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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 1934For the year ended December 31, 1999/ / 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 VIII, L.P.
______________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 23-2627143
______________________________________________________________________
(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, 1999 is 21,695.There is no public market for these securities.
The index of Exhibits is located on page 12.
1
PART I
Item 1. BUSINESS
Fidelity Leasing Income Fund VIII, L.P. (the "Fund"), a Delaware limited
partnership, was organized in 1990 and acquires computer equipment, including
printers, tape and disk storage devices, data communications equipment, com-
puter terminals, technical workstations, networking equipment, as well as other
electronic equipment that is leased to third parties on a short-term basis.
The Fund's principal objective is to generate leasing revenues for distri-
bution. The Fund manages the equipment, releasing or disposing of equipment
as it comes off lease in order to achieve its principal objective. The Fund
does not borrow funds to purchase equipment.
The Fund generally acquires equipment subject to a lease. Purchases of
equipment for lease are typically made through equipment leasing brokers,
under a sale-leaseback arrangement directly from lessees owning equipment,
from the manufacturer either pursuant to a purchase agreement relating to
significant quantities of equipment or on an ad hoc basis to meet the needs
of a particular lessee.
The equipment leasing industry is highly competitive. The Fund competes
with leasing companies, equipment manufacturers and distributors, and entities
similar to the Fund (including similar programs sponsored by the General
Partner), some of which have greater financial resources than the Fund.
Other leasing companies and equipment manufacturers and distributors may be in
a position to offer equipment to prospective lessees on financial terms which
are more favorable than those which the Fund can offer. They may also be in
a position to offer trade-in-privileges, maintenance contracts and other
services which the Fund may not be able to offer. Equipment manufacturers and
distributors may offer to sell equipment on terms and conditions (such as
liberal financing terms and exchange privileges) which will afford benefits to
the purchaser similar to those obtained through leases. As a result of the
advantages which certain of its competitors may have, the Fund may find it
necessary to lease its equipment on a less favorable basis than certain of
its competitors.
A brief description of the types of equipment in which the Fund has
invested as of December 31, 1999, 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 methods as of December 31, 1999:
Operating Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Technical Workstations and Terminals $1,074,786 62.41%
Tape Storage Systems 426,714 24.78
Other 220,638 12.81
__________ ______
Totals $1,722,138 100.00%
========== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Technical Workstations and Terminals $1,912,760 44.54%
Network Communications 1,704,047 39.68
PCB Assembly Equipment 293,687 6.84
Printers 68,531 1.59
Tape Storage Systems 7,663 0.18
Other 308,114 7.17
__________ ______
Totals $4,294,802 100.00%
========== ======
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, 1999:
Operating Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Consumer Products/Retailing $ 656,670 38.13%
Computers/Data Processing 646,919 37.56
Manufacturing/Refining 418,549 24.31
__________ ______
Totals $1,722,138 100.00%
========== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Consumer Products/Retailing $3,613,866 84.14%
Manufacturing/Refining 338,001 7.87
Telecommunications 293,687 6.84
Diversified Financial/Banking/Insurance 49,248 1.15
__________ ______
Totals $4,294,802 100.00%
========== ======
Average Initial Term of Leases (in months): 35
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, 1999
Limited Partnership Interests 952
General Partnership Interest 1
Item 6. SELECTED FINANCIAL DATA
For the Years Ended December 31,
1999 1998 1997 1996 1995
Total Income $1,051,009 $2,790,169 $2,273,084 $2,258,564 $2,543,493
Net Income (Loss) 364,639 93,898 382,297 24,373 (137,721)
Distributions to Partners 240,000 220,000 240,000 225,000 1,105,691
Net Income (Loss)
per Equivalent Limited
Partnership Unit 27.55 6.87 28.53 1.62 (9.05)
Weighted Average Number
of Equivalent Limited
Partnership Units
Outstanding During
the Year 13,105 13,312 13,264 13,396 15,067
December 31,
1999 1998 1997 1996 1995
Total Assets $5,203,246 $5,130,180 $5,276,226 $5,071,493 $5,596,725
Equipment under
Operating Leases and
Equipment Held for
Sale or Lease (Net) 296,219 758,243 3,014,540 2,572,350 2,395,085
Net Investment in
Direct Financing Leases 3,103,244 2,817,738 - - -
Limited Partnership
Units 21,695 21,695 21,695 21,695 22,812
Limited Partners 952 945 942 943 962
5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Fidelity Leasing Income Fund VIII, L.P. had revenues of $1,051,009,
$2,790,169 and $2,273,084 for the years ended December 31, 1999, 1998 and
1997, respectively. Rental income from the leasing of equipment accounted
for 56%, 90% and 90% of total revenues in 1999, 1998 and 1997, respectively.
