SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the year ended December 31, 1995
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the transition period from _______________ to ______________
Commission file number 0-15765
Fidelity Leasing Income Fund III, L.P.
_________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 51-0292194
_________________________________________________________________
(State of Organization) (I.R.S. Employer Identification No.)
7 E. Skippack Pike, Suite 275, Ambler, Pennsylvania 19002
_________________________________________________________________
(Address of principal executive offices) (Zip Code)
(215) 619-2800
_________________________________________________________________
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
None Not applicable
Securities registered pursuant to Section 12 (g) of the Act:
Limited Partnership Interests
Title of Class
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No_____
The number of outstanding limited partnership units of the
Registrant at December 31, 1995 is 61,743.
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 III, L.P. (the "Fund"), a
Delaware limited partnership, was organized in 1985 and acquired
equipment, primarily computer peripheral equipment, including
printers, tape and disk storage devices, data communications
equipment, computer terminals, data processing and office
equipment, which was 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 closed on April 30, 1987 and raised $34,985,398 of
proceeds through the sale of limited partnership units.
Equipment of approximately $42,586,000 was purchased through
December 31, 1995 with these proceeds raised, and also with cash
distributions which were reinvested by partners and cash from
operations which was not distributed to partners. As of December
31, 1995, the Fund has equipment on lease and equipment held for
sale or lease with an approximate total net book value of
$324,000. The General Partner intends to liquidate the remaining
equipment by December 31, 1996.
The Fund generally acquired equipment subject to a lease.
Purchases of equipment for lease were 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 acquired was generally leased under
"operating" leases. Operating leases provided the Fund as
lessor, aggregate rental payments in an amount that is less than
the purchase price of the equipment. Operating leases represent
a greater risk but with the potential for increased returns,
depending on the realization of renewal and remarketing results,
as compared to full payout leases. Full payout leases are
generally for longer initial terms whereby the noncancellable
rental payments due during the initial term of the lease are at
least sufficient to recover the purchase price of the equipment.
Due to technological, competitive, market and economic factors,
the Fund experienced renewals and remarketing of leases at lower
rental rates and residual values than was forecasted at the
inception of the leases.
2
The Fund's ability to attain its investment objectives was
subject to the factors discussed above. The Fund competed in the
equipment leasing industry with leasing companies, equipment
manufacturers and distributors, and entities similar to the Fund
(including similar programs sponsored by the General Partner),
some of which had greater financial resources than the Fund and
more experience in the equipment leasing business than the
General Partner. This competition may have been in the position
to offer equipment to lessees on financial terms more favorable
than those which the Fund could offer. The offer of maintenance
contracts, trade-in-privileges and other services which the Fund
could not provide may have resulted in the Fund leasing its
equipment on a less favorable basis than its competitors.
In addition, competitive factors in the computer equipment
industry, including pricing, technological innovation and methods
of financing, could have adversely affected the Fund in its
ability to obtain new leases and renewals or to sell equipment
for its anticipated net realizable values.
A brief description of the types of equipment in which the
Fund has invested as of December 31, 1995 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.
Item 2. PROPERTIES
The following schedules detail the type and aggregate
purchase price of the various types of equipment acquired and
leased by the Fund as of December 31, 1995, along with the
percentage of total equipment represented by each type of
equipment, a breakdown of equipment usage by industrial
classification and the average initial term of leases:
Purchase Price Percentage of
Type of Equipment Acquired of Equipment Total Equipment
Communication Controllers $ 2,662,644 43.29%
Disk Storage Systems 867,962 14.11
Network Communications 619,568 10.07
Personal Computers, Terminals
and Work Stations 200,737 3.26
Printers 1,350,386 21.95
Tape Storage Systems 438,035 7.12
Other 12,514 0.20
___________ ______
Totals $ 6,151,846 100.00%
=========== ======
3
Breakdown of Equipment Usage
By Industrial Classification
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Computers/Data Processing $ 1,327,647 21.58%
Diversified Financial/Banking/
Insurance 915,912 14.89
Manufacturing/Refining 1,856,787 30.18
Publishing/Printing 563,309 9.16
Retailing/Consumer Goods 937,092 15.23
Telephone/Telecommunications 546,907 8.89
Utilities 4,192 0.07
__________ ______
Totals $ 6,151,846 100.00%
========== ======
Average Initial Term of Leases (in months): 39
All of the above equipment is currently leased under
operating leases.
