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, 1999
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ______________
Commission file number 0-19232
Fidelity Leasing Income Fund VII, L.P.
_________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 23-2581971
_________________________________________________________________
(State of Organization) (I.R.S. Employer Identification No.)
3 North Columbus Blvd., Philadelphia, Pennsylvania 19106
_________________________________________________________________
(Address of principal executive offices) (Zip Code)
(215) 574-1636
_________________________________________________________________
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
None Not applicable
Securities registered pursuant to Section 12 (g) of the Act:
Limited Partnership Interests
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes__X__ No_____
The number of outstanding limited partnership units of the Registrant at
December 31, 1999 is 65,389.
There is no public market for these securities.
The index of Exhibits is located on page 12.
1
<PAGE>
PART I
Item 1. BUSINESS
Fidelity Leasing Income Fund VII, L.P. (the "Fund"), a Delaware limited
partnership, was organized in 1989 and acquires computer equipment, including
printers, tape and disk storage devices, data communications equipment, com-
puter terminals, technical workstations, networking equipment, as well as other
electronic equipment which is leased to third parties on a short-term basis.
The Fund's principal objective is to generate leasing revenues for distri-
bution. The Fund manages the equipment, releasing or disposing of equipment
as it comes off lease in order to achieve its principal objective. The Fund
does not borrow funds to purchase equipment.
The Fund generally acquires equipment subject to a lease. Purchases
of equipment for lease are typically made through equipment leasing brokers,
under a sale-leaseback arrangement directly from lessees owning equipment,
from the manufacturer either pursuant to a purchase agreement relating to
significant quantities of equipment or on an ad hoc basis to meet the needs
of a particular lessee.
The equipment leasing industry is highly competitive. The Fund competes
with leasing companies, equipment manufacturers and distributors, and entities
similar to the Fund (including similar programs sponsored by the General
Partner), some of which have greater financial resources than the Fund.
Other leasing companies and equipment manufacturers and distributors may be
in a position to offer equipment to prospective lessees on financial terms
that are more favorable than those which the Fund can offer. They may also
be in a position to offer trade-in-privileges, maintenance contracts and other
services which the Fund may not be able to offer. Equipment manufacturers and
distributors may offer to sell equipment on terms and conditions (such as
liberal financing terms and exchange privileges) which will afford benefits to
the purchaser similar to those obtained through leases. As a result of the
advantages that certain of its competitors may have, the Fund may find it
necessary to lease its equipment on a less favorable basis than certain of its
competitors.
A brief description of the types of equipment in which the Fund has
invested as of December 31, 1999, together with information concerning the
users of such equipment is contained in Item 2, following.
The Fund does not have any employees. All persons who work on the Fund
are employees of the General Partner.
2
<PAGE>
Item 2. PROPERTIES
The following schedules detail the type, aggregate purchase price and
percentage of the various types of equipment acquired and leased by the Fund
under the operating and direct financing methods as of December 31, 1999:
Operating Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Testing Equipment $1,732,707 28.40%
Disk Storage Systems 1,417,249 23.23
Technical Workstations and Terminals 1,245,798 20.41
Network Communications 411,024 6.74
Mini Computer Systems 365,416 5.99
PCB Assembly Equipment 341,619 5.60
Printers 304,758 4.99
Communication Controllers 99,221 1.63
Other 183,987 3.01
__________ ______
Totals $6,101,779 100.00%
========== ======
Direct Financing Leases:
Purchase Price Percentage of
Type of Equipment of Equipment Total Equipment
Testing Equipment $3,572,201 43.03%
Network Communications 3,522,587 42.43
PCB Assembly Equipment 791,573 9.54
Other 415,034 5.00
__________ ______
Totals $8,301,395 100.00%
========== ======
The following schedules detail the type of business, aggregate purchase
price and percentage of equipment usage by industrial classification for equip-
ment leased by the Fund under the operating and direct financing methods as of
December 31, 1999:
Operating Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Manufacturing/Refining $3,447,043 56.49%
Retailing/Consumer Goods 1,363,850 22.36
Aerospace 602,487 9.87
Telephone/Telecommunications 365,416 5.99
Utilities 237,387 3.89
