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, 1997
/ / 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 0-15765
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.)
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, 1997 is 61,231.
There is no public market for these securities.
The index of Exhibits is located on page 9.
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 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 was to generate leasing revenues for distribution. The
Fund managed equipment, released or disposed of equipment as it
came off lease in order to achieve its principal objective. The
Fund did not borrow funds to purchase equipment.
The Fund closed on April 30, 1987 and raised approximately
$35,000,000 of proceeds through the sale of limited partnership
units. Equipment of approximately $46,000,000 was purchased
through 1997 with the 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, 1997, the Fund's equipment portfolio has been liquidated.
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 represented 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 were 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.
The Fund did not have any employees. All persons who worked
on the Fund were employees of the General Partner.
Item 2. PROPERTIES
During 1997, the General Partner liquidated all remaining
properties owned by the Fund.
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
3
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
(a) The Fund's limited partnership units were not publicly
traded. There was no market for the Fund's limited
partnership units.
(b) Number of Equity Security Holders:
Number of Partners
Title of Class as of December 31, 1997
Limited Partnership Interests 2,078
General Partnership Interest 1
<TABLE>
Item 6. SELECTED FINANCIAL DATA
<CAPTION>
For the Years Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Total Income $ 626,842 $1,054,992 $2,043,528 $3,819,594 $4,494,595
Net Income 484,172 736,261 925,528 693,878 725,087
Distributions to
Partners 1,017,915 1,133,278 2,423,671 4,154,686 5,521,419
Net Income (Loss) Per
Equivalent Limited
Partnership Unit 53.26 (0.49) 87.50 43.18 27.52
Weighted Average Number
of Equivalent Limited
Partnership Units
Outstanding During
the Year 8,191 9,138 10,161 15,240 24,357
</TABLE>
<TABLE>
December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Total Assets $ - $593,584 $1,351,877 $2,617,225 $6,315,363
Equipment under Operating
Leases and Equipment
Held for Sale or
Lease (Net) - 102,325 323,565 1,641,892 4,283,142
Limited Partnership
Units 61,231 61,231 61,743 62,215 63,209
Limited Partners 2,078 2,078 2,098 2,110 2,123
</TABLE>
4
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The significant decrease in revenues and expenses in 1997 and 1996 is
primarily due to the dissolution process of the Fund that commenced in 1995
and was completed during the fourth quarter of 1997. Equipment was sold to
the end user at lease expiration or packaged and sold prior to lease
expiration for the present value of the remaining lease payments plus the
forecasted future residual value.
The Fund had revenues of $626,842, $1,054,992 and $2,043,528 for the
years ended December 31, 1997, 1996 and 1995, respectively. The decrease in
revenues between 1997, 1996 and 1995 is primarily caused by the decrease in
rental income because of lease terminations and sales of equipment. Rental
income from the leasing of computer equipment accounted for 56%, 74% and 87%
of total income in 1997, 1996 and 1995, respectively.
Expenses were $142,670, $318,731 and $1,118,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. Depreciation expense
comprised 44%, 50% and 63% of total expenses in 1997, 1996 and 1995,
respectively. The decrease in expenses between these years
is directly related to the decrease in depreciation expense because of
equipment which came off lease and was terminated or sold. Additionally, the
reduction in management fees to related party, resulting from the decrease in
rental income also contributed to the decrease in total expenses in 1997 and
1996. Furthermore, the decrease in general and administrative expenses
resulting from the dissolution of the Fund also accounted for the overall
decrease in expenses in 1997 and 1996. In 1995, the Fund charged
approximately $141,000 to write-down of equipment to net realizable value.
In 1997 and 1996, there was no charge to write-down of equipment to net
realizable value. The Fund's practice was to review the
recoverability of its undepreciated costs of rental equipment quarterly. The
Fund's policy, as part of this review, was to analyze such factors as
releasing of equipment, technological developments and information provided
in third party publications. In accordance with Generally Accepted
Accounting Principles, the Fund wrote down its rental equipment to its
estimated net realizable value when the amounts were reasonably estimated and
only recognized gains upon actual sale of its rental equipment.