The decrease in total revenues in 1999 and the increase in total revenues in
1998 was primarily attributable to the change in rental income. Rental income
decreased by approximately $1,207,000 in 1999 because of equipment that
terminated and sold during both 1999 and 1998. Additionally, the Fund entered
into transactions in which it collected the remaining rents owed on certain
leases resulting in the recognition of $712,000 of rental income during the
last quarter of 1998 which also contributed to the decrease in rental income
in 1999 and the increase in this account in 1998. In 1998, rental income also
increased by approximately $220,000 because of equipment purchased during the
year as well as rents earned on 1997 equipment purchases for which a full year
of rental income was earned in 1998 and only a partial year was earned in 1997.
This increase in rental income, however, was reduced by approximately $464,000
because of equipment that came off lease and was released at lower rental rates
or sold. The Fund recognized a net gain on sale of equipment of $49,407,
$85,228 and $142,890 for the years ended December 31, 1999, 1998 and 1997,
respectively. The decrease in this account also contributed to the total
decrease in income in 1999 and lowered the total increase in income in 1998.
The Fund also invested in $1.9 million of direct financing leases during the
year ended December 31, 1999 and $3.3 million during the year ended December
31, 1998. There were no investments made in direct financing leases in 1997.
For the twelve months ended December 31, 1999 and 1998, the Fund recognized
$304,000 and $128,000 of earned income on these direct financing leases which
mitigated the overall decrease in revenues in 1999 and contributed to the
increase in total revenues in 1998.
Expenses were $686,370, $2,696,271 and $1,890,787 for the years ended
December 31, 1999, 1998 and 1997, respectively. Depreciation expense comprised
53%, 78% and 84% of total expenses during the years ended December 31, 1999,
1998 and 1997, respectively. The decrease in total expenses in 1999 and the
increase in total expenses in 1998 was primarily related to the change in
depreciation expense. In 1999, depreciation expense decreased because of
equipment that terminated and sold. Further, in the last quarter of 1998, the
Fund recorded additional depreciation of $762,000 on equipment discussed above
for which the Fund entered into transactions to collect the remaining rents
owed on certain leases. This additional depreciation also accounted for the
decrease in depreciation expense in 1999 and the increase in depreciation
expense in 1998. The changes in total expenses in 1999, 1998 and 1997 are also
related to the fluctuation in write-down of equipment to net realizable value.
Based upon the quarterly review of the recoverability of the undepreciated cost
of rental equipment, $80,267, $246,318 and $32,282 was charged to operations to
write down equipment to its estimated net realizable value during the years
ended December 31, 1999, 1998 and 1997, respectively. 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 infor-
mation provided in third party publications. In accordance with Generally
Accepted Accounting Principles, the Fund writes down its rental equipment to
6
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
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 types of equipment in the portfolio in subsequent years. Furthermore, the
variation in management fee to related party resulting from the variation in
rental income in 1999 and 1998 also contributed to the overall decrease in
expenses during this year and the increase in expenses in 1998. The Fund also
paid lower management fees of 2% of rentals on full pay-out leases. Many of
the leases purchased in 1999 and 1998 were direct financing leases which meet
the requirements of full pay-out leases for the purpose of calculating
management fees.
The Fund's net income was $364,639, $93,898 and $382,297 for the years
ended December 31, 1999, 1998 and 1997, respectively. The earnings per equiv-
alent limited partnership unit, after earnings allocated to the General
Partner, were $27.55, $6.87 and $28.53 based on a weighted average number of
equivalent limited partnership units outstanding of 13,105, 13,312 and 13,264
for the years ended December 31, 1999, 1998 and 1997, respectively.
