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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, 2000
/ / 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 0-19232
Fidelity Leasing Income Fund VII, L.P.
_________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 23-2581971
_________________________________________________________________
(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, 2000 is 65,389.
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 VII, L.P. (the "Fund"), a Delaware limited
partnership, was organized in 1989 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 which 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
that 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 that 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, 2000, 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 acquired and leased by the Fund
under the operating and direct financing methods as of December 31, 2000:
Operating Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
PCB Assembly Equipment $341,619 53.43%
Printers 293,172 45.85
Communication Controllers 4,571 0.72
________ ______
Totals $639,362 100.00%
======== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Network Communications $ 4,633,981 40.87%
Testing Equipment 3,572,202 31.50
Disk Storage Systems 2,241,269 19.76
PCB Assembly Equipment 719,947 6.35
Other 172,233 1.52
___________ ______
Totals $11,339,632 100.00%
=========== ======
The following schedules detail the type of business, aggregate purchase
price and percentage of equipment usage by industrial classification for equip-
ment leased by the Fund under the operating and direct financing methods as of
December 31, 2000:
Operating Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Manufacturing/Refining $639,362 100.00%
________ ______
Totals $639,362 100.00%
======== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Retailing/Consumer Goods $ 4,822,977 42.53%
Manufacturing/Refining 4,296,965 37.89
Computers/Data Processing 2,165,813 19.10
Education 34,736 0.31
Diversified Financial/Banking 19,141 0.17
___________ ______
Totals $11,339,632 100.00%
=========== ======
Average Initial Term of Leases (in months): 33
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 EQUITY AND RELATED STOCKHOLDER
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, 2000
Limited Partnership Interests 2,317
General Partnership Interest 1
Item 6. SELECTED FINANCIAL DATA
For the Years Ended December 31,
2000 1999 1998 1997 1996
Total Income $1,814,779 $2,293,932 $4,416,369 $4,846,809 $5,778,248
Net Income (Loss) 639,275 279,122 (185,085) 197,895 604,654
Distributions to Partners 600,000 600,000 80,000 560,000 600,000
Net Income (Loss)
per Equivalent Limited
Partnership Unit 21.91 9.45 (6.14) 6.36 19.21
Weighted Average Number
of Equivalent Limited
Partnership Units
Outstanding During
the Year 28,884 28,917 29,856 30,302 31,096
December 31,
2000 1999 1998 1997 1996
Total Assets $9,985,958 $10,028,870 $10,394,528 $10,620,394 $10,941,033
Equipment under
Operating Leases and
Equipment Held for
Sale or Lease (Net) 236,345 1,357,657 2,957,392 6,254,336 7,734,171
Net Investment in
Direct Financing Leases 7,456,639 6,543,062 4,335,444 295,319 29,334
Limited Partnership
Units 65,389 65,389 65,449 65,449 65,589
Limited Partners 2,317 2,316 2,314 2,309 2,307
5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Fidelity Leasing Income Fund VII, L.P. had revenues of $1,814,779,
$2,293,932 and $4,416,369 for the years ended December 31, 2000, 1999 and
1998, respectively. Rental income from the leasing of equipment accounted
for 57%, 74% and 89% of total revenues in 2000, 1999 and 1998, respectively.