The Fund's net income was $484,172, $736,261 and $925,528 for the years
ended December 31, 1997, 1996 and 1995, respectively. The earnings (loss)
per equivalent limited partnership unit, after earnings (loss) allocated to
the General Partner, were $53.26, ($0.49) and $87.50 for the years ended
December 31, 1997, 1996 and 1995, respectively. The weighted average number
of equivalent limited partnership units outstanding were 8,191, 9,138 and
10,161 for 1997, 1996 and 1995, respectively.
5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
The Fund generated funds from operations, for the purpose of determining
cash available for distribution, of $325,865, $672,902 and $1,556,199 and
declared distributions of $967,915, $933,278 and $1,892,377 to partners
for 1997, 1996 and 1995, respectively. The distributions for 1997, 1996 and
1995 include $642,050, $260,376 and $336,178, respectively, of sales
proceeds and cash available from previous years which had not been
distributed. For financial statement purposes, the Fund recorded cash
distributions to partners on a cash basis in the period in which they were
paid. During the fourth quarter of 1996, the General Partner revised its
policy regarding cash distributions so that the distributions more accurately
reflected the net income of the Fund over the most recent twelve months.
Analysis of Financial Condition
The Fund's equipment portfolio was liquidated as of December 31, 1997.
The cash position of the Fund was reviewed daily and cash was invested
on a short-term basis.
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.
6
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. The Directors and Executive Officers of FLPMI
are:
FREDDIE M. KOTEK, age 41, Chairman of the Board of Directors,
President, and Chief Executive Officer of FLPMI 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 48, Director and Secretary of FLPMI since
September 1995 and Senior Vice President and Secretary of Resource
America, Inc. since 1989.
SCOTT F. SCHAEFFER, age 35, Director of FLPMI 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.
Others:
STEPHEN P. CASO, age 42, Vice President and General Counsel of
FLPMI since 1992.
MARIANNE T. SCHUSTER, age 39, Vice President and Controller of
FLPMI since 1984.
KRISTIN L. CHRISTMAN, age 30, Portfolio Manager of FLPMI since
December 1995 and Equipment Brokerage Manager since 1993.
7
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, 1997:
Name of Individual or Capacities in
Number in Group Which Served Compensation
F.L. Partnership
Management, Inc. General Partner $20,957(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, 1997, 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 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 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, 1997, the Fund was charged
$20,957 of management fees by the General Partner.
During the year ended December 31, 1997, the General Partner
received $49,790 of cash distributions.
The Fund incurred $26,927 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 1997.
8
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.
9
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: F.L. PARTNERSHIP MANAGEMENT, INC.
Freddie M. Kotek, Chairman
By: ___________________________
Freddie M. Kotek, Chairman
and President
Dated March 26, 1998
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 3-26-98
Freddie M. Kotek and President of F.L. Partnership
Management, Inc. (Principal Executive
Officer)
Michael L. Staines
___________________________ Director of F.L. Partnership 3-26-98
Michael L. Staines Management, Inc.
Marianne T. Schuster
___________________________ Vice President and Controller 3-26-98
Marianne T. Schuster of F.L. Partnership Management,
Inc. (Principal Financial
Officer)
10
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Certified Public Accountants F-2
Balance Sheets as of December 31, 1997 and 1996 F-3
Statements of Operations for the years ended F-4
December 31, 1997, 1996 and 1995
Statements of Partners' Capital for the years ended F-5
December 31, 1997, 1996 and 1995
Statements of Cash Flows for the years ended F-6
December 31, 1997, 1996 and 1995
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, 1997 and 1996 and the
related statements of operations, changes in partners' capital and cash
flows for each of the three years in the period ending December 31, 1997.
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, 1997 and 1996 and the
results of its operations and its cash flows for each of the three years
in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
Grant Thornton LLP
Philadelphia, Pennsylvania
February 17, 1998
F-2
FIDELITY LEASING INCOME FUND III, L.P.