The Fund generated cash from operations of $760,331, $2,358,458 and
$1,863,778, for the purpose of determining cash available for distribution,
and distributed 24%, 8% and 11% to partners in 1999, 1998 and 1997, respec-
tively, and 8%, 2% and 2% in January and February 2000, 1999 and 1998, respec-
tively. For financial statement purposes, the Fund records cash distributions
to partners on a cash basis in the period in which they are paid.
Analysis of Financial Condition
The Fund began the process of dissolution during 1999. As provided in
the Restated Limited Partnership Agreement, the assets of the Fund shall be
liquidated as promptly as is consistent with obtaining their fair value.
During this time, the Fund continued to purchase equipment for lease with cash
available from operations which was not distributed to partners. During the
years ended December 31, 1998 and 1997, the Fund purchased $231,262 and
$1,066,561, respectively, of equipment subject to operating leases. The Fund
also invested in $1,857,519 and $3,312,383 of direct financing leases during
the years ended December 31, 1999 and 1998, respectively.
The cash position of the Fund is reviewed daily and cash is invested on
a short-term basis.
The Fund's cash from operations is expected to continue to be adequate to
cover all operating expenses and contingencies during the next twelve month
period.
7
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.
8
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 44, 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 50, Director and Secretary of FLPMI since
September 1995. Director of Resource America since 1989 and Senior Vice
President of Resource America since 1989.
SCOTT F. SCHAEFFER, age 37, 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:
MARIANNE T. SCHUSTER, age 41, Vice President and Controller of FLPMI
since 1984.
KRISTIN L. CHRISTMAN, age 32, Portfolio Manager of FLPMI since December
1995 and Equipment Brokerage Manager since 1993.
9
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, 1999:
Name of Individual or Capacities in
Number in Group Which Served Compensation
F.L. Partnership
Management, Inc. General Partner $57,784(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, 1999, 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 1990, 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 part-
nership 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 an 11% cumulative 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, 1999, the Fund was charged by the
General Partner $57,784 of management fees. The General Partner will
continue to receive 4% or 2% of rental payments on equipment under operating
leases and full pay-out leases, respectively, for administrative and manage-
ment 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 equip-
ment, 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 the initial closing through the end of the most recent
calendar quarter equal to a return for such period at a rate of 11% 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
10
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
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 an 11% 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 an 11% cumulative compounded priority return. Thereafter, the General
Partner will receive 10% of cash distributions. During 1999, the General
Partner received cash distributions of $2,400.
The Fund incurred $113,635 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 1999.
11
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.
12
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 VIII, 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, 2000
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 3-23-00
Freddie M. Kotek and President of F.L. Partnership
Management, Inc.
(Principal Executive Officer)
Michael L. Staines
___________________________ Director of F.L. Partnership 3-23-00
Michael L. Staines Management, Inc.
Marianne T. Schuster
___________________________ Vice President and Controller 3-23-00
Marianne T. Schuster of F.L. Partnership Management, Inc.
(Principal Financial Officer)
13
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Certified Public Accountants F-2
Balance Sheets as of December 31, 1999 and 1998 F-3
Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-4
Statements of Partners' Capital for the years ended
December 31, 1999, 1998 and 1997 F-5
Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 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 VIII, L.P.
We have audited the accompanying balance sheets of Fidelity Leasing
Income Fund VIII, L.P. as of December 31, 1999 and 1998, and the related
statements of operations, partners' capital and cash flows for each of the
three years in the period ended December 31, 1999. 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 signif-
icant 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 VIII, L.P. as of December 31, 1999 and 1998, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
Grant Thornton LLP
Philadelphia, Pennsylvania
February 11, 2000
F-2
FIDELITY LEASING INCOME FUND VIII, L.P.
