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 June 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.)
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)
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)
June 30, December 31,
1996 1995
____________ ____________
Cash and cash equivalents $ 4,012,058 $ 2,199,456
Investment securities held to maturity - 499,740
Accounts receivable 77,125 78,373
Interest receivable 37,163 15,225
Due from related parties 106,766 66,249
Equipment under operating leases
(net of accumulated depreciation
of $13,949,008 and $14,445,214,
respectively) 6,648,004 8,670,653
Net investment in direct financing leases 34,257 38,961
Equipment held for sale or lease 127,278 26,116
___________ ___________
Total assets $11,042,651 $11,594,773
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 92,008 $ 47,361
Accounts payable and
accrued expenses 172,366 81,601
Due to related parties 83 204,707
___________ ___________
Total liabilities 264,457 333,669
Partners' capital 10,778,194 11,261,104
___________ ___________
Total liabilities and
partners' capital $11,042,651 $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 Six Months Ended
June 30 June 30
1996 1995 1996 1995
____ ____ ____ ____
Income:
Rentals $1,203,656 $1,398,257 $2,450,986 $2,772,537
Earned income on direct
financing leases 795 1,001 1,643 2,051
Interest 59,215 72,901 88,158 149,817
Gain on sale of equipment,
net 234,195 - 288,992 -
Other 2,384 1,145 3,522 17,008
__________ __________ __________ __________
1,500,245 1,473,304 2,833,301 2,941,413
__________ __________ __________ __________
Expenses:
Depreciation and
amortization 931,098 1,138,522 1,892,483 2,269,825
Write-down of equipment to
net realizable value 133,455 201,303 279,393 251,303
General and administrative 35,296 12,225 74,238 43,145
General and administrative
to related party 72,329 76,190 136,875 126,144
Management fee to
related party 60,246 66,081 122,515 130,873
Loss on sale of equipment,
net - 71,667 - 80,163
__________ __________ __________ __________
1,232,424 1,565,988 2,505,504 2,901,453
__________ __________ __________ __________
Net income (loss) $ 267,821 $ (92,684) $ 327,797 $ 39,960
========== ========== ========== ==========
Net income per equivalent
limited partnership unit $ 8.65 $ (2.55) $ 10.41 $ .52
========== ========== ========== ==========
Weighted average number of
equivalent limited
partnership units outstand-
ing during the period 30,739 35,989 31,156 36,971
========== ========== ========== ==========
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 six months ended June 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 (3,000) - (297,000) (300,000)
Net income 3,600 - 324,197 327,797
________ ______ ___________ ___________
Balance, June 30, 1996 $(30,864) 65,589 $10,809,058 $10,778,194
======== ====== =========== ===========
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 six months ended June 30, 1996 and 1995
(Unaudited)
1996 1995
____ ____
Cash flows from operating activities:
Net income $ 327,797 $ 39,960
__________ __________
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,892,483 2,269,825
Write-down of equipment to net
realizable value 279,393 251,303
Proceeds from direct financing leases, net
of earned income 4,704 4,296
(Gain) loss on sale of equipment, net (288,992) 80,163
(Increase) decrease in accounts receivable 1,248 (99,290)
(Increase) decrease in interest receivable (21,938) 8,416
(Increase) decrease in due from related parties (40,517) 74,489
Increase (decrease) in lease rents paid
in advance 44,647 (134,227)
Increase (decrease) in accounts payable-
equipment - 332,940
Increase (decrease) in accounts payable and
accrued expenses 90,765 (181,925)
Increase (decrease) in due to related parties (204,624) 22,744
__________ __________
1,757,169 2,628,734
__________ __________
Net cash provided by operating activities 2,084,966 2,668,694
__________ __________
Cash flows from investing activities:
Acquisition of equipment (299,957) (3,738,009)
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 338,560 694,976
__________ __________
Net cash provided by (used in)
investing activities 538,343 (2,547,042)
__________ __________
Cash flows from financing activities:
Redemptions of capital (510,707) (132,426)
Distributions (300,000) (2,079,314)
__________ __________
Net cash used in financing activities (810,707) (2,211,740)
__________ __________
Increase (decrease)in cash and cash
equivalents 1,812,602 (2,090,088)
Cash and cash equivalents, beginning
of period 2,199,456 4,782,344
__________ __________
Cash and cash equivalents, end of period $4,012,058 $2,692,256
========== ==========
The accompanying notes are an integral part of these financial statements.
5
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
June 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 equipment under operating
leases. A 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 16
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, $279,393 and $251,303 was charged to
write-down of equipment to net realizable value for the six months ended
June 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 June 30, 1996 is as
follows:
Net minimum lease payments to be received $39,000
Less unearned income 5,000
Add expected future residuals -
_______
$34,000
=======
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 June 30, 1996 are as
follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ _________
1996 $2,030,000 $ 6,000
1997 2,584,000 13,000
1998 807,000 13,000
1999 269,000 7,000
2000 112,000 -
__________ _______
$5,802,000 $39,000
========== =======
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 three months ended June 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 six months ended
June 30, 1996 and 1995:
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
____ ____ ____ ____
Management fee $60,246 $66,081 $122,515 $130,873
Reimbursable costs 72,329 76,190 136,875 126,144
Accrued sales fee - 2,542 - 21,494
7
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. RELATED PARTY TRANSACTIONS (Continued)
Amounts due from related parties at June 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 to the Fund.