BALANCE SHEETS
<TABLE>
ASSETS
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
Cash and cash equivalents $ - $462,633
Accounts receivable - 27,153
Due from related parties - 1,473
Equipment under operating leases
(net of accumulated depreciation
of $- and $4,102,935, respectively) - 102,325
________ _______
Total assets $ - $593,584
======== ========
</TABLE>
<TABLE>
LIABILITIES AND PARTNERS' CAPITAL
<CAPTION>
Liabilities:
<S> <C> <C>
Lease rents paid in advance $ - $ 19,702
Accounts payable and
accrued expenses - 30,249
Due to related parties - 9,890
________ ________
Total liabilities - 59,841
Partners' capital - 533,743
________ ________
Total liabilities and
partners' capital $ - $593,584
======== ========
</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,
1997 1996 1995
Income:
<S> <C> <C> <C>
Rentals $349,279 $ 785,705 $1,775,370
Interest 36,080 26,343 38,394
Gain on sale of equipment, net 220,793 221,231 215,441
Other 20,690 21,713 14,323
________ __________ __________
626,842 1,054,992 2,043,528
________ __________ __________
Expenses:
Depreciation 62,486 157,872 704,856
Write-down of equipment to
net realizable value - - 141,256
General and administrative 32,300 76,299 118,098
General and administrative to
related party 26,927 37,418 47,576
Management fee to related party 20,957 47,142 106,214
________ __________ __________
142,670 318,731 1,118,000
________ __________ __________
Net income $484,172 $ 736,261 $ 925,528
======== ========== ==========
Net income (loss) per equivalent
limited partnership unit $ 53.26 $ (0.49) $ 87.50
======== ========== ==========
Weighted average number of
equivalent limited partnership units
outstanding during the year 8,191 9,138 10,161
======== ========== ==========
</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, 1997, 1996 and 1995
General Limited Partners
Partner Units Amount Total
_______ ___________________ _____
<S> <C> <C> <C> <C>
Balance, January 1, 1995 $ 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
Redemptions - (512) (5,772) (5,772)
Cash distributions (750,778) - (382,500) (1,133,278)
Net income (loss) 740,778 - (4,517) 736,261
________ _______ __________ __________
Balance, December 31, 1996 1,841 61,231 531,902 533,743
Cash distributions (49,790) (61,231) (968,125) (1,017,915)
Net income 47,949 - 436,223 484,172
________ _______ __________ __________
Balance, December 31, 1997 $ 0 0 $ 0 $ 0
======== ======= ========== ==========
</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,
1997 1996 1995
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 484,172 $ 736,261 $ 925,528
__________ __________ __________
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 62,486 157,872 704,856
Write down of equipment to net realizable value - - 141,256
Gain on sale of equipment, net (220,793) (221,231) (215,441)
(Increase) decrease in accounts receivable 27,153 274,601 (133,587)
Increase (decrease) in lease rents
paid in advance (19,702) (355,946) 261,045
Increase (decrease) in other, net (38,666) 9,508 6,499
__________ __________ __________
(189,522) (135,196) 764,628
__________ __________ __________
Net cash provided by operating activities 294,650 601,065 1,690,156
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment - - (1,984)
Proceeds from sale of equipment 260,632 284,599 689,640
__________ __________ __________
Net cash provided by investing activities 260,632 284,599 687,656
__________ __________ __________
Cash flows from financing activities:
Distributions (1,017,915) (1,133,278) (2,423,671)
Redemptions of capital - (5,772) (9,959)
__________ __________ __________
Net cash used in financing activities (1,017,915) (1,139,050) (2,433,630)
__________ __________ __________
Decrease in cash and cash equivalents (462,633) (253,386) (55,818)
Cash and cash equivalents, beginning of year 462,633 716,019 771,837
__________ __________ __________
Cash and cash equivalents, end of year $ - $ 462,633 $ 716,019
========== ========== ==========
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 DISSOLUTION
Fidelity Leasing Income Fund III, L.P. (the "Fund") was formed in December
1985. 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 was managed
by the General Partner. The Fund's limited partnership interests were not
publicly traded. There was no market for the Fund's limited partnership
interests. During 1997, the General Partner completed the dissolution
process of the Fund. The remaining equipment was sold during the year and
all remaining cash was distributed to partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration of Credit Risk
Financial instruments which potentially subject the Fund to concentrations
of credit risk consisted principally of temporary cash investments. The
Fund placed its temporary investments in bank repurchase agreements.