BALANCE SHEETS
ASSETS
December 31,
1999 1998
Cash and cash equivalents $1,628,789 $1,336,219
Accounts receivable 97,705 154,987
Due from related parties 77,289 62,993
Equipment under operating leases
(net of accumulated depreciation
of $1,438,669 and $2,426,589,
respectively) 283,469 656,241
Net investment in direct financing
leases 3,103,244 2,817,738
Equipment held for sale or lease 12,750 102,002
__________ __________
Total assets $5,203,246 $5,130,180
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 12,701 $ 9,503
Accounts payable and
accrued expenses 52,747 106,614
Due to related parties 6,164 7,068
__________ __________
Total liabilities 71,612 123,185
Partners' capital 5,131,634 5,006,995
__________ __________
Total liabilities and
partners' capital $5,203,246 $5,130,180
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
FIDELITY LEASING INCOME FUND VIII, L.P.
STATEMENTS OF OPERATIONS
For the years ended December 31,
1999 1998 1997
Income:
Rentals $ 589,216 $2,507,807 $2,039,604
Earned income on direct
financing leases 304,021 128,079 -
Interest 81,090 58,324 88,212
Gain on sale of equipment, net 49,407 85,228 142,890
Other 27,275 10,731 2,378
__________ __________ __________
1,051,009 2,790,169 2,273,084
__________ __________ __________
Expenses:
Depreciation 364,832 2,103,470 1,592,089
Write-down of equipment to
net realizable value 80,267 246,318 32,282
General and administrative 69,852 88,133 61,228
General and administrative to
related party 113,635 145,328 124,149
Management fee to related party 57,784 113,022 81,039
__________ __________ __________
686,370 2,696,271 1,890,787
__________ __________ __________
Net income $ 364,639 $ 93,898 $ 382,297
========== ========== ==========
Net income per equivalent
limited partnership unit $ 27.55 $ 6.87 $ 28.53
========== ========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during the year 13,105 13,312 13,264
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
FIDELITY LEASING INCOME FUND VIII, L.P.
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1999, 1998 and 1997
General Limited Partners
Partner Units Amount Total
________ ___________________ _____
Balance, January 1, 1997 $ (9,959) 21,695 $5,000,759 $4,990,800
Cash distributions (2,400) - (237,600) (240,000)
Net income 3,823 - 378,474 382,297
________ ______ __________ __________
Balance, December 31, 1997 (8,536) 21,695 5,141,633 5,133,097
Cash distributions (2,200) - (217,800) (220,000)
Net income 2,400 - 91,498 93,898
________ ______ __________ _________
Balance, December 31, 1998 (8,336) 21,695 5,015,331 5,006,995
Cash distributions (2,400) - (237,600) (240,000)
Net income 3,646 - 360,993 364,639
________ ______ __________ __________
Balance, December 31, 1999 $ (7,090) 21,695 $5,138,724 $5,131,634
======== ====== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-5
FIDELITY LEASING INCOME FUND VIII, L.P.
STATEMENTS OF CASH FLOWS
For the years ended December 31,
1999 1998 1997
Cash flows from operating activities:
Net income $ 364,639 $ 93,898 $ 382,297
__________ __________ __________
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 364,832 2,103,470 1,592,089
Write-down of equipment to net
realizable value 80,267 246,318 32,282
(Gain) loss on sale of equipment, net (49,407) (85,228) (142,890)
(Increase) decrease in accounts receivable 57,282 (175) 61,884
(Increase) decrease in due from
related parties (14,296) 20,914 (81,030)
Increase (decrease) in lease rents paid in
advance 3,198 (73,007) 38,698
Increase (decrease) in accounts payable
and accrued expenses (53,867) 53,913 24,534
Increase (decrease) in due to related parties (904) (850) (796)
__________ __________ __________
387,105 2,265,355 1,524,771
__________ __________ __________
Net cash provided by operating activities 751,744 2,359,253 1,907,068
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment - (231,262) (1,066,561)
Investment in direct financing leases (1,857,519) (3,312,383) -
Proceeds from direct financing leases,
net of earned income 1,572,013 494,645 -
Proceeds from sale of equipment 66,332 222,999 142,890
__________ __________ __________
Net cash used in investing activities (219,174) (2,826,001) (923,671)
__________ __________ __________
Cash flows from financing activities:
Distributions (240,000) (220,000) (240,000)
_________ __________ __________
Net cash used in financing activities (240,000) (220,000) (240,000)
__________ __________ __________
Increase (decrease) in cash and cash
equivalents 292,570 (686,748) 743,397
Cash and cash equivalents, beginning of year 1,336,219 2,022,967 1,279,570
__________ __________ __________
Cash and cash equivalents, end of year $1,628,789 $1,336,219 $2,022,967
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Fidelity Leasing Income Fund VIII, L.P. (the "Fund") was formed on
November 21, 1990. 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 partner-
ship interests and it is unlikely that any will develop. The Fund acquires
equipment, including printers, tape and disk storage devices, data communi-
cations equipment, computer terminals, technical workstations and networking
equipment, 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
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 dis-
closure 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.