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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, 1995
Limited Partnership Interests 2,098
General Partnership Interest 1
<TABLE>
Item 6. SELECTED FINANCIAL DATA
<CAPTION>
For the Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total Income $2,043,528 $3,819,594 $4,494,595 $5,564,503 $7,092,854
Net Income 925,528 693,878 725,087 1,505,755 1,492,962
Distributions to
Partners 2,423,671 4,154,686 5,521,419 5,699,652 5,846,135
Net Income Per
Equivalent Limited
Partnership Unit 87.50 43.18 27.52 42.67 32.49
Weighted Average Number
of Equivalent Limited
Partnership Units
Outstanding During
the Year 10,161 15,240 24,357 33,956 39,946
</TABLE>
<TABLE>
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total Assets $1,351,877 $2,617,225 $6,315,363 $11,558,376 $15,601,392
Equipment under Operating
Leases and Equipment
Held for Sale or
Lease (Net) 323,565 1,641,892 4,283,142 6,836,119 10,968,660
Limited Partnership
Units 61,743 62,215 63,209 65,389 66,505
Limited Partners 2,098 2,110 2,123 2,186 2,206
</TABLE>
5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The Fund had revenues of $2,043,528, $3,819,594 and $4,494,595 for the
years ended December 31, 1995, 1994 and 1993, respectively. The decrease in
revenues between 1995, 1994 and 1993 is primarily caused by the decrease in
rental income generated from equipment on operating leases. Rental income
from the leasing of computer peripheral equipment accounted for 87%, 94% and
92% of total income in 1995, 1994 and 1993, respectively. In 1995, rental
income decreased by approximately $1,850,000 because of equipment which came
off lease and was re-leased at lower rental rates or sold. This decrease,
however, was offset by rental income of approximately $53,000 generated from
1994 equipment purchases for which a full year of rental income was earned in
1995 and only a partial year was earned in 1994. In 1994, rental income
decreased by approximately $733,000 because of equipment which came off
lease and was re-leased at lower rental rates or sold. This decrease,
however, was offset by rental income of $166,000 generated from 1994
equipment purchases and rents realized on 1993 equipment purchases for which
only a partial year was earned in 1993 but a full year was earned in 1994.
In addition, the Fund recognized a net gain on sale of equipment of $215,441,
$190,212 and $243,108 for the years ended December 31, 1995, 1994 and
1993, respectively which affected the decrease in total revenues for
these years. Furthermore, interest income decreased in 1995 and 1994 due to
a decrease in cash available for investment and, in 1994, the decline in
interest rates also accounts for the decline in interest income. The
decrease in interest income contributed to the decrease in total revenues for
these years, as well.
Expenses were $1,118,000, $3,125,716 and $3,769,508 for the years ended
December 31, 1995, 1994 and 1993, respectively. Depreciation expense
comprised 63% of total expenses in 1995, 80% of total expenses in 1994 and
78% of total expenses in 1993. The decrease in expenses between these years
is primarily attributable to the decrease in depreciation expense because of
equipment which came off lease and was terminated or sold. Currently, the
Fund's practice is to review the recoverability of its undepreciated costs of
rental equipment quarterly. The Fund's policy, as part of this review, is
to analyze such factors as releasing of equipment, technological developments
and information provided in third party publications. In 1995, 1994 and
1993, approximately $141,000, $148,000 and $359,000, respectively, was
charged to write-down of equipment to net realizable value which also
accounts for the decrease in total expenses in 1995 and 1994. 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. The General Partner believes, after analyzing the current
equipment portfolio, that there are impending gains to be recognized upon the
sale of certain of its equipment in future years. Additionally, the decline
in management fees, resulting from the decrease in rental income contributed
to the decrease in total expenses in 1995 and 1994.
6
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
The Fund's net income was $925,528, $693,878 and $725,087 for the years
ended December 31, 1995, 1994 and 1993, respectively. The earnings per
equivalent limited partnership unit, after earnings allocated to the General
Partner, were $87.50, $43.18 and $27.52 for the years ended December 31,
1995, 1994 and 1993, respectively. The weighted average number of equivalent
limited partnership units outstanding were 10,161, 15,240 and 24,357 for
1995, 1994 and 1993, respectively.
The Fund generated funds from operations, for the purpose of determining
cash available for distribution, of $1,556,199, $3,164,239 and $3,763,637 and
declared distributions of $1,892,377, $3,573,922 and $5,470,813 to partners
for 1995, 1994 and 1993, respectively. The distributions for 1995, 1994 and
1993 include $336,178, $409,683 and $1,707,176, respectively, of sales
proceeds and cash available from previous years which was not distributed.