Concentrations of credit risk with respect to accounts receivables were
limited due to the dispersion of the Fund's lessees over different
industries and geographies.
Impairment of Long-Lived Assets
Effective January 1, 1996, the Fund adopted Statement of Financial
Accounting Standard (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." This
standard provides guidance on when to recognize and how to measure
impairment losses of long-lived assets and how to value long-lived assets
to be disposed of. The adoption of SFAS No. 121 had no impact on the net
income of the Fund.
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.
F-7
FIDELITY LEASING INCOME FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting for Leases
The Fund's leasing operations consisted only of operating leases. The
cost of the leased equipment was 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 were allocated to
equipment when purchased and depreciated as part of equipment cost. Rental
income consisted primarily of monthly periodic rentals due under the terms
of the leases. Generally, during the remaining terms of existing
operating leases, the Fund would not recover all of the undepreciated cost
and related expenses of its rental equipment and was prepared to remarket
the equipment in future years. Upon sale or other disposition of assets,
the cost and related accumulated depreciation was removed from the accounts
and the resulting gain or loss, if any, was 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.
Reclassification
Certain amounts on the 1996 and 1995 financial statements have been
reclassified to conform to the presentation in 1997.
F-8
FIDELITY LEASING INCOME FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
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, were 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. During the
year ended December 31, 1996, the General Partner received cash distribu-
tions of $730,646 representing the remaining portion of the 5% of cash
distributions which the General Partner was entitled to receive in
accordance with the Partnership Agreement for prior periods.
Net Losses were allocated 99% to the Limited Partners and 1% to the General
Partner. The General Partner was 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 were 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 consisted primarily of computer equipment under
operating leases. A majority of the equipment was manufactured by IBM.
The lessees had agreements with the manufacturer to provide maintenance
for the leased equipment.
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. There was no charge to write-down of equipment to
net realizable value during the twelve months ended December 31, 1997 and
1996. In 1995, approximately $141,000 was charged to write-down of equipment
to net realizable value.
5. RELATED PARTY TRANSACTIONS
The General Partner received 6% of gross rental payments from equipment
under operating leases for administrative and management services performed
on behalf of the Fund.
F-9
FIDELITY LEASING INCOME FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. RELATED PARTY TRANSACTIONS (Continued)
Additionally, the General Partner and its parent company were 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 and its
parent company during the years ended December 31:
1997 1996 1995
Management fee $20,957 $47,142 $106,214
Reimbursable costs 26,927 37,418 47,576
During 1997, 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, 1996 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, 1996 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, 1997, four customers accounted for approxi-
mately 38%, 17%, 15% and 13% of the Fund's rental income. For the year
ended December 31, 1996, two customers accounted for approximately 25% and
17% and two customers accounted for approximately 12% each of the Fund's
rental income. For the year ended December 31, 1995, three customers
accounted for approximately 21%, 19% and 11% of the Fund's rental income.
F-10
FIDELITY LEASING INCOME FUND III, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
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 1997 1996 1995
<CAPTION>
<S> <C> <C> <C>
February $ 50,000 $ 250,000 $ 781,294
May - 254,587 973,400
August - 314,346 482,233
November 967,915 314,345 186,744
__________ __________ __________
$1,017,915 $1,133,278 $2,423,671
========== ========== ==========
</TABLE>
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 349,279
<TOTAL-REVENUES> 626,842
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 142,670
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 484,172
<INCOME-TAX> 0
<INCOME-CONTINUING> 484,172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 484,172
<EPS-PRIMARY> 53.26
<EPS-DILUTED> 53.26
</TABLE>