The decrease in revenues in both 2000 and 1999 was primarily attributable to
the decrease in rental income. In 2000, rental income decreased by approxi-
mately $671,000 because of equipment under operating leases that came off lease
or teminated and was sold. In 1999, rental income decreased by approximately
$1,111,000 because of equipment that terminated and was sold. This decrease,
however, was mitigated somewhat by an increase in rental income of $32,000
generated from 1998 equipment purchases for which a full year of rent was rec-
ognized in 1999 and only a partial year was recognized in 1998. Additionally,
the Fund entered into several transactions in which it collected the remaining
rents owed on certain leases resulting in the recognition of approximately
$1,131,000 of rental income in 1998. This increase in rental income in 1998
also contributed to the overall decrease in revenues in 1999. Additionally,
the variation in interest income also affected the overall decrease in revenues
in 2000 and 1999. Interest income decreased in 2000 and increased in 1999
because the Fund had larger cash balances available for investment during the
first nine months of 1999 compared to 2000 and 1998. During 2000, the Fund
invested in $3,369,964 of direct financing leases compared to $3,522,588 in
1999 and $6,066,963 in 1998. As a result, the Fund recognized $560,405,
$396,265 and $288,680 of earned income on direct financing leases in 2000,
1999 and 1998, respectively, which served to lower the overall decrease in
revenues in 2000 and 1999. The Fund recorded a net gain on sale of equipment
of $90,945, $25,388 and $116,049 in 2000, 1999 and 1998, respectively. The
fluctuation in this account served to mitigate the decrease in total revenues
in 2000 and contributed to the overall decrease in revenues in 1999. Further-
more, the increase in other income also reduced the amount of the decrease in
total revenues in 2000. During the years ended December 31, 2000, 1999 and
1998, the Fund recognized approximately $28,000, $2,000 and $-0-, respectively,
of late charges on delinquent rentals collected and approximately $24,000,
$14,000 and $14,000, respectively, of transfer fees on investor account
transfers. These accounts are included in other income and contributed to
the increase in other income during the year ended December 31, 2000.
Expenses were $1,175,504, $2,014,810 and $4,601,454 for the twelve months
ended December 31, 2000, 1999 and 1998, respectively. Depreciation expense
comprised 67%, 72% and 79% of total expenses in 2000, 1999 and 1998,
respectively. The decrease in expenses in 2000 and 1999 was primarily
related to the decrease in depreciation expense due to equipment that came
off lease or terminated and was sold. The decrease in write-down of equipment
to net realizable value also accounted for the decrease in total expenses in
2000 and 1999. In 2000, 1999 and 1998, approximately $6,000, $104,000 and
$340,000 respectively, was charged to write-down of equipment to net realizable
value. 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, techno-
logical developments and information provided in third party publications.
In accordance with accounting principles generally accepted in the United
States of America, the Fund writes down its rental equipment to its estimated
6
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
net realizable value when the amounts are reasonably estimated and only
recognizes gains, if any, 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. Additionally, the
decrease in general and administrative expense to related party in 2000 and
1999 also contributed to the overall decrease in expenses during these years.
The decrease in this account resulted from a decrease in the expenses charged
by the General Partner or its parent company for services and materials
provided to the Fund during the years ended December 31, 2000 and 1999.
Furthermore, management fee to related party decreased in 2000 and 1999 in
proportion to the rental income recognized on operating leases. The decrease
in this account also accounted for the decrease in total expenses during the
twelve months ended December 31, 2000 and 1999.
The Fund's net income (loss) was $639,275, $279,122 and ($185,085) for the
years ended December 31, 2000, 1999 and 1998, respectively. The earnings
(loss) per equivalent limited partnership unit, after earnings (loss)
allocated to the General Partner, were $21.91, $9.45 and ($6.14) based on a
weighted average number of equivalent limited partnership units outstanding
of 28,884, 28,917 and 29,856 for the years ended December 31, 2000, 1999 and
1998, respectively.
The Fund generated cash from operations of $1,343,483, $1,812,604 and
$3,664,714 for the purpose of determining cash available for distribution
during the years ended December 31, 2000, 1999 and 1998, respectively. The
Fund distributed $450,000, $450,000 and $-0- of those amounts during the period
from April 1 through December 31, 2000, 1999 and 1998, respectively, and during
each of the first quarters of 2001, 2000 and 1999, the Fund distributed
$150,000 of those amounts. The Fund also paid $80,000 of cash distributions to
partners during the first quarter of 1998 for the last quarter of the previous
year. 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 is currently in the process of dissolution. 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 will continue to look for opportunities to purchase
equipment under operating leases or invest in direct financing leases for lease
terms consistent with the plan of dissolution. There was no equipment pur-
chased during the year ended December 31, 2000. During the years ended
December 31, 1999 and 1998, the Fund purchased $60,024 and $999,749, re-
spectively, of equipment subject to operating leases. Additionally, the Fund
invested in $3,369,964, $3,522,588 and $6,066,963 of equipment under direct
financing leases during the twelve months ended December 31, 2000, 1999 and
1998, respectively.