For financial statement purposes, the Fund records cash distributions to
partners on a cash basis in the period in which they are paid. During the
fourth quarter of 1995, the General Partner revised its policy regarding cash
distributions so that the distributions more accurately reflect the net
income of the Fund over the most recent twelve months.
Analysis of Financial Condition
The General Partner has commenced the dissolution process for the Fund
with the intent of fully liquidating the Fund by the end of 1996. Therefore,
as leases expire, the General Partner will seek to sell the equipment at its
market value or extend the equipment for lease terms consistent with the plan
of liquidation. The Fund purchased $1,984, $181,144 and $828,475 of
equipment during the years ended December 31, 1995, 1994 and 1993
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 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.
7
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Effective September 1, 1995, The Fidelity Mutual Life Insurance
Company (in Rehabilitation) sold Fidelity Leasing Corporation (FLC), the
General Partner of the Fund, to Resource Leasing, Inc., a wholly owned
subsidiary of Resource America, Inc. The Directors and Executive
Officers of FLC are:
FREDDIE M. KOTEK, age 39, Chairman of the Board of Directors,
President, and Chief Executive Officer of FLC since September 1995
and Senior Vice President of Resource America, Inc. since 1995.
President of Resource Leasing, Inc. since September 1995.
Executive Vice President of Resource Properties, Inc. (a wholly
owned subsidiary of Resource America, Inc.) since 1993. Senior
Vice President and Chief Financial Officer of Paine Webber
Properties from 1990 to 1991.
MICHAEL L. STAINES, age 46, Director and Secretary of FLC since
September 1995 and Senior Vice President and Secretary of Resource
America, Inc. since 1989.
SCOTT F. SCHAEFFER, age 33, Director of FLC since September 1995
and Senior Vice President of Resource America, Inc. since 1995.
Vice President-Real Estate of Resource America, Inc. and President
of Resource Properties, Inc. (a wholly owned subsidiary of Resource
America, Inc.) since 1992. Vice President of the Dover Group, Ltd.
(a real estate investment company) from 1985 to 1992.
MARK A. MAYPER, age 42, Senior Vice President of FLC overseeing the
lease syndication business since 1987.
Others:
STEPHEN P. CASO, age 40, Vice President and Counsel of FLC since
1992.
MARIANNE T. SCHUSTER, age 37, Vice President and Controller of FLC
since 1984.
KRISTIN L. CHRISTMAN, age 28, Portfolio Manager of FLC 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, 1995:
Name of Individual or Capacities in
Number in Group Which Served Compensation
Fidelity Leasing
Corporation General Partner $106,214(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, 1995, 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 1985, 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 Fidelity Leasing
Corporation 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 5% of cash distributions until the Limited Partners have
received an amount equal to the purchase price of their Units plus
a 10% 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, 1995, the Fund was charged
$106,214 of management fees by the General Partner. The General Partner
will continue to receive 6% of rental payments on equipment under
operating leases for administrative and management services performed on
behalf of the Fund.
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 10%
cumulative compounded Priority Return. Based on current estimates, it
is not expected that the Fund will be required to pay the General
Partner a sales fee.
9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
The General Partner also receives 5% of cash distributions until
the Limited Partners have received an amount equal to the purchase price
of their Units plus a 10% compounded Priority Return. Thereafter, the
General Partner will receive 10% of cash distributions. During the year
ended December 31, 1995, the General Partner received $31,706 of cash
distributions.
The Fund incurred $32,766 of reimbursable costs to the General
Partner for services and materials provided in connection with the
administration of the Fund during 1995.
10
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) (1) and (2). The response to this portion of Item 14 is
submitted as a separate section of this report commencing on page
F-1.
(a) (3) and (c) Exhibits (numbered in accordance with Item 601
of Regulation S-K)
Exhibit Numbers Description Page Number
3(a) & (4) Amended and Restated Agreement *
of Limited Partnership
(9) not applicable
(10) not applicable
(11) not applicable
(12) not applicable
(13) not applicable
(18) not applicable
(19) not applicable
(22) not applicable
(23) not applicable
(24) not applicable
(25) not applicable
(28) not applicable
* Incorporated by reference.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FIDELITY LEASING INCOME FUND III, L.P.