Computers/Data Processing 85,596 1.40
__________ ______
Totals $6,101,779 100.00%
========== ======
3
<PAGE>
Item 2. PROPERTIES (Continued)
Direct Financing Leases:
Purchase Price Percentage of
Type of Business of Equipment Total Equipment
Manufacturing/Refining $4,363,774 52.57%
Retailing/Consumer Goods 3,937,621 47.43
__________ ______
Totals $8,301,395 100.00%
========== ======
Average Initial Term of Leases (in months): 38
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
4
<PAGE>
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, 1999
Limited Partnership Interests 2,316
General Partnership Interest 1
<TABLE>
Item 6. SELECTED FINANCIAL DATA
<CAPTION>
For the Years Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Total Income $2,293,932 $4,416,369 $4,846,809 $5,778,248 $5,636,048
Net Income (Loss) 279,122 (185,085) 197,895 604,654 (17,688)
Distributions to Partners 600,000 80,000 560,000 600,000 3,577,138
Net Income (Loss)
per Equivalent Limited
Partnership Unit 9.45 (6.14) 6.36 19.21 (0.50)
Weighted Average Number
of Equivalent Limited
Partnership Units
Outstanding During
the Year 28,917 29,856 30,302 31,096 35,095
</TABLE>
<TABLE>
December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Total Assets $10,028,870 $10,394,528 $10,620,394 $10,941,033 $11,594,773
Equipment under
Operating Leases and
Equipment Held for
Sale or Lease (Net) 1,357,657 2,957,392 6,254,336 7,734,171 8,696,769
Net Investment in
Direct Financing Leases 6,543,062 4,335,444 295,319 29,334 38,961
Limited Partnership
Units 65,389 65,449 65,449 65,589 68,718
Limited Partners 2,316 2,314 2,309 2,307 2,396
</TABLE>
5
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Fidelity Leasing Income Fund VII, L.P. had revenues of $2,293,932,
$4,416,369 and $4,846,809 for the years ended December 31, 1999, 1998 and
1997, respectively. Rental income from the leasing of equipment accounted
for 74%, 89% and 96% of total revenues in 1999, 1998 and 1997, respectively.
The decrease in revenues in both 1999 and 1998 was primarily attributable to
the decrease in rental income. In 1999, rental income decreased by approxi-
mately $1,111,000 because of equipment that came off lease and sold. This
decrease, however, was mitigated somewhat by an increase in rental income of
$32,000 generated from 1998 equipment purchases for which a full year of rent
was recognized in 1999 and only a partial year was recognized in 1998.
Additionally, the Fund entered into several transactions in which it collected
the remaining rents owed on certain leases resulting in the recognition of
approximately $1,131,000 of rental income in 1998. This increase in rental
income in 1998 also contributed to the overall decrease in revenues in 1999
and mitigated the overall decrease in revenues in 1998. In 1998, rental income
decreased by approximately $2,432,000 because of equipment that came off lease
and sold. This decrease, however, was reduced by rental income of approxi-
mately $547,000 generated from equipment purchased during 1998 as well as
rental income earned on 1997 equipment on operating leases purchased for which
a full year of rental income was earned in 1998 and only a partial year was
earned in 1997. During 1999, the Fund invested in $3,522,588 of direct
financing leases compared to $6,066,963 in 1998 and $302,825 in 1997. As a
result, the Fund recognized $396,265, $288,680 and $4,215 of earned income on
direct financing leases in 1999, 1998 and 1997, respectively, which served to
lower the overall decrease in revenues in 1999 and 1998. The Fund recorded a
net gain on sale of equipment of $25,388 in 1999 and $116,049 in 1998. There
was no net gain on sale of equipment recognized in 1997. The decrease in this
account in 1999 contributed to the decrease in total revenues during this year
and the increase in this account in 1998 reduced the amount of the overall
decrease in revenues from 1997. Furthermore, the fluctuation in interest
income also affected the decrease in total revenues in 1999 and 1998. Interest
income increased during the twelve months ended December 31, 1999 because of
larger cash balances available for investment by the Fund during the first nine
months of 1999 compared to 1998. In 1998, however, interest income decreased
because of lower cash balances available for investment by the Fund compared
to 1997.
Expenses were $2,014,810, $4,601,454 and $4,648,914 for the twelve months
ended December 31, 1999, 1998 and 1997, respectively. Depreciation expense
comprised 72%, 79% and 82% of total expenses in 1999, 1998 and 1997,
respectively. The decrease in expenses in 1999 and 1998 was partially
related to the decrease in depreciation expense due to equipment that came
off lease or terminated and sold. The change in write-down of equipment to
net realizable value also affected the decrease in total expenses in 1999 and
1998. In 1999, 1998 and 1997, approximately $104,000, $340,000 and $102,000,
respectively, was charged to write-down of equipment to net realizable value.