7
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Analysis of Financial Condition (Continued)
The cash position of the Fund is reviewed daily and cash is invested on
a short-term basis.
The Fund's cash from operations is expected to continue to be adequate
to cover all operating expenses and contingencies during the next fiscal year.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted as a separate section of this
report commencing on page F-1.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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 45, 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. President of Resource Properties, Inc. (a
wholly owned subsidiary of Resource America) since 2000. Executive Vice
President of Resource Properties, Inc. from 1993 to 2000.
MICHAEL L. STAINES, age 51, Director and Secretary of FLPMI since
September 1995. Director of Resource America from 1989 to 2000 and
Senior Vice President of Resource America since 1989. Chief Operating
Officer, Secretary and Managing Board Member of Atlas Pipeline Partners
G.P., LLC since its formation in 1999. President, Secretary and a direc-
tor of Resource Energy, Inc. (a wholly owned subsidiary of Resource
America) since 1993.
SCOTT F. SCHAEFFER, age 38, Director of FLPMI since September 1995.
President of RAIT Investment Trust (a publicly traded real estate invest-
ment trust) since October 2000. Vice Chairman of the Board of Resource
America from 1998 to September 2000 and Executive Vice President of Re-
source America from 1997 to 1998. Prior thereto, Senior Vice President
of Resource America since 1995. President of Resource Properties, Inc.
(a wholly owned subsidiary of Resource America) from 1992 to September
2000.
Others:
MARIANNE T. SCHUSTER, age 42, Vice President and Controller of FLPMI
since 1984.
KRISTIN L. CHRISTMAN, age 33, 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, 2000:
Name of Individual or Capacities in
Number in Group Which Served Compensation
F.L. Partnership
Management, Inc. General Partner $108,457(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) Based upon a review of Schedule 13D as filed with the Securities and
Exchange Commission, the table set forth below outlines the persons or
groups known to the Fund that own more than 5% of the Fund's outstanding
securities either beneficially or of record.
Name of Individual Number of
or Group Units Owned
James S. and Danea T. Riley 4,167.732 (1)
Odd Lot Liquidity Fund, LLC 4,167.732 (2)
Sierra Fund 4, LLC 4,167.732 (3)
(1) Amount represents beneficial ownership interest through
ownership of Odd Lot Liquidity Fund, LLC and Sierra Fund 4, LLC
which own 1,556.176 units and 2,611.556 units, respectively, of
the outstanding limited partnership units of the Fund.
(2) Amount represents direct ownership by Odd Lot Liquidity
Fund, LLC of 1,556.176 units and beneficial ownership of
2,611.556 units by virtue of group membership and affiliate
status with Sierra Fund 4, LLC.
(3) Amount represents direct ownership by Sierra Fund 4, LLC
of 2,611.556 units and beneficial ownership of 1,556.176 units
by virtue of group membership and affiliate status with Odd Lot
Liquidity Fund, LLC.
(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 distri-
butions 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.
10
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(Continued)
(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, 2000, the Fund was charged $108,457
of management fees by the General Partner. The General Partner will continue
to receive 5% or 2% of rental payments on equipment under operating 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 due during the initial term of the leases
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, 1991 through the end of the most recent quarter
equal to a return for such period at a rate of 12% per year on the aggregate
amount paid for their units.
The General Partner may also receive up to 3% of the proceeds from the
sale of the Fund's equipment for services and activities to be performed in
connection with the disposition of equipment. The payment of this sales fee
is deferred until the Limited Partners have received cash distributions equal
to the purchase price of their units plus a 12% cumulative compounded priority
return. Based on current estimates, it is not expected that the Fund will be
required to pay this sales fee to the General Partner.