F-7
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
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 con-
sists 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.
Under the direct financing method of accounting for leases, 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.
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, tech-
nological developments and information provided in third party publications.
Based upon this review, there were no significant fourth quarter adjustments
F-8
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Fourth Quarter Adjustments (Continued)
for the year ended December 31, 1999. However, the Fund recorded an adjustment
of approximately $73,000 and $18,000 or $5.48 and $1.36 per equivalent limited
partnership unit to write down its rental equipment in the fourth quarter of
1998 and 1997, respectively.
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's operating system is Year 2000 capable. Additionally, all of
the main software systems used to generate information for the Fund are Year
2000 compliant.
The costs incurred to make the software systems Year 2000 compliant were
not material as of December 31, 1999.
Furthermore, all significant outside suppliers have been contacted to
ensure that their systems are Year 2000 compliant. The Fund has not experi-
enced any problems with outside suppliers regarding Year 2000 compliance
issues.
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 an
11% compounded priority return (an amount equal to 11% 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 VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
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
11 to 36 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 1999, 1998 and 1997, approxi-
mately $80,000, $246,000 and $32,000, 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 sub-
sequent 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, 1999
is as follows:
Minimum lease payments to be received $3,192,000
Unguaranteed residuals 221,000
Unearned rental income (275,000)
Unearned residual income (35,000)
__________
$3,103,000
==========
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
2000 $182,000 $1,526,000
2001 51,000 1,223,000
2002 34,000 380,000
2003 - 63,000
________ __________
$267,000 $3,192,000
======== ==========
6. RELATED PARTY TRANSACTIONS
The General Partner receives 4% or 2% of rental payments from equipment
under operating leases and full pay-out leases, respectively, for adminis-
trative and management services performed on behalf of the Fund. Full pay-out
leases are noncancellable leases for which the rental payments due during the
initial term of the lease are at least sufficient to recover the purchase price
F-10
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. RELATED PARTY TRANSACTIONS (Continued)
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 the initial closing through the end of the most recent calendar
quarter equal to a return for such period at a rate of 11% 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 an 11% 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:
1999 1998 1997
Management fee $ 57,784 $113,022 $ 81,039
Reimbursable costs 113,635 145,328 124,149
The Fund maintained its checking and investment accounts in Jefferson
Bank, a subsidiary of JeffBanks, Inc. in which the Chairman of Resource
America, Inc. served as a director. In November 1999, Hudson United Bancorp
acquired JeffBanks, Inc. The Fund maintains its banking relationship with
Hudson United Bancorp. The Chairman of Resource America, Inc. does not hold a
position with Hudson United Bancorp.
Amounts due from related parties at December 31, 1999 and 1998 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, 1999 and 1998 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, 1999, four customers accounted for
approximately 34%, 16%, 14% and 12% of the Fund's rental income. For the year
ended December 31, 1998, two customers accounted for approximately 32% and 14%
of the Fund's rental income. For the year ended December 31, 1997, three
customers generated approximately 29%, 15% and 13% of the Fund's rental income.
F-11
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. CASH DISTRIBUTIONS
Below is a summary of the cash distributions paid to partners during the
years ended December 31:
For the Quarter Ended 1999 1998 1997
March $ 60,000 $ 40,000 $ 60,000
June 80,000 80,000 80,000
September 60,000 40,000 40,000
December 40,000 60,000 60,000
________ ________ ________
$240,000 $220,000 $240,000
======== ======== ========
In addition, the General Partner declared and paid three cash distri-
butions of $20,000 each in January and February 2000 for each of the months
ended October 31, November 30 and December 31, 1999, for an aggregate of
$60,000 to all admitted partners as of October 31, November 30 and December
31, 1999.
F-12