A Delaware limited partnership
By: FIDELITY LEASING CORPORATION
Freddie M. Kotek, Chairman
By: ___________________________
Freddie M. Kotek, Chairman
and President
Dated March 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this annual report has been signed below by the following persons, on
behalf of the Registrant and in the capacities and on the date indicated:
Signature Title Date
Freddie M. Kotek
___________________________ Chairman of the Board of Directors 3-26-96
Freddie M. Kotek and President of Fidelity Leasing
Corporation (Principal Executive
Officer)
Michael L. Staines
___________________________ Director of Fidelity Leasing 3-26-96
Michael L. Staines Corporation
Marianne T. Schuster
____________________________ Vice President and Controller 3-26-96
Marianne T. Schuster of Fidelity Leasing Corporation
(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, 1995 and 1994 F-3
Statements of Operations for the years ended F-4
December 31, 1995, 1994 and 1993
Statements of Partners' Capital for the years F-5
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended F-6
December 31, 1995, 1994 and 1993
Notes to Financial Statements F-7 - F-11
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 III, L.P.
We have audited the accompanying balance sheets of Fidelity Leasing
Income Fund III, L. P. as of December 31, 1995 and 1994, and the related
statements of operations, changes in partners' capital and cash flows for
each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Fidelity Leasing
Income Fund III, L.P. as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
Grant Thornton, LLP
Philadelphia, Pennsylvania
February 2, 1996
F-2
FIDELITY LEASING INCOME FUND III, L.P.
BALANCE SHEETS
<TABLE>
ASSETS
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Cash and cash equivalents $ 716,019 $ 771,837
Accounts receivable 301,754 168,167
Due from related parties 6,349 32,941
Interest receivable 4,190 2,388
Equipment under operating leases
(net of accumulated depreciation
of $5,841,499 and $11,077,285,
respectively) 310,347 1,495,382
Equipment held for sale or lease 13,218 146,510
__________ __________
Total assets $1,351,877 $2,617,225
========== ==========
</TABLE>
<TABLE>
LIABILITIES AND PARTNERS' CAPITAL
<CAPTION>
Liabilities:
<S> <C> <C>
Lease rents paid in advance $ 375,648 $ 114,603
Accounts payable and
accrued expenses 24,597 57,018
Due to related parties 15,100 970
__________ __________
Total liabilities 415,345 172,591
Partners' capital 936,532 2,444,634
__________ __________
Total liabilities and
partners' capital $1,351,877 $2,617,225
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
FIDELITY LEASING INCOME FUND III, L.P.
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
For the years ended December 31,
1995 1994 1993
Income:
<S> <C> <C> <C>
Rentals $1,775,370 $3,571,929 $4,139,363
Interest 38,394 51,466 103,672
Gain on sale of equipment, net 215,441 190,212 243,108
Other 14,323 5,987 8,452
__________ __________ __________
2,043,528 3,819,594 4,494,595
__________ __________ __________
Expenses:
Depreciation 704,856 2,512,324 2,922,658
Write-down of equipment to
net realizable value 141,256 148,249 359,000
General and administrative 132,908 186,242 120,190
General and administrative to
related party 32,766 65,606 122,555
Management fee to related party 106,214 213,295 245,105
__________ __________ __________
1,118,000 3,125,716 3,769,508
__________ __________ __________
Net income $ 925,528 $ 693,878 $ 725,087
========== ========== ==========
Net income per equivalent
limited partnership unit $ 87.50 $ 43.18 $ 27.52
========== ========== ==========
Weighted average number of
equivalent limited partnership units
outstanding during the year 10,161 15,240 24,357
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
FIDELITY LEASING INCOME FUND III, L.P.
<TABLE>
STATEMENTS OF PARTNERS' CAPITAL
<CAPTION>
For the years ended December 31, 1995, 1994 and 1993
General Limited Partners
Partner Units Amount Total
_______ ___________________ _____
<S> <C> <C> <C> <C>
Balance, January 1, 1993 $13,468 65,389 $11,093,002 $11,106,470
Redemptions - (2,180) (329,471) (329,471)
Cash distributions (55,214) - (5,466,205) (5,521,419)
Net income 54,708 - 670,379 725,087
_______ ______ ___________ ___________
Balance, December 31, 1993 12,962 63,209 5,967,705 5,980,667
Redemptions - (994) (75,225) (75,225)
Cash distributions (41,547) - (4,113,139) (4,154,686)
Net income 35,739 - 658,139 693,878
_______ ______ ___________ ___________
Balance, December 31, 1994 7,154 62,215 2,437,480 2,444,634
Redemptions - (472) (9,959) (9,959)
Cash distributions (31,706) - (2,391,965) (2,423,671)
Net income 36,393 - 889,135 925,528
_______ _______ __________ ___________
Balance, December 31, 1995 $11,841 61,743 $ 924,691 $ 936,532
======= ====== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
FIDELITY LEASING INCOME FUND III, L.P.