The General Partner also receives 1% of cash distributions until the
Limited Partners have received an amount equal to the purchase price of their
units plus a 12% cumulative compounded priority return. Thereafter, the
General Partner will receive 10% of cash distributions. During the year ended
December 31, 2000, the General Partner received $6,000 of cash distributions.
The Fund incurred $171,465 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 2000.
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
(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 VII, L.P.
A Delaware limited partnership
By: F.L. PARTNERSHIP MANAGEMENT, INC.
/s/ Freddie M. Kotek
By: ___________________________
Freddie M. Kotek, Chairman and President
Dated March 29, 2001
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
/s/ Freddie M. Kotek
_________________________ Chairman of the Board of Directors 3-29-01
Freddie M. Kotek and President of F.L. Partnership
Management, Inc.
(Principal Executive Officer)
/s/ Michael L. Staines
_________________________ Director of F.L. Partnership 3-29-01
Michael L. Staines Management, Inc.
/s/ Marianne T. Schuster
_________________________ Vice President and Controller 3-29-01
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, 2000 and 1999 F-3
Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 F-4
Statements of Partners' Capital for the years ended
December 31, 2000, 1999 and 1998 F-5
Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 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 VII, L.P.
We have audited the accompanying balance sheets of Fidelity Leasing
Income Fund VII, L.P. as of December 31, 2000 and 1999, and the related state-
ments of operations, partners' capital and cash flows for each of the three
years in the period ended December 31, 2000. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the finan-
cial statements are free of material misstatement. An audit includes examin-
ing, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Fidelity Leasing
Income Fund VII, L.P. as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted
in the United States of America.
Grant Thornton LLP
Philadelphia, Pennsylvania
February 16, 2001
F-2
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
ASSETS
December 31,
2000 1999
Cash and cash equivalents $2,055,814 $ 1,769,740
Accounts receivable 234,535 273,492
Due from related parties 2,625 84,919
Equipment under operating leases
(net of accumulated depreciation
of $491,659 and $4,899,775,
respectively) 147,703 1,202,004
Net investment in direct financing
leases 7,456,639 6,543,062
Equipment held for sale or lease 88,642 155,653
__________ ___________
Total assets $9,985,958 $10,028,870
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 13,930 $ 122,331
Accounts payable and
accrued expenses 67,642 49,370
Due to related parties 23,353 15,411
Security deposits 67,825 67,825
__________ ___________
Total liabilities 172,750 254,937
Partners' capital 9,813,208 9,773,933
__________ ___________
Total liabilities and
partners' capital $9,985,958 $10,028,870
========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF OPERATIONS
For the years ended December 31,
2000 1999 1998
Income:
Rentals $1,027,197 $1,698,640 $3,909,010
Earned income on direct
financing leases 560,405 396,265 288,680
Interest 83,727 156,774 84,274
Gain on sale of equipment, net 90,945 25,388 116,049
Other 52,505 16,865 18,356
__________ __________ __________
1,814,779 2,293,932 4,416,369
__________ __________ __________
Expenses:
Depreciation 788,886 1,454,819 3,625,790
Write-down of equipment to
net realizable value 6,267 104,051 340,058
General and administrative 100,429 111,692 137,927
General and administrative to
related party 171,465 231,221 278,762
Management fee to related party 108,457 113,027 218,917
__________ __________ __________
1,175,504 2,014,810 4,601,454
__________ __________ __________
Net income (loss) $ 639,275 $ 279,122 $ (185,085)
========== ========== ==========
Net income (loss) per equivalent
limited partnership unit $ 21.91 $ 9.45 $ (6.14)
========== ========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during the year 28,884 28,917 29,856
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 2000, 1999 and 1998
General Limited Partners
Partner Units Amount Total
________ ___________________ _____
Balance, January 1, 1998 $(30,664) 65,449 $10,399,498 $10,368,834
Cash distributions (800) - (79,200) (80,000)
Net loss (1,851) - (183,234) (185,085)
________ ______ ___________ ___________
Balance, December 31, 1998 (33,315) 65,449 10,137,064 10,103,749
Redemptions - (60) (8,938) (8,938)
Cash distributions (6,000) - (594,000) (600,000)
