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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, 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 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, 1998 is 21,695.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 VIII, L.P. (the "Fund"), a Delaware limited
partnership, was organized in 1990 and acquires equipment, primarily computer
equipment, which is leased to third parties on a short-term basis. The
Fund's principal objective is to generate leasing revenues for distribution.
The Fund manages the equipment, releasing or disposing of equipment as it
comes off lease in order to achieve its principal objective. The Fund
does not borrow funds to purchase equipment. The Fund generally acquires
equipment subject to a lease. Purchases of equipment for lease are
typically made through equipment leasing brokers, under a sale-leaseback
arrangement directly from lessees owning equipment, from the manufacturer
either pursuant to a purchase agreement relating to significant quantities
of equipment or on an ad hoc basis to meet the needs of a particular lessee.
The equipment leasing industry is highly competitive.
The Fund competes with leasing companies, equipment manufacturers and
distributors, and entities similar to the Fund (including similar programs
sponsored by the General Partner), some of which have greater financial
resources than the Fund. Other leasing companies and equipment
manufacturers and distributors may be in a position to offer equipment to
prospective lessees on financial terms which are more favorable than those
which the Fund can offer. They may also be in a position to offer
trade-in-privileges, maintenance contracts and other services which the
Fund may not be able to offer. Equipment manufacturers and distributors
may offer to sell equipment on terms and conditions (such as liberal
financing terms and exchange privileges) which will afford benefits to
the purchaser similar to those obtained through leases. As a result
of the advantages which certain of its competitors may have, the Fund
may find it necessary to lease its equipment on a less favorable basis
than certain of its competitors.
The computer equipment industry is extremely competitive as well.
Competitive factors include pricing, technological innovation and methods
of financing. Certain manufacturer-lessors maintain advantages through patent
protection, where applicable, and through product protection by the use of a
policy which combines service and hardware with payment for such benefits
accomplished through a single periodic charge. A brief description of the
types of equipment in which the Fund has invested as of December 31, 1998,
together with information concerning the users of such equipment is
contained in Item 2, following. The Fund does not
have any employees. All persons who work on the Fund are employees of
the General Partner. 2
Item 2. PROPERTIES The following schedules detail the type, aggregate
purchase price and percentage of the various types of equipment leased
by the Fund under the operating and direct financing lease methods as of
December 31, 1998:
Operating Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Disk Storage Systems $1,054,269 34.20%
Network Communications 35,985 1.17
Tape Storage Systems 426,714 13.84
Technical Workstations and Terminals 1,344,729 43.62
Other 221,133 7.17
__________ ______
Totals $3,082,830 100.00%
========== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Electron Microscopes $ 875,101 28.89%
Network Communications 35,297 1.17
Tape Storage Systems 7,663 0.25
Technical Workstations and Terminals 1,802,681 59.52
Other 308,114 10.17
__________ ______
Totals $3,028,856 100.00%
========== ======
The following schedules detail the type of business, aggregate purchase
price and percentage of equipment usage by industrial classification for equip-
ent 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 $ 646,919 20.99%
Computer Products/Retailing 656,670 21.30
Defense Contractors 194,932 6.32
Manufacturing/Refining 530,040 17.19
Telephone/Telecommunications 1,054,269 34.20
__________ ______
Totals $3,082,830 100.00%
========== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Consumer Products/Retailing $2,104,507 69.48%
Diversified Financial/Banking/Insurance 49,248 1.63
Manufacturing/Refining 875,101 28.89
__________ ______
Totals $3,028,856 100.00%
========== ======
Average Initial Term of Leases (in months): 38
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 945
General Partnership Interest 1
Item 6. SELECTED FINANCIAL DATA
For the Years Ended December 31,
1998 1997 1996 1995 1994
Total Income $2,790,169 $2,273,084 $2,258,564 $2,543,493 $3,452,905
Net Income (Loss) 93,898 382,297 24,373 (137,721) 123,837
Distributions to Partners 220,000 240,000 225,000 1,105,691 1,307,741
Net Income (Loss)
per Equivalent Limited
Partnership Unit 6.87 28.53 1.62 (9.05) 6.16
Weighted Average Number
of Equivalent Limited
Partnership Units
Outstanding During
the Year 13,312 13,264 13,396 15,067 17,997
December 31,
1998 1997 1996 1995 1994
Total Assets $5,130,180 $5,276,226 $5,071,493 $5,596,725 $6,966,272
Equipment under
Operating Leases and
Equipment Held for
Sale or Lease (Net) 758,243 3,014,540 2,572,350 2,395,085 4,323,766
Net Investment in
Direct Financing Leases 2,817,738 - - - -
Limited Partnership
Units 21,695 21,695 21,695 22,812 23,223
Limited Partners 945 942 943 962 975
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 $2,790,169,
$2,273,084 and $2,258,564 for the years ended December 31, 1998, 1997 and
1996, respectively. Rental income from the leasing of equipment accounted
for 90%, 90% and 96% of total revenues in 1998, 1997 and 1996, respectively.