Amounts due to related parties at June 30, 1996 and December 31, 1995
represent monies due to the General Partner for the fees and costs men-
tioned 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 a cash distribution of $60,000 in July 1996
for the month ended June 30, 1996, to all admitted partners as of
June 30, 1996.
Lease Commitment:
Subsequent to June 30, 1996, the Fund purchased $362,700 of equipment
subject to an operating lease with an initial lease term of 36 months. The
future approximate minimum rentals to be received on this noncancellable
operating lease are $47,000 in 1996, $111,000 in 1997, $111,000 in 1998 and
$63,000 in 1999.
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 $1,500,245 and
$1,473,304 for the three months ended June 30, 1996 and 1995, respectively,
and $2,833,301 and $2,941,413 for the six months ended June 30, 1996 and 1995,
respectively. Rental income from the leasing of computer peripheral equipment
accounted for 80% and 95% of total revenues for the second quarter of 1996
and 1995, respectively and 87% and 94% of total revenues for the six months
ended June 30, 1996 and 1995, respectively. The decrease in revenues is
primarily attributable to a decrease in rental income. Rental income decreased
during 1996 by approximately $694,000 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 $372,000 of rental income realized from
equipment purchases made since June 30, 1995 as well as rental income
recognized on 1995 equipment purchases for which a full six months was earned
in 1996 and only a portion of the six months was earned in 1995. Additionally,
the decrease in interest income in 1996 resulting from lower cash balances
available for investment also contributed to the decrease in total revenues in
1996. However, the Fund incurred a net gain on sale of equipment of $288,992
during the first six months of 1996 as compared to a net loss of $80,163 for
the first six months of 1995 which lessened the overall decrease in total
revenues in 1996.
Expenses were $1,232,424 and $1,565,988 for the three months ended June 30,
30, 1996 and 1995, respectively, and $2,505,504 and $2,901,453 for the six
months ended June 30, 1996 and 1995, respectively. Depreciation and
amortization comprised 76% and 73% of total expenses during the quarter ended
June 30, 1996 and 1995, respectively and 87% and 73% of total expenses during
the six months ended June 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 since June 1995.
However, the increase in write-down of equipment to net realizable value during
the first six 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, $279,393 and $251,303 was charged to operations to write
down equipment to its estimated net realizable value during the six months
ended June 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 (loss) was $267,821 and ($92,684) for the three
months ended June 30, 1996 and 1995, respectively, and $327,797 and $39,960
for the six months ended June 30, 1996 and 1995, respectively. The earnings
(loss) per equivalent limited partnership unit, after earnings (loss)
allocated to the General Partner, were $8.65 and ($2.55) based on a
weighted average number of equivalent limited partnership units outstanding
of 30,739 and 35,989 for the three months ended June 30, 1996 and 1995,
respectively. The earnings per equivalent limited partnership unit, after
earnings allocated to the General Partner, were $10.41 and $0.52 based on
a weighted average number of equivalent limited partnership units outstanding
of 31,156 and 36,971 for the six months ended June 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 $1,098,179 and $1,318,808 of funds from operations, for
the purpose of determining cash available for distribution, for the quarter
ended June 30, 1996 and 1995, respectively and distributed 11% and 52% of
these amounts to partners during the second quarter of 1996 and 1995, respec-
tively and 5% and 26% to partners in July 1996 and 1995, respectively.
For the six months ended June 30, 1996 and 1995, the Fund generated $2,210,681
and $2,641,251 of funds from operations and distributed 14% and 66% of these
amounts to partners during the six months ended June 30, 1996 and 1995,
respectively and 3% and 13% of these amounts to partners in July 1996 and
1995, respectively.
ANALYSIS OF FINANCIAL CONDITION
During the six months ended June 30, 1996 and 1995, the Fund purchased
$299,957 and $3,738,009, respectively of equipment. The Fund will continue to
purchase equipment with cash available from operations which is not distributed
to partners.
Subsequent to June 30, 1996, the Fund purchased $362,700 of computer
peripheral equipment subject to an operating lease.
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.
June 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.
8-13-96 By: Freddie M. Kotek
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
8-13-96 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.
8-13-96 By:
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
8-13-96 By:
_______ ___________________________
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,012,058
<SECURITIES> 0
<RECEIVABLES> 221,054
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,233,112
<PP&E> 20,724,290
<DEPRECIATION> 13,949,008
<TOTAL-ASSETS> 11,042,651
<CURRENT-LIABILITIES> 264,457
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,778,194
<TOTAL-LIABILITY-AND-EQUITY> 11,042,651
<SALES> 2,450,986
<TOTAL-REVENUES> 2,833,301
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,505,504
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 327,797
<INCOME-TAX> 0
<INCOME-CONTINUING> 327,797
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 327,797
<EPS-PRIMARY> 10.41
<EPS-DILUTED> 10.41
</TABLE>