Net income 6,000 - 273,122 279,122
________ ______ ___________ ___________
Balance, December 31, 1999 (33,315) 65,389 9,807,248 9,773,933
Cash distributions (6,000) - (594,000) (600,000)
Net income 6,393 - 632,882 639,275
________ ______ ___________ ___________
Balance, December 31, 2000 $(32,922) 65,389 $ 9,846,130 $ 9,813,208
======== ====== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF CASH FLOWS
For the years ended December 31,
2000 1999 1998
Cash flows from operating activities:
Net income (loss) $ 639,275 $ 279,122 $ (185,085)
__________ __________ __________
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 788,886 1,454,819 3,625,790
Write-down of equipment to net
realizable value 6,267 104,051 340,058
(Gain) loss on sale of equipment, net (90,945) (25,388) (116,049)
(Increase) decrease in accounts receivable 38,957 (203,882) 371,220
(Increase) decrease in due from
related parties 82,294 (20,000) 379,978
Increase (decrease) in lease rents paid in
advance (108,401) 91,656 (70,629)
Increase (decrease) in accounts payable
and accrued expenses 18,272 (14,399) (37,116)
Increase (decrease) in due to related parties 7,942 (113,099) 86,189
Increase (decrease) in other, net - - (7,050)
__________ __________ __________
743,272 1,273,758 4,572,391
__________ __________ __________
Net cash provided by operating activities 1,382,547 1,552,880 4,387,306
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment - (60,024) (999,749)
Investment in direct financing leases (3,369,964) (3,522,588) (6,066,963)
Proceeds from direct financing leases,
net of earned income 2,516,412 1,386,595 2,026,837
Proceeds from sale of equipment 357,079 54,652 446,895
Security deposits received - - 67,825
__________ __________ __________
Net cash used in investing activities (496,473) (2,141,365) (4,525,155)
__________ __________ __________
Cash flows from financing activities:
Distributions (600,000) (600,000) (80,000)
Redemptions of capital - (8,938) -
_________ __________ __________
Net cash used in financing activities (600,000) (608,938) (80,000)
__________ __________ __________
Increase (decrease) in cash and cash
equivalents 286,074 (1,197,423) (217,849)
Cash and cash equivalents, beginning of year 1,769,740 2,967,163 3,185,012
__________ __________ __________
Cash and cash equivalents, end of year $2,055,814 $1,769,740 $2,967,163
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Fidelity Leasing Income Fund VII, L.P. (the "Fund") was formed in November
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. (Resource America). 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 communica-
tions equipment, computer terminals, technical workstations, networking equip-
ment as well as other electronic equipment, which is leased to third parties
throughout the United States on a short-term basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration of Credit Risk
Financial instruments which potentially subject the Fund to concentra-
tions of credit risk consist principally of temporary cash investments. The
Fund places its temporary investments in money market 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 accounting principles
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F-7
FIDELITY LEASING INCOME FUND VII, 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
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 accu-
mulated 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.
F-8
FIDELITY LEASING INCOME FUND VII, 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, tech-
nological developments and information provided in third party publications.
Based upon this review, there were no significant fourth quarter adjustments
made for the years ended December 31, 2000 and 1999. However, the Fund re-
corded an adjustment of approximately $27,000 or $0.90 per equivalent limited
partnership unit to write down its rental equipment in the fourth quarter of
1998.
3. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
Cash distributions, if any, are made monthly as follows: 99% to the
Limited Partners and 1% to the General Partner, until the Limited Partners
have received an amount equal to the purchase price of their units, plus a
12% compounded priority return (an amount equal to 12% compounded annually
on the portion of the purchase price not previously distributed); thereafter,
90% to the Limited Partners and 10% to the General Partner.
Net Losses are allocated 99% to the Limited Partners and 1% to the
General Partner. The General Partner is allocated Net Income equal to its
cash distributions, but not less than 1% of Net Income, with the balance
allocated to the Limited Partners.
