SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996
/ / 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.)
Seven East Skippack Pike, Ambler, Pennsylvania 19002
_______________________________________________________________________________
(Address of principal executive offices) (Zip code)
(215) 619-2800
_______________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the regis-
trant was required to file such reports), and (2) has been subject to such fil-
ing requirements for the past 90 days.
Yes __X__ No _____
Page 1 of 12
Part I: Financial Information
Item 1: Financial Statements
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
September 30, December 31,
1996 1995
_____________ ____________
Cash and cash equivalents $ 1,732,646 $ 2,199,456
Investment securities held to maturity - 499,740
Accounts receivable 233,728 78,373
Interest receivable 37,163 15,225
Due from related parties 205,953 66,249
Equipment under operating leases
(net of accumulated depreciation
of $12,751,177 and $14,445,214,
respectively) 8,865,512 8,670,653
Net investment in direct financing leases 31,824 38,961
Equipment held for sale or lease 74,564 26,116
___________ ___________
Total assets $11,181,390 $11,594,773
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 94,032 $ 47,361
Accounts payable and
accrued expenses 180,042 81,601
Due to related parties - 204,707
___________ ___________
Total liabilities 274,074 333,669
Partners' capital 10,907,316 11,261,104
___________ ___________
Total liabilities and
partners' capital $11,181,390 $11,594,773
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
____ ____ ____ ____
Income:
Rentals $1,287,599 $1,238,981 $3,738,585 $4,011,518
Earned income on direct
financing leases 740 951 2,383 3,002
Interest 21,993 40,666 110,151 190,483
Gain on sale of equipment,
net 317,035 136,731 606,027 56,568
Other 2,823 2,824 6,345 19,832
__________ __________ __________ __________
1,630,190 1,420,153 4,463,491 4,281,403
__________ __________ __________ __________
Expenses:
Depreciation and
amortization 1,017,226 1,000,835 2,909,709 3,270,660
Write-down of equipment
to net realizable value 133,455 24,810 412,848 276,113
General and administrative 33,366 27,068 107,604 70,213
General and administrative
to related party 72,577 44,376 209,452 170,520
Management fee to
related party 64,444 61,558 186,959 192,431
__________ __________ __________ __________
1,321,068 1,158,647 3,826,572 3,979,937
__________ __________ __________ __________
Net income $ 309,122 $ 261,506 $ 636,919 $ 301,466
========== ========== ========== ==========
Net income per equivalent
limited partnership unit $ 9.89 $ 7.37 $ 20.29 $ 7.51
========== ========== ========== ==========
Weighted average number of
equivalent limited
partnership units outstanding
during the period 31,067 34,059 31,127 36,000
========== ========== ========= ==========
The accompanying notes are an integral part of these financial statements.
3
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENT OF PARTNERS' CAPITAL
For the nine months ended September 30, 1996
(Unaudited)
General Limited Partners
Partner Units Amount Total
_______ _____ ______ _____
Balance, January 1, 1996 $ (31,464) 68,718 $11,292,568 $11,261,104
Redemptions - (3,129) (510,707) (510,707)
Cash distributions (4,800) - (475,200) (480,000)
Net income 5,400 - 631,519 636,919
________ ______ ___________ ___________
Balance, September 30, 1996 $(30,864) 65,589 $10,938,180 $10,907,316
======== ====== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996 and 1995
(Unaudited)
1996 1995
____ ____
Cash flows from operating activities:
Net income $ 636,919 $ 301,466
__________ __________
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,909,709 3,270,660
Write-down of equipment to
net realizable value 412,848 276,113
Proceeds from direct financing leases, net
of earned income 7,137 6,518
Gain on sale of equipment, net (606,027) (56,568)
(Increase) decrease in accounts receivable (155,355) 9,545
(Increase) decrease in interest receivable (21,938) 24,423
(Increase) decrease in due from related
parties (139,704) 97,491
Increase (decrease) in lease rents paid
in advance 46,671 (194,480)
Increase (decrease) in accounts payable
and accrued expenses 98,441 182,404
Increase (decrease) in due to related
parties (204,707) 15,186
__________ __________
2,347,075 3,631,292
__________ __________
Net cash provided by operating activities 2,983,994 3,932,758
__________ __________
Cash flows from investing activities:
Acquisition of equipment (3,635,051) (3,972,406)
Purchase of investment securities
held to maturity - (250,253)
Maturity of investment securities
held to maturity 499,740 746,244
Proceeds from sale of equipment 675,214 1,073,770
__________ __________
Net cash used in investing activities (2,460,097) (2,402,645)
__________ __________
Cash flows from financing activities:
Redemptions of capital (510,707) (157,000)
Distributions (480,000) (3,113,663)
__________ __________
Net cash used in financing activities (990,707) (3,270,663)
__________ __________
Decrease in cash and cash equivalents (466,810) (1,740,550)
Cash and cash equivalents, beginning
of period 2,199,456 4,782,344
__________ __________
Cash and cash equivalents, end of period $1,732,646 $3,041,794
========== ==========
The accompanying notes are an integral part of these financial statements.