The increase in total revenues in 1998 was primarily attributable to an
increase in rental income. Rental income increased in 1998 by approximately
$220,000 because of equipment purchased during 1998 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. The Fund also 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. The increase in rental income, however, was reduced
by $464,000 because of equipment which came off lease and was released at
lower rental rates or sold. In 1997, rental income decreased by approxi-
mately $834,000 because of equipment that came off lease and was released
at lower rental rates or sold. This decrease, however, was offset by rental
income of approximately $708,000 generated from equipment on operating leases
purchased during 1997 as well as rental income earned from 1996 equipment
purchases for which a full year of rental income was earned in 1997 and only
a partial year was earned in 1996. The Fund also invested in $3.3 million of
direct financing leases during the year ended December 31, 1998. There were
no direct financing leases in 1997 and 1996. For the twelve months ended
December 31, 1998, the Fund recognized $128,000 of earned income on these
direct financing leases which also accounts for the increase in total revenues
in the current year. However, the Fund recorded a net gain on sale of equip-
ment of $85,228, $142,890 and $0 for the years ended December 31, 1998, 1997
and 1996, respectively. The fluctuation in this account lowered the overall
increase in revenues in 1998 and contributed to the overall increase in
revenues in 1997.
Expenses were $2,696,271, $1,890,787 and $2,234,191 for the years ended
December 31, 1998, 1997 and 1996, respectively. Depreciation and amorti-
zation comprised 78%, 84% and 62% of total expenses during the years ended
December 31, 1998, 1997 and 1996, respectively. The increase in total
expenses in 1998 was primarily related to an increase in depreciation expense.
The Fund recorded additional depreciation of $762,000 on equipment discussed
above for which the Fund entered into transactions to collect the remaining
rents on certain leases during the last quarter of 1998. In 1997,
depreciation expense increased because of equipment purchases made during
1997 as well as depreciation expense recorded on equipment purchases in 1996
for which a full year of depreciation expense was taken in 1997 and only a
partial year was taken in 1996. This increase lowered the amount of the
decrease in total expenses in 1997. The changes in total expenses in 1998,
1997 and 1996 are also related to the fluctuation in write-down of equipment
to net realizable value. Furthermore, the increase in management fee to
related party resulting from the increase in rental income in 1998 also
contributed to the overall increase in expenses during this year.
Based upon the quarterly review of the recoverability of the undepre-
ciated cost of rental equipment, $246,318, $32,282 and $536,697 was charged
to operations to write down equipment to its estimated net realizable value
during the years ended December 31, 1998, 1997 and 1996, respectively.
6
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
Currently, the Fund's practice is to review the recoverability of its undepre-
ciated costs of rental equipment quarterly. The Fund's policy, as part of
this review, is to analyze such factors as releasing of equipment, techno-
logical developments and information provided in third party publications.
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 types of equipment in the portfolio
in subsequent years.
The Fund's net income was $93,898, $382,297 and $24,373 for the years
ended December 31, 1998, 1997 and 1996, respectively. The earnings per equi-
valent limited partnership unit, after earnings allocated to the General
Partner, were $6.87, $28.53 and $1.62 based on a weighted average number of
equivalent limited partnership units outstanding of 13,312, 13,264 and 13,396
for the years ended December 31, 1998, 1997 and 1996, respectively.
The Fund generated cash from operations of $2,358,458, $1,863,778 and
$1,950,783, for the purpose of determining cash available for distribution,
and distributed 8%, 11% and 12% to partners in 1998, 1997 and 1996, respect-
ively and 2% of these amounts to partners in January and February 1999, 1998
and 1997. For financial statement purposes, the Fund records cash distribu-
tions 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 $231,262, $1,066,561 and
$3,389,929, respectively, of equipment subject to operating leases. The Fund
also invested in $3,312,383 of direct financing leases during the year ended
December 31, 1998.
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 $113,022(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 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.
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 ash 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 $113,022 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
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
9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
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 1998, the General
Partner received cash distributions of $2,200.