The decrease in this account during 1999 contributed to the overall decrease
in expenses in this year but the increase in this account in 1998 reduced the
overall decrease in expenses in 1998. 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
6
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
factors as releasing of equipment, technological developments and information
provided in third party publications. 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. Any future
losses are dependent upon unanticipated technological developments affecting
the types of equipment in the portfolio in subsequent years. Furthermore,
management fee to related party decreased in 1999 and 1998 in proportion to
the rental income recognized on operating leases. The Fund did not incur any
net loss on sale of equipment for the years ended December 31, 1999 and 1998
but recorded $116,083 of net loss on sale of equipment for the year ended
December 31, 1997. The decrease in this account in 1998 contributed to the
decrease in total expenses in 1998.
The Fund's net income (loss) was $279,122, ($185,085) and $197,895 for
the years ended December 31, 1999, 1998 and 1997, respectively. The earnings
(loss) per equivalent limited partnership unit, after earnings (loss)
allocated to the General Partner, were $9.45, ($6.14) and $6.36 based on a
weighted average number of equivalent limited partnership units outstanding
of 28,917, 29,856 and 30,302 for the years ended December 31, 1999, 1998 and
1997, respectively.
The Fund generated cash from operations of $1,812,604, $3,664,714 and
$4,242,564 for the purpose of determining cash available for distribution,
and distributed 25%, 0% and 13% of these amounts to partners during the years
ended December 31, 1999, 1998 and 1997, respectively, and 8%, 4% and 2% of
these amounts to partners in January and February 2000, 1999 and 1998, respec-
tively. For financial statement purposes, the Fund records cash distributions
to partners on a cash basis in the period in which they are paid.
Analysis of Financial Condition
The Fund is currently in the process of dissolution. As provided in the
Restated Limited Partnership Agreement, the assets of the Fund shall be
liquidated as promptly as is consistent with obtaining their fair value.
During this time, the Fund continues to purchase equipment for lease with cash
available from operations which was not distributed to partners. During the
years ended December 31, 1999, 1998 and 1997, the Fund purchased $60,024,
$999,749 and $2,942,752, respectively, of equipment subject to operating
leases. Additionally, the Fund invested in $3,522,588, $6,066,963 and $302,825
of equipment under direct financing leases during the twelve months ended
December 31, 1999, 1998 and 1997, 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.
7
<PAGE>
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 AND ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
8
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
F.L. Partnership Management, Inc. (FLPMI) is a wholly owned subsidiary
of Resource Leasing, Inc., a wholly owned subsidiary of Resource America,
Inc. (Resource America). The Directors and Executive Officers of FLPMI are:
FREDDIE M. KOTEK, age 44, Chairman of the Board of Directors, President,
and Chief Executive Officer of FLPMI since September 1995 and Senior Vice
President of Resource America since 1995. President of Resource Leasing,
Inc. since September 1995. Executive Vice President of Resource
Properties, Inc. (a wholly owned subsidiary of Resource America) since
1993.
MICHAEL L. STAINES, age 50, Director and Secretary of FLPMI since
September 1995. Director of Resource America since 1989 and Senior Vice
President of Resource America since 1989.
SCOTT F. SCHAEFFER, age 37, Director of FLPMI since September 1995.
Vice Chairman of the Board of Resource America since 1998 and Executive
Vice President of Resource America since 1997. Prior thereto, Senior
Vice President of Resource America since 1995. Vice President-Real
Estate of Resource America and President of Resource Properties, Inc.
(a wholly owned subsidiary of Resource America) since 1992.
Others:
MARIANNE T. SCHUSTER, age 41, Vice President and Controller of FLPMI
since 1984.
KRISTIN L. CHRISTMAN, age 32, Portfolio Manager of FLPMI since December
1995 and Equipment Brokerage Manager since 1993.
9
<PAGE>
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, 1999:
Name of Individual or Capacities in
Number in Group Which Served Compensation
F.L. Partnership
Management, Inc. General Partner $113,027(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, 1999, 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 1989, the General Partner contributed $1,000 to the capital of
the Fund but it does not own any of the Fund's outstanding securities.