5
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
The accompanying unaudited condensed financial statements have been prepared
by the Fund in accordance with Generally Accepted Accounting Principles,
pursuant to the rules and regulations of the Securities and Exchange Commis-
sion. In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
1. EQUIPMENT LEASED
Equipment on lease consists primarily of computer peripheral equipment
under operating leases. A majority of the equipment was manufactured by
IBM. The lessees have agreements with the manufacturer to provide main-
tenance for the leased equipment. The Fund's operating leases are for
initial lease terms of 20 to 60 months. Generally, operating leases will
not recover all of the undepreciated cost and related expenses of its
rental equipment during the initial lease terms and the Fund is prepared to
remarket the equipment in future years. Fund policy is to review quarterly
the expected economic life of its rental equipment in order to determine
the recoverability of its undepreciated cost. Recent and anticipated
technological developments affecting computer equipment and competitive
factors in the marketplace are considered among other things, as part of
this review. 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, $ 412,848 and
$276,113 was charged to write-down of equipment to net realizable value
for the nine months ended September 30, 1996 and 1995, respectively. Any
future losses are dependent upon unanticipated technological developments
affecting the computer equipment industry in subsequent years.
The Fund also has equipment leased under the direct financing method in
accordance with Statement of Financial Accounting Standards No. 13. This
method provides for recognition of income (the excess of the aggregate
future rentals and estimated additional amounts recoverable upon expiration
of the lease over the related equipment cost) over the life of the lease
using the interest method.
The net investment in direct financing leases as of September 30, 1996 are
as follows:
Net minimum lease payments to be received $36,000
Less unearned income 4,000
Add expected future residuals -
_______
$32,000
=======
6
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. EQUIPMENT LEASED (Continued)
The future approximate minimum rentals to be received on noncancellable
operating leases and direct financing leases as of September 30, 1996 are
as follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ _________
1996 $1,276,000 $ 3,000
1997 3,652,000 13,000
1998 1,880,000 13,000
1999 899,000 7,000
2000 112,000 -
__________ _______
$7,819,000 $36,000
========== =======
2. RELATED PARTY TRANSACTIONS
The General Partner receives 5% or 2% of gross rental payments from equip-
ment under operating leases and full pay-out leases, respectively, for
administrative and management services performed on behalf of the Fund.
Full pay-out leases are noncancellable leases for which the rental payments
due during the initial term of the lease are at least sufficient to recover
the purchase price of the equipment, including acquisition fees. This
management fee is paid monthly only if and when the Limited Partners have
received distributions for the period from January 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 con-
nection 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. As a
result, $193,808 of sales fee accrued by the Fund in prior periods was
recognized into income as part of the net gain on sale of equipment during
the nine months ended September 30, 1996.
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 of services and materials charged by the General
Partner or its affiliates during the three and nine months ended September
30, 1996 and 1995:
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
____ ____ ____ ____
Management fee $64,444 $61,558 $186,959 $192,431
Reimbursable costs 72,577 44,376 209,452 170,520
Accrued sales fee - 11,867 - 33,361
7
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. RELATED PARTY TRANSACTIONS (Continued)
Amounts due from related parties at September 30, 1996 and December 31,
1995 represent monies due the Fund from the General Partner and/or other
affiliated funds for rentals and sales proceeds collected and not yet re-
mitted the Fund.
The amount due to related parties at December 31, 1995 represents 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.
3. SUBSEQUENT EVENT
Cash Distribution:
The General Partner declared and paid a cash distribution of $60,000 in
October 1996 for the month ended September 30, 1996, to all admitted
partners as of September 30, 1996.
8
FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: 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 $1,630,190 and
$1,420,153 for the three months ended September 30, 1996 and 1995,
respectively, and $4,463,491 and $4,281,403 for the nine months ended September
30, 1996 and 1995, respectively. Rental income from the leasing of computer
peripheral equipment accounted for 79% and 87% of total revenues for the third
quarter of 1996 and 1995, respectively and 84% and 94% for the nine months
ended September 30, 1996 and 1995, respectively. The increase in revenues is
primarily attributable to an increase in the net gain on sale of equipment.
The Fund recognized a net gain on sale of equipment of $606,027 during the
first nine months of 1996 as compared to $56,568 for the first nine months of
1995 which caused an increase in total revenues in 1996. The overall increase
in revenues in 1996, however, was reduced by the decrease in both rental income
and interest income. Rental income decreased during 1996 by approximately
$937,000 because of equipment which came off lease and was re-leased at lower
rental rates or sold. This decrease, however, was reduced by an increase of
approximately $664,000 of rental income realized from equipment purchases made
since September 30, 1995 as well as rental income earned on 1995 equipment
purchases for which a full nine months was earned in 1996 and only a portion of
the nine months was earned in 1995. Additionally, interest income decreased in
1996 because of lower cash balances available for investment by the Fund.