The Fund incurred $145,328 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 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, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed below by the following persons, on behalf of the
Registrant and in the capacities and on the date indicated:
Signature Title Date
Freddie M. Kotek
____________________________ Chairman of the Board of Directors
Freddie M. Kotek and President of F.L. Partnership 3-23-99
Management, Inc.
(Principal Executive Officer)
Michael L. Staines
____________________________ Director of F.L. Partnership
Michael L. Staines Management, Inc. 3-23-99
Marianne T. Schuster
____________________________ Vice President and Controller
Marianne T. Schuster of F.L. Partnership Management, Inc. 3-23-99
(Principal Financial Officer)
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 VIII, L.P.
We have audited the accompanying balance sheets of Fidelity Leasing
Income Fund VIII, 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 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 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, in all material respects, the financial position of Fidelity Leasing
Income Fund VIII, 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 VIII, L.P.
BALANCE SHEETS
ASSETS
December 31,
1998 1997
Cash and cash equivalents $1,336,219 $2,022,967
Accounts receivable 154,987 154,812
Due from related parties 62,993 83,907
Equipment under operating leases
(net of accumulated depreciation
of $2,426,589 and $4,603,427,
respectively) 656,241 3,014,540
Net investment in direct financing
leases 2,817,738 -
Equipment held for sale or lease 102,002 -
__________ __________
Total assets $5,130,180 $5,276,226
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 9,503 $ 82,510
Accounts payable and
accrued expenses 106,614 52,701
Due to related parties 7,068 7,918
__________ __________
Total liabilities 123,185 143,129
Partners' capital 5,006,995 5,133,097
__________ __________
Total liabilities and
partners' capital $5,130,180 $5,276,226
========== ==========
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,
1998 1997 1996
Income:
Rentals $2,507,807 $2,039,604 $2,165,342
Earned income on direct
financing leases 128,079 - -
Interest 58,324 88,212 83,499
Gain on sale of equipment, net 85,228 142,890 -
Other 10,731 2,378 9,723
__________ __________ __________
2,790,169 2,273,084 2,258,564
__________ __________ __________
Expenses:
Depreciation and amortization 2,103,470 1,592,089 1,377,101
Write-down of equipment to
net realizable value 246,318 32,282 536,697
General and administrative 88,133 61,228 71,903
General and administrative to
related party 145,328 124,149 149,847
Management fee to related party 113,022 81,039 86,031
Loss on sale of equipment, net - - 12,612
__________ __________ __________
2,696,271 1,890,787 2,234,191
__________ __________ __________
Net income $ 93,898 $ 382,297 $ 24,373
========== ========== ==========
Net income per equivalent
limited partnership unit $ 6.87 $ 28.53 $ 1.62
========== ========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during the year 13,312 13,264 13,396
========== ========== ==========
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, 1998, 1997 and 1996
General Limited Partners
Partner Units Amount Total
________ ___________________ _____
Balance, January 1, 1996 $(10,359) 22,812 $5,439,134 $5,428,775
Redemptions - (1,117) (237,348) (237,348)
Cash distributions (2,250) - (222,750) (225,000)
Net income 2,650 - 21,723 24,373
________ ______ __________ __________
Balance, December 31, 1996 (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
======== ====== ========== ==========
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,
1998 1997 1996
Cash flows from operating activities:
Net income $ 93,898 $ 382,297 $ 24,373
__________ __________ __________
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,103,470 1,592,089 1,377,101
Write-down of equipment to net
realizable value 246,318 32,282 536,697
(Gain) loss on sale of equipment, net (85,228) (142,890) 12,612
(Increase) decrease in accounts receivable (175) 61,884 97,049
(Increase) decrease in due from
related parties 20,914 (81,030) 17,829
Increase (decrease) in lease rents paid in
advance (73,007) 38,698 14,246
Increase (decrease) in accounts payable
and accrued expenses 53,913 24,534 (12,316)
Increase (decrease) in due to related parties (850) (796) (89,187)
Increase (decrease) in other, net - - 4,259
__________ __________ __________
2,265,355 1,524,771 1,958,290
__________ __________ __________
Net cash provided by operating activities 2,359,253 1,907,068 1,982,663
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment (231,262) (1,066,561) (3,389,929)
Investment in direct financing leases (3,312,383) - -
Proceeds from direct financing leases,
net of earned income 494,645 - -
Proceeds from sale of equipment 222,999 142,890 287,587
__________ __________ __________
Net cash used in investing activities (2,826,001) (923,671) (3,102,342)
__________ __________ __________
Cash flows from financing activities:
Distributions (220,000) (240,000) (225,000)
Redemptions of capital - - (237,348)
_________ __________ __________
Net cash used in financing activities (220,000) (240,000) (462,348)
__________ __________ __________
Increase (decrease) in cash and cash
equivalents (686,748) 743,397 (1,582,027)
Cash and cash equivalents, beginning of year 2,022,967 1,279,570 2,861,597
__________ __________ __________
Cash and cash equivalents, end of year $1,336,219 $2,022,967 $1,279,570
========== ========== ==========
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 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 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.