<TABLE>
STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended December 31,
1995 1994 1993
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 925,528 $ 693,878 $ 725,087
__________ __________ __________
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 704,856 2,512,324 2,922,658
Write down of equipment to net realizable value 141,256 148,249 359,000
Gain on sale of equipment, net (215,441) (190,212) (243,108)
(Increase) decrease in accounts receivable (133,587) 22,708 150,394
(Increase) decrease in due from related parties 26,592 91,112 (122,600)
Increase (decrease) in lease rents
paid in advance 261,045 (111,955) (103,305)
Increase (decrease) in other, net (20,093) (47,882) 6,860
__________ __________ __________
764,628 2,424,344 2,969,899
__________ __________ __________
Net cash provided by operating activities 1,690,156 3,118,222 3,694,986
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment (1,984) (181,144) (828,475)
Purchase of investment securities
held to maturity - (247,795) -
Maturity of investment securities
held to maturity - 495,738 2,202,220
Proceeds from sale of equipment 689,640 352,033 342,902
__________ __________ __________
Net cash provided by investing activities 687,656 418,832 1,716,647
__________ __________ __________
Cash flows from financing activities:
Distributions (2,423,671) (4,154,686) (5,521,419)
Redemptions of capital (9,959) (75,225) (329,471)
__________ __________ __________
Net cash used in financing activities (2,433,630) (4,229,911) (5,850,890)
__________ __________ __________
Decrease in cash and cash equivalents (55,818) (692,857) (439,257)
Cash and cash equivalents, beginning of year 771,837 1,464,694 1,903,951
__________ __________ __________
Cash and cash equivalents, end of year $ 716,019 $ 771,837 $1,464,694
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
FIDELITY LEASING INCOME FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Fidelity Leasing Income Fund III, L.P. (the "Fund") was formed in December
1985 with Fidelity Leasing Corporation ("FLC") as the General Partner. FLC
is a wholly owned subsidiary of Resource Leasing Inc., a wholly owned
subsidiary of Resource America, Inc. The Fund is managed by the General
Partner. The Fund's limited partnership interests are not publicly traded.
There is no market for the Fund's limited partnership interests and it is
unlikely that any will develop. The Fund acquired computer equipment,
including printers, tape and disk storage devices, data communications
equipment, computer terminals, data processing and office equipment, which
is leased to third parties throughout the United States on a short-term
basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Securities Held to Maturity
The Fund adopted Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities" on
January 1, 1994. This new standard requires investments in securities to
be classified in one of three categories: held to maturity, trading and
available for sale. Debt securities that the Fund has the positive intent
and ability to hold to maturity are classified as held to maturity and are
reported at amortized cost. As the Fund does not engage in security
trading, the balance, if any, of its debt securities and equity securities
are classified as available for sale. Net unrealized gains and losses for
securities available for sale are required to be recognized as a separate
component of partner's capital and excluded from the determination of net
income. The Fund adopted this new standard for the year ended December 31,
1994 with no resulting financial statement impact on the Fund. Prior to
the adoption of SFAS No. 115, investment securities were carried at cost
which approximates market.
Concentration of Credit Risk
Financial instruments which potentially subject the Fund to concentrations
of credit risk consist principally of temporary cash investments. The Fund
places its temporary investments in securities backed by the United States
Government, commercial paper with high credit quality institutions, bank
money market funds and time deposits and certificates of deposit.
Concentrations of credit risk with respect to accounts receivables are
limited due to the dispersion of the Fund's leesees over different
industries and geographies.
Equipment Held for Sale or Lease
Equipment held for sale or lease is carried at its estimated net realizable
value.
F-7
FIDELITY LEASING INCOME FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
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.
Accounting for Leases
The Fund's leasing operations consist primarily of operating 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 six years.
Acquisition fees associated with lease placements are allocated to
equipment when purchased and depreciated as part of equipment cost. Rental
income consists primarily of monthly periodic rentals due under the terms
of the leases. 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.