No individual director or officer of F.L. Partnership Management, Inc.
nor such directors or officers as a group, owns more than one percent of
the Fund's outstanding securities. The General Partner owns a general
partnership interest which entitles it to receive 1% of cash distri-
butions until the Limited Partners have received an amount equal to the
purchase price of their Units plus a 12% compounded priority return;
thereafter 10%. The General Partner will also share in net income equal
to the greater of its cash distributions or 1% of net income or to the
extent there are losses, 1% of such losses.
(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, 1999, the Fund was charged $113,027
of management fees by the General Partner. The General Partner will continue
to receive 5% or 2% of rental payments on equipment under operating and full
pay-out leases, respectively, for administrative and management services
performed on behalf of the Fund. Full pay-out leases are noncancellable
leases for which rental payments due during the initial term of the leases
are at least sufficient to recover the purchase price of the equipment,
including acquisition fees. All of the direct financing leases in which the
Fund has invested meet the criteria for a full pay-out lease and pay a 2%
management fee to the General Partner. This management fee is paid monthly
only if and when the Limited Partners have received distributions for the
period from January 1, 1991 through the end of the most recent quarter
equal to a return for such period at a rate of 12% per year on the aggregate
amount paid for their units.
The General Partner may also receive up to 3% of the proceeds from the
sale of the Fund's equipment for services and activities to be performed in
connection with the disposition of equipment. The payment of this sales fee
10
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
is deferred until the Limited Partners have received cash distributions equal
to the purchase price of their units plus a 12% cumulative compounded priority
return. Based on current estimates, it is not expected that the Fund will be
required to pay this sales fee to the General Partner.
The General Partner also receives 1% of cash distributions until the
Limited Partners have received an amount equal to the purchase price of their
Units plus a 12% cumulative compounded priority return. Thereafter, the
General Partner will receive 10% of cash distributions. During the year ended
December 31, 1999, the General Partner received $6,000 of cash distributions.
The Fund incurred $231,221 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 1999.
11
<PAGE>
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
(27) Financial Data Schedule
(28) not applicable
* Incorporated by reference.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FIDELITY LEASING INCOME FUND VII, L.P.
A Delaware limited partnership
By: F.L. PARTNERSHIP MANAGEMENT, INC.
Freddie M. Kotek
By: ___________________________
Freddie M. Kotek, Chairman and President
Dated March 23, 2000
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 3-23-00
Freddie M. Kotek and President of F.L. Partnership
Management, Inc.
(Principal Executive Officer)
Michael L. Staines
_________________________ Director of F.L. Partnership 3-23-00
Michael L. Staines Management, Inc.
Marianne T. Schuster
_________________________ Vice President and Controller 3-23-00
Marianne T. Schuster of F.L. Partnership Management, Inc.
(Principal Financial Officer)
13
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Certified Public Accountants F-2
Balance Sheets as of December 31, 1999 and 1998 F-3
Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-4
Statements of Partners' Capital for the years ended
December 31, 1999, 1998 and 1997 F-5
Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-6
Notes to Financial Statements F-7 - F-12
All schedules have been omitted because the required information is not
applicable or is included in the Financial Statements or Notes thereto.
F-1
<PAGE>
Report of Independent Certified Public Accountants
The Partners
Fidelity Leasing Income Fund VII, L.P.