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.
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, the Fund recorded an adjustment of approximately
$73,000, $18,000 and $132,000 or $5.48, $1.36 and $9.85 per equivalent
limited partnership unit to write down its rental equipment in the fourth
quarter of 1998, 1997 and 1996, respectively.
F-8
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
3. YEAR 2000 COMPLIANCE
The "Year 2000 Issue" addresses the ability of computer programs to
distinguish between the year 2000 and the year 1900. Computer programs were
written using two digits rather than four digits for the year in a date field.
This could ultimately result in miscalculations or inaccuracies in processing
data.
The Fund is currently in the process of ensuring that all of its systems
are Year 2000 compliant. The Fund's operating system is year 2000 capable.
Additionally, two of the three main software systems are Year 2000 compliant
and in the testing phase. The third software system is expected to be year
2000 capable by July 1999.
The costs incurred to make the software system Year 2000 compliant has
not been material as of December 31, 1998. It is not anticipated that any
remaining costs incurred to complete this project will have a material affect
on the net income of the Fund.
Furthermore, all significant outside suppliers have been contacted to
ensure that their systems will be Year 2000 compliant. All have indicated
that their systems are in compliance or that Year 2000 Compliance programs
will be completed in early 1999. If the Fund determines that any of its
significant external suppliers are not in compliance, the Fund will not be
materially adversely affected and will seek the services of another supplier.
4. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
Cash distributions, 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.
5. EQUIPMENT LEASED
Equipment on lease consists of equipment under operating leases. A
majority of the equipment was manufactured by Sun and 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 36 to
58 months.
F-9
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. EQUIPMENT LEASED (Continued)
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 $246,000, $32,000 and $537,000, 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, 1998
is as follows:
Minimum lease payments to be received $3,003,000
Unguaranteed residuals 143,000
Unearned rental income (305,000)
Unearned residual income (23,000)
__________
$2,818,000
==========
The future approximate minimum rentals to be received on noncancellable
operating and direct financing leases as of December 31 are as follows:
Direct
Operating Financing
1999 $448,000 $1,086,000
2000 132,000 1,164,000
2001 51,000 580,000
2002 30,000 94,000
2003 - 79,000
________ __________
$661,000 $3,003,000
======== ==========
6. RELATED PARTY TRANSACTIONS
The General Partner receives 4% 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-cancelable 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 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.
F-10
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. RELATED PARTY TRANSACTIONS (Continued)
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. As a
result, $55,244 of sales fee accrued by the Fund in prior periods was
recorded as part of the net gain (loss) 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 of services and materials charged by the General
Partner and its parent company during the years ended December 31:
1998 1997 1996
Management fee $113,022 $ 81,039 $ 86,031
Reimbursable costs 145,328 124,149 149,847
During 1998, the Fund maintained its checking and investment accounts in
Jefferson Bank, a subsidiary of JeffBanks, Inc. in which the Chairman of
Resource America, Inc. serves as a director.
Amounts due from related parties at December 31, 1998 and 1997
represent monies due to the Fund from the General Partner and/or other
affiliated funds for rentals and sales proceeds collected and not yet
remitted to the Fund.
Amounts due to related parties at December 31, 1998 and 1997 represent
monies due to the General Partner for the fees and costs mentioned above, as
well as, rentals and sales proceeds collected by the Fund on behalf of other
affiliated funds.
7. MAJOR CUSTOMERS
For the year ended December 31, 1998, 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. For the year ended December 31, 1996, three
customers accounted for approximately 17%, 14% and 12% 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 1998 1997 1996
March $ 40,000 $ 60,000 $ 65,000
June 80,000 80,000 60,000
September 40,000 40,000 60,000
December 60,000 60,000 40,000
________ ________ ________
$220,000 $240,000 $225,000
======== ======== ========
In addition, the General Partner declared and paid a cash distribution
of $20,000 in January and February 1999 for each of the months ended
October 31, November 30 and December 31, 1998, for an aggregate of $60,000 to
all admitted partners as of October 31, November 30 and December 31, 1998.
F-12