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 III, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Fourth Quarter Adjustments
Currently, the Fund's practice has been to review the recoverability of its
undepreciated costs of rental equipment quarterly. The Fund's policy,
as part of this review, is to analyze such factors as releasing of
equipment, technological developments and information provided in third
party publications. Based upon this review, the Fund recorded an
adjustment of approximately $20,000, $148,000 and $359,000 or $1.97, $9.71
and $14.74 per equivalent limited partnership unit to write down its rental
equipment in the fourth quarter of 1995, 1994 and 1993, respectively.
Reclassification
Certain amounts on the 1994 and 1993 financial statements have been
reclassified to conform to the presentation adopted in 1995.
3. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
Cash distributions (except for the period from January 1, 1992 through
June 30, 1995), if any, are made quarterly as follows: 95% to the Limited
Partners and 5% to the General Partner, until the Limited Partners have
received an amount equal to the purchase price of their Units, plus a 10%
compounded Priority Return (an amount equal to 10% 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 UNDER OPERATING LEASES
Equipment on lease consists primarily of computer peripheral equipment
under operating leases. The majority of the equipment was manufactured by
IBM. The lessees have agreements with the manufacturer to provide
maintenance for the leased equipment. The Fund's operating leases are for
initial lease terms of 13 to 48 months.
F-9
FIDELITY LEASING INCOME FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. EQUIPMENT UNDER OPERATING LEASES (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 1995, 1994 and 1993 approximately
$141,000, $148,000 and $359,000, respectively was charged to write-down of
equipment to net realizable value. However, the General Partner believes,
after analyzing the current equipment portfolio, that there are impending
gains to be recognized upon the sale of certain equipment in future years.
The future approximate minimum rentals to be received on noncancellable
operating leases as of December 31 are as follows:
1996 $ 341,000
1997 98,000
__________
$ 439,000
==========
5. RELATED PARTY TRANSACTIONS
The General Partner receives 6% of rental payments on equipment under
operating leases for administrative and management services performed on
behalf of the Fund.
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 10% cumulative compounded
Priority Return. Based on current estimates, it is not expected that the
Fund will be required to pay the General Partner a sales fee.
Additionally, the General Partner and its affiliates are reimbursed by the
Fund for certain costs of services and materials used by or for the Fund
except those items covered by the above-mentioned fees. Following is a
summary of fees and costs charged by the General Partner or its affiliates
during the years ended December 31:
1995 1994 1993
Management fee $106,214 $213,295 $245,105
Reimbursable costs 32,766 65,606 122,555
F-10
FIDELITY LEASING INCOME FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. RELATED PARTY TRANSACTIONS (Continued)
Amounts due from related parties at December 31, 1995 and 1994 represent
monies due to the Fund from the General Partner and/or other affiliated
funds for rentals and sales proceeds collected and not yet remitted the
Fund.
Amounts due to related parties at December 31, 1995 and 1994 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, 1995, three customers accounted for
approximately 21%, 19% and 11% of the Fund's rental income. For the year
ended December 31, 1994, three customers accounted for approximately 16%,
15% and 14% and two customers accounted for approximately 11% each of the
Fund's rental income. For the year ended December 31, 1993, three
customers accounted for approximately 14% each of the Fund's rental income.
7. CASH DISTRIBUTIONS
Below is a summary of the quarterly cash distributions made to partners
during the years ended December 31:
</TABLE>
<TABLE>
Month of Distribution 1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
February $ 781,294 $1,362,057 $1,412,663
May 973,400 1,117,318 1,374,037
August 482,233 781,812 1,372,419
November 186,744 893,499 1,362,300
__________ __________ __________
$2,423,671 $4,154,686 $5,521,419
========== ========== ==========
</TABLE>
In addition, the General Partner declared a cash distribution of $250,000
in February 1996 for the three months ended December 31, 1995, to all
admitted partners as of December 31, 1995.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 716,019
<SECURITIES> 0
<RECEIVABLES> 312,293
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,028,312
<PP&E> 6,165,064
<DEPRECIATION> 5,841,499
<TOTAL-ASSETS> 1,351,877
<CURRENT-LIABILITIES> 415,345
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 936,532
<TOTAL-LIABILITY-AND-EQUITY> 1,351,877
<SALES> 1,775,370
<TOTAL-REVENUES> 2,043,528
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,118,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 925,528
<INCOME-TAX> 0
<INCOME-CONTINUING> 925,528
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 925,528
<EPS-PRIMARY> 87.50
<EPS-DILUTED> 87.50
</TABLE>