We have audited the accompanying balance sheets of Fidelity Leasing
Income Fund VII, L.P. as of December 31, 1999 and 1998, and the related state-
ments of operations, partners' capital and cash flows for each of the three
years in the period ended December 31, 1999. 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 signif-
icant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Fidelity Leasing
Income Fund VII, L.P. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
Grant Thornton LLP
Philadelphia, Pennsylvania
February 11, 2000
F-2
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
<TABLE>
ASSETS
<CAPTION>
December 31,
1999 1998
<S> <C> <C>
Cash and cash equivalents $ 1,769,740 $ 2,967,163
Accounts receivable 273,492 69,610
Due from related parties 84,919 64,919
Equipment under operating leases
(net of accumulated depreciation
of $4,899,775 and $4,039,764,
respectively) 1,202,004 2,658,322
Net investment in direct financing
leases 6,543,062 4,335,444
Equipment held for sale or lease 155,653 299,070
___________ ___________
Total assets $10,028,870 $10,394,528
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 122,331 $ 30,675
Accounts payable and
accrued expenses 49,370 63,769
Due to related parties 15,411 128,510
Security deposits 67,825 67,825
___________ ___________
Total liabilities 254,937 290,779
Partners' capital 9,773,933 10,103,749
___________ ___________
Total liabilities and
partners' capital $10,028,870 $10,394,528
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
For the years ended December 31,
1999 1998 1997
Income:
<S> <C> <C> <C>
Rentals $1,698,640 $3,909,010 $4,663,392
Earned income on direct
financing leases 396,265 288,680 4,215
Interest 156,774 84,274 169,945
Gain on sale of equipment, net 25,388 116,049 -
Other 16,865 18,356 9,257
__________ __________ __________
2,293,932 4,416,369 4,846,809
__________ __________ __________
Expenses:
Depreciation 1,454,819 3,625,790 3,826,599
Write-down of equipment to
net realizable value 104,051 340,058 101,987
General and administrative 111,692 137,927 109,411
General and administrative to
related party 231,221 278,762 263,767
Management fee to related party 113,027 218,917 231,067
Loss on sale of equipment, net - - 116,083
__________ __________ __________
2,014,810 4,601,454 4,648,914
__________ __________ __________
Net income (loss) $ 279,122 $ (185,085) $ 197,895
========== ========== ==========
Net income (loss) per equivalent
limited partnership unit $ 9.45 $ (6.14) $ 6.36
========== ========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during the year 28,917 29,856 30,302
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
<TABLE>
STATEMENTS OF PARTNERS' CAPITAL
<CAPTION>
For the years ended December 31, 1999, 1998 and 1997
General Limited Partners
Partner Units Amount Total
________ ___________________ _____
<S> <C> <C> <C> <C>
Balance, January 1, 1997 $(30,264) 65,589 $10,785,313 $10,755,049
Redemptions - (140) (24,110) (24,110)
Cash distributions (5,600) - (554,400) (560,000)
Net income 5,200 - 192,695 197,895
________ ______ ___________ ___________
Balance, December 31, 1997 (30,664) 65,499 10,399,498 10,368,834
Cash distributions (800) - (79,200) (80,000)
Net loss (1,851) - (183,234) (185,085)
________ ______ ___________ ___________
Balance, December 31, 1998 (33,315) 65,449 10,137,064 10,103,749
Redemptions - (60) (8,938) (8,938)
Cash distributions (6,000) - (594,000) (600,000)
Net income 6,000 - 273,122 279,122
________ ______ ___________ ___________
Balance, December 31, 1999 $(33,315) 65,389 $ 9,807,248 $ 9,773,933
======== ====== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
<TABLE>
STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended December 31,
1999 1998 1997
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ 279,122 $ (185,085) $ 197,895
__________ __________ __________
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 1,454,819 3,625,790 3,826,599
Write-down of equipment to net
realizable value 104,051 340,058 101,987
(Gain) loss on sale of equipment, net (25,388) (116,049) 116,083
(Increase) decrease in accounts receivable (203,882) 371,220 (294,820)
(Increase) decrease in due from
related parties (20,000) 379,978 (396,643)
Increase (decrease) in lease rents paid in
advance 91,656 (70,629) 2,470
Increase (decrease) in accounts payable
and accrued expenses (14,399) (37,116) 33,355
Increase (decrease) in due to related parties (113,099) 86,189 22,701
Increase (decrease) in other, net - (7,050) 7,050
__________ __________ __________
1,273,758 4,572,391 3,418,782
__________ __________ __________
Net cash provided by operating activities 1,552,880 4,387,306 3,616,677
__________ __________ __________
Cash flows from investing activities:
Acquisition of equipment (60,024) (999,749) (2,942,752)
Investment in direct financing leases (3,522,588) (6,066,963) (302,825)
Proceeds from direct financing leases,
net of earned income 1,386,595 2,026,837 36,839
Proceeds from sale of equipment 54,652 446,895 377,919
Security deposits received - 67,825 -
__________ __________ __________
Net cash used in investing activities (2,141,365) (4,525,155) (2,830,819)
__________ __________ __________
Cash flows from financing activities:
Distributions (600,000) (80,000) (560,000)
Redemptions of capital (8,938) - (24,110)
_________ __________ __________
Net cash used in financing activities (608,938) (80,000) (584,110)
__________ __________ __________
Increase (decrease) in cash and cash
equivalents (1,197,423) (217,849) 201,748
Cash and cash equivalents, beginning of year 2,967,163 3,185,012 2,983,264
__________ __________ __________
Cash and cash equivalents, end of year $1,769,740 $2,967,163 $3,185,012
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Fidelity Leasing Income Fund VII, L.P. (the "Fund") was formed in November