Net Income (Losses) allocated to the Limited Partners are allocated to
individual limited partners based on the ratio of the daily weighted average
partner's net capital account balance (after deducting related commission
expense) to the total daily weighted average of the Limited Partners' net
capital account balances.
4. 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 58 months.
In accordance with accounting principles generally accepted in the United
States of America, the Fund writes down its rental equipment to its estimated
net realizable value when the amounts are reasonably estimated and only recog-
nizes gains upon actual sale of its rental equipment. As a result, in 2000,
1999 and 1998, approximately $6,000, $104,000 and $340,000, 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.
F-9
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. EQUIPMENT LEASED (Continued)
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, 2000
is as follows:
Minimum lease payments to be received $7,175,000
Unguaranteed residuals 1,102,000
Unearned rental income (676,000)
Unearned residual income (144,000)
__________
$7,457,000
==========
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
2001 $ 90,000 $3,618,000
2002 28,000 2,638,000
2003 13,000 729,000
2004 - 190,000
________ __________
$131,000 $7,175,000
======== ==========
5. RELATED PARTY TRANSACTIONS
The General Partner receives 5% or 2% of rental payments on equipment
under operating leases and full pay-out leases, respectively, for administra-
tive and management services performed on behalf of the Fund. Full pay-out
leases are noncancellable leases for which rental payments during the initial
term are at least sufficient to recover the purchase price of the equipment,
including acquisition fees. This management fee is paid monthly only if and
when the Limited Partners have received distributions for the period from
January 1, 1991 through the end of the most recent quarter equal to a return
for such period at a rate of 12% per year on the aggregate amount paid for
their units.
The General Partner may also receive up to 3% of the proceeds from the
sale of the Fund's equipment for services and activities to be performed in
connection with the disposition of equipment. The payment of this sales fee
is deferred until the Limited Partners have received cash distributions equal
to the purchase price of their units plus a 12% cumulative compounded priority
return. Based on current estimates, it is not expected that the Fund will be
required to pay this sales fee to the General Partner.
F-10
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. RELATED PARTY TRANSACTIONS (Continued)
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. The following
is a summary of fees and costs charged by the General Partner or its parent
company during the years ended December 31:
2000 1999 1998
Management fee $108,457 $113,027 $218,917
Reimbursable costs 171,465 231,221 278,762
During 1999, the Fund maintained its checking and investment accounts in
Jefferson Bank, a subsidiary of JeffBanks, Inc. in which the Chairman of
Resource America served as a director. In November 1999, Hudson United Bancorp
acquired JeffBanks, Inc. The Fund maintains a normal banking relationship
with Hudson United Bancorp. As of December 31, 2000 and 1999, the Chairman of
Resource America did not hold any position with Hudson United Bancorp.
Amounts due from related parties at December 31, 2000 and 1999 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, 2000 and 1999 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.
6. MAJOR CUSTOMERS
For the year ended December 31, 2000, one customer accounted for approx-
imately 48% of the Fund's rental income and two customers accounted for approx-
imately 11% each of the Fund's rental income. For the year ended December 31,
1999, four customers accounted for approximately 33%, 16%, 13% and 11% of the
Fund's rental income. For the year ended December 31, 1998, one customer
accounted for approximately 29% and three customers accounted for 14% each of
the Fund's rental income.
F-11
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
7. CASH DISTRIBUTIONS
Below is a summary of the cash distributions paid to partners during the
years ended December 31:
For the Quarter Ended 2000 1999 1998
March $150,000 $150,000 $80,000
June 150,000 200,000 -
September 150,000 150,000 -
December 150,000 100,000 -
________ ________ _______
$600,000 $600,000 $80,000
======== ======== =======
In addition, the General Partner declared and paid three cash distri-
butions of $50,000 each in February 2001 for each of the months ended
October 31, November 30 and December 31, 2000 to all admitted partners
as of October 31, November 30 and December 31, 2000.
F-12