Expenses were $1,321,068 and $1,158,647 for the three months ended Septem-
ber 30, 1996 and 1995, respectively, and $3,826,572 and $3,979,937 for the nine
months ended September 30, 1996 and 1995, respectively. Depreciation and
amortization comprised 77% and 86% of total expenses for the third quarter of
1996 and 1995, respectively and 76% and 82% of total expenses for the nine
months ended September 30, 1996 and 1995, respectively. The decrease in
expenses is primarily related to the decrease in depreciation expense due to
equipment which came off lease or was terminated and sold. However, the
increase in write-down of equipment to net realizable value during the first
nine months of 1996 reduced the overall decrease in total expenses. Based upon
the quarterly review of the recoverability of the undepreciated cost of rental
equipment, $412,848 and $276,113 was charged to write-down of equipment to net
realizable value during the nine months ended September 30, 1996 and 1995,
respectively. Any future losses are dependent upon unanticipated technological
developments affecting the computer equipment industry in subsequent years.
The Fund's net income was $309,122 and $261,506 for the three months ended
September 30, 1996 and 1995, respectively, and $636,919 and $301,466 for the
nine months ended September 30, 1996 and 1995, respectively. The earnings
per equivalent limited partnership unit, after earnings allocated to the
General Partner, were $9.89 and $7.37 based on a weighted average number of
equivalent limited partnership units outstanding of 31,067 and 34,059 for the
three months ended September 30, 1996 and 1995, respectively. The earnings per
equivalent limited partnership unit, after earnings allocated to the General
Partner, were $20.29 and $7.51 based on a weighted average number of equivalent
limited partnership units outstanding of 31,127 and 36,000 for the nine months
ended September 30, 1996 and 1995, respectively.
9
FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
The Fund generated $1,142,768 and $1,150,420 of funds from operations,
for the purpose of determining cash available for distribution for the quarter
ended September 30, 1996 and 1995, respectively, and distributed 11% and 60% to
partners during the third quarter of 1996 and 1995, respectively, and 5% and
30% to partners in October 1996 and 1995, respectively. For the nine months
ended September 30, 1996 and 1995, the Fund generated $3,353,449 and $3,791,671
of funds from operations and distributed 14% and 73% of these amounts to
partners during the nine months ended September 30, 1996 and 1995,
respectively, and 2% and 9% of these amounts to partners in October 1996 and
1995, respectively. 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
During the nine months ended September 30, 1996 and 1995, the Fund
purchased $3,635,051 and $3,972,406, respectively, of equipment. The Fund will
continue to purchase equipment with sales proceeds and cash available from
operations which is not distributed to partners.
The cash position of the Fund is reviewed daily and cash is invested on a
short-term basis.
The Fund's cash from operations is expected to continue to be adequate to
cover all operating expenses and contingencies during the next twelve month
period.
10
Part II: Other Information
FIDELITY LEASING INCOME FUND VII, L.P.
September 30, 1996
Item 1. Legal Proceedings: Inapplicable.
Item 2. Changes in Securities: Inapplicable.
Item 3. Defaults Upon Senior Securities: Inapplicable.
Item 4. Submission of Matters to a Vote of Securities Holders: Inapplicable.
Item 5. Other Information: Inapplicable.
Item 6. Exhibits and Reports on Form 8-K:
a) Exhibits: EX-27
b) Reports on Form 8-K: None
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the regis-
trant has duly caused this report to be signed on its behalf by the under-
signed, thereunto duly authorized.
FIDELITY LEASING INCOME FUND VII, L.P.
11-13-96 By: Freddie M. Kotek
________ _____________________________
Date Freddie M. Kotek
President of F.L. Partnership Management, Inc.
(Principal Operating Officer)
11-13-96 By: Marianne T. Schuster
________ _____________________________
Date Marianne T. Schuster
Vice President of F.L. Partnership Management, Inc.
(Principal Financial Officer)
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the regis-
trant has duly caused this report to be signed on its behalf by the under-
signed, thereunto duly authorized.
FIDELITY LEASING INCOME FUND VII, L.P.
_______ _____________________________
Date Freddie M. Kotek
President of F.L. Partnership Management, Inc.
(Principal Operating Officer)
_______ _____________________________
Date Marianne T. Schuster
Vice President of F.L. Partnership Management, Inc.
(Principal Financial Officer)
12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,732,646
<SECURITIES> 0
<RECEIVABLES> 476,844
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,209,490
<PP&E> 21,691,253
<DEPRECIATION> 12,751,177
<TOTAL-ASSETS> 11,181,390
<CURRENT-LIABILITIES> 274,074
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,907,316
<TOTAL-LIABILITY-AND-EQUITY> 11,181,390
<SALES> 3,738,585
<TOTAL-REVENUES> 4,463,491
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,826,572
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 636,919
<INCOME-TAX> 0
<INCOME-CONTINUING> 636,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 636,919
<EPS-PRIMARY> 20.29
<EPS-DILUTED> 20.29
</TABLE>
