138,702 4,718,892
Net investment in direct financing
leases 3,545,522 126,057
Equipment held for sale or lease 605,526 468,075
__________ __________
Total assets $9,392,891 $9,845,711
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 45,211 $ 111,922
Accounts payable - equipment 30,848 16,097
Accounts payable and
accrued expenses 49,720 105,025
Due to related parties 163,466 454,765
__________ __________
Total liabilities 289,245 687,809
Partners' capital 9,103,646 9,157,902
__________ __________
Total liabilities and
partners' capital $9,392,891 $9,845,711
========== ==========
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,
1998 1997 1996
Income:
Rentals $6,324,748 $4,435,249 $4,047,597
Earned income on direct
financing leases 140,128 37,404 53,395
Interest 95,069 132,822 116,695
Gain on sale of equipment, net 180,509 146,387 513,405
Other 23,625 13,233 9,515
__________ __________ __________
6,764,079 4,765,095 4,740,607
__________ __________ __________
Expenses:
Depreciation 5,382,228 3,393,070 3,493,500
Write-down of equipment to
net realizable value 398,530 375,942 418,774
General and administrative 153,055 111,289 190,857
General and administrative to
related party 257,295 229,091 260,883
Management fee to related party 327,227 232,477 206,765
__________ __________ __________
6,518,335 4,341,869 4,570,779
__________ __________ __________
Net income $ 245,744 $ 423,226 $ 169,828
========== ========== ==========
Net income per equivalent
limited partnership unit $ 8.18 $ 14.22 $ 5.49
========== ========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during the year 29,663 29,471 29,822
========== ========== ==========
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, 1998, 1997 and 1996
General Limited Partners
Partner Units Amount Total
________ ____________________ _____
Balance, January 1, 1996 $ 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
Cash distributions (3,000) - (297,011) (300,011)
Net income 4,232 - 418,994 423,226
________ ______ ___________ ___________
Balance, December 31, 1997 2,982 75,294 9,154,920 9,157,902
Cash distributions (3,000) - (297,000) (300,000)
Net income 3,000 - 242,744 245,744
________ ______ ___________ ___________
Balance, December 31, 1998 $ 2,982 75,294 $ 9,100,664 $ 9,103,646
======== ====== =========== ===========
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,
1998 1997 1996
Cash flows from operating activities:
Net income $ 245,744 $ 423,226 $ 169,828
__________ __________ __________
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,382,228 3,393,070 3,493,500
Write-down of equipment to net
realizable value 398,530 375,942 418,774
(Gain) loss on sale of equipment, net (180,509) (146,387) (513,405)
(Increase) decrease in accounts receivable 78,109 (146,937) (814)
(Increase) decrease in due from
related parties (26,061) 59,250 (89,073)
Increase (decrease) in lease rents paid in
advance (66,711) (173,011) 197,119
Increase (decrease) in accounts payable
and accrued expenses (55,305) (3,691) 19,788
Increase (decrease) in due to related parties (291,299) 413,582 (246,970)
Increase (decrease) in other, net 14,751 49,718 (6,005)
__________ __________ __________
5,253,733 3,821,536 3,272,914
__________ __________ __________
Net cash provided by operating activities 5,499,477 4,244,762 3,442,742
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment (3,893,271) (3,169,760) (3,934,480)
Investment in direct financing leases (3,824,885) (129,332) -
Proceeds from direct financing leases,
net of earned income 405,416 506,368 184,513
Maturity of investment securities held
to maturity - - 499,740
Proceeds from sale of equipment 735,765 333,971 813,826
__________ __________ __________
Net cash used in investing activities (6,576,975) (2,458,753) (2,436,401)
__________ __________ __________
Cash flows from financing activities:
Distributions (300,000) (300,011) (668,800)
Redemptions of capital - - (473,814)
_________ __________ __________
Net cash used in financing activities (300,000) (300,011) (1,142,614)
__________ __________ __________
Increase (decrease) in cash and cash
equivalents (1,377,498) 1,485,998 (136,273)
Cash and cash equivalents, beginning of year 4,269,825 2,783,827 2,920,100
__________ __________ __________
Cash and cash equivalents, end of year $2,892,327 $4,269,825 $2,783,827
========== ========== ==========
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 and networking equip-
ment, as well as other electronic equipment. This equipment 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
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.
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 real-
izable value.
F-7
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 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 seven 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.
The Fund does have direct financing leases, as well. Under the direct
financing method, income (the excess of the aggregate future rentals and
estimated unguaranteed residuals 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.
F-8
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 approxi-
mately $125,000 and $109,000 or $4.24 and $3.66 per equivalent limited
partnership unit to write down its rental equipment in the fourth quarter of
1997 and 1996, respectively. There was no significant fourth quarter adjust-
ment made for the year ended December 31, 1998.
Reclassification
Certain amounts on the 1997 and 1996 financial statements have been
reclassified to conform to the presentation adopted in 1998.
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 systems 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, 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.
F-9
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS (Continued)
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.
5. EQUIPMENT LEASED
Equipment on lease consists of equipment under operating leases. 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
24 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 $399,000, $376,000 and $419,000, respectively, was charged to write-
down of equipment to net realizable value. Any future losses are dependent
upon unanticipated technological developments affecting the equipment in
subsequent years.
Unguaranteed residuals for direct financing leases represent the
estimated amounts recoverable at lease termination from lease extensions or
disposition of the equipment. The Fund reviews these residual values
quarterly. If the equipment's fair market value is below the estimated
residual value, an adjustment is made.
The net investment in direct financing leases as of December 31, 1998
is as follows:
Minimum lease payments to be received $3,889,000
Unguaranteed residuals 322,000
Unearned rental income (575,000)
Unearned residual income (90,000)
__________
$3,546,000
==========
F-10
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. EQUIPMENT LEASED (Continued)
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 $ 971,000 $ 942,000
2000 647,000 1,031,000
2001 176,000 760,000
2002 167,000 696,000
2003 117,000 441,000
Thereafter - 19,000
__________ __________
$2,078,000 $3,889,000
========== ==========
6. RELATED PARTY TRANSACTIONS
The General Partner receives 5% or 2% of gross rental payments from
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 non-cancellable leases for which the rental payments due
during the initial term of the lease 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 calendar 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.
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 of services and materials charged by the General
Partner and its parent company during the years ended December 31:
1998 1997 1996
Management fee $327,227 $232,477 $206,765
Reimbursable costs 257,295 229,091 260,883
The Fund maintains 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.
F-11
FIDELITY LEASING INCOME FUND VI, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. RELATED PARTY TRANSACTIONS (Continued)
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, three customers accounted for
approximately 25%, 21%, 20% and 12% of the Fund's rental income. For the
year ended December 31, 1997, three customers generated approximately 23%,
17% and 12% of the Fund's rental income. For the year ended December 31,
1996, two customers accounted for approximately 12% and 11% of the Fund's
rental income.
8. CASH DISTRIBUTIONS
Below is a summary of the cash distributions paid to partners during
the years ended December 31:
For the Quarter Ended 1998 1997 1996
March $ 75,000 $ 75,000 $218,800
June 75,000 100,000 150,000
September 75,000 75,000 150,000
December 75,000 50,011 150,000
________ ________ ________
$300,000 $300,011 $668,800
======== ======== ========
In addition, the General Partner declared and paid three cash distri-
bution of $25,000 each during January and February 1999 for the three months
ended October 31, November 30 and December 31, 1998, to all admitted partners
as of October 31, November 30 and December 31, 1998.
F-12