1989. The General Partner of the Fund is F.L. Partnership Management, Inc.
("FLPMI") which is a wholly owned subsidiary of Resource Leasing, Inc., a
wholly owned subsidiary of Resource America, Inc. The Fund is managed by the
General Partner. The Fund's limited partnership interests are not publicly
traded. There is no market for the Fund's limited partnership interests and
it is unlikely that any will develop. The Fund acquires computer equipment
including printers, tape and disk storage devices, data communications equip-
ment, computer terminals, technical workstations, networking equipment as well
as other electronic equipment, which is leased to third parties throughout the
United States on a short-term basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration of Credit Risk
Financial instruments which potentially subject the Fund to concentra-
tions of credit risk consist principally of temporary cash investments. The
Fund places its temporary investments in bank repurchase agreements and jumbo
savings accounts.
Concentrations of credit risk with respect to accounts receivables are
limited due to the dispersion of the Fund's lessees over different industries
and geographies.
Impairment of Long-Lived Assets
The Fund reviews its assets to determine if it has any long-lived assets
that are carried on the books for an amount that may not be recoverable. If
it is determined that an asset's estimated future cash flows will not be suf-
ficient to recover its carrying amount, an impairment charge will be recorded.
Equipment Held for Sale or Lease
Equipment held for sale or lease is carried at its estimated net realiz-
able value.
Use of Estimates
In preparing financial statements in conformity with Generally Accepted
Accounting Principles, management is required to make estimates and assump-
tions that affect the reported amounts of assets and liabilities and the dis-
closure 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
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting for Leases
The Fund's leasing operations consist of both operating and direct
financing leases. Under the operating method of accounting for leases, the
cost of the leased equipment is recorded as an asset and depreciated on a
straight-line basis over its estimated useful life, up to seven years.
Acquisition fees associated with lease placements are allocated to equipment
when purchased and depreciated as part of equipment cost. Rental income
consists primarily of monthly periodic rentals due under the terms of the
leases. Generally, during the remaining terms of existing operating leases,
the Fund will not recover all of the undepreciated cost and related expenses
of its rental equipment and is prepared to remarket the equipment in future
years. Upon sale or other disposition of assets, the cost and related accu-
mulated depreciation are removed from the accounts and the resulting gain or
loss, if any, is reflected in income.
Under the direct financing method of accounting for leases, income (the
excess of the aggregate future rentals and estimated unguaranteed residuals
upon expiration of the lease over the related equipment cost) is recognized
over the life of the lease using the interest method.
Income Taxes
Federal and State income tax regulations provide that taxes on the
income or benefits from losses of the Fund are reportable by the partners in
their individual income tax returns. Accordingly, no provision for such taxes
has been made in the accompanying financial statements.
Statements of Cash Flows
For purposes of the statements of cash flows, the Fund considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Net Income per Equivalent Limited Partnership Unit
Net income per equivalent limited partnership unit is computed by
dividing net income allocated to limited partners by the weighted average
number of equivalent limited partnership units outstanding during the year.
The weighted average number of equivalent units outstanding during the year is
computed based on the weighted average monthly limited partners' capital
account balances, converted into equivalent units at $500 per unit.
F-8
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Fourth Quarter Adjustments
Currently, the Fund's practice is to review the recoverability of its
undepreciated costs of rental equipment quarterly. The Fund's policy, as part
of this review, is to analyze such factors as releasing of equipment, tech-
nological developments and information provided in third party publications.
Based upon this review, there were no significant fourth quarter adjustments
made for the year ended December 31, 1999. However, the Fund recorded an
adjustment of approximately $27,000 and $57,000 or $0.90 and $1.88 per equiva-
lent limited partnership unit to write down its rental equipment in the fourth
quarter of 1998 and 1997, respectively.
3. YEAR 2000 COMPLIANCE
The "Year 2000 Issue" addresses the ability of computer programs to
distinguish between the year 2000 and the year 1900. Computer programs were
written using two digits rather than four digits for the year in a date field.
This could ultimately result in miscalculations or inaccuracies in processing
data.
The Fund's operating system is Year 2000 capable. Additionally, all of
the main software systems used to generate information for the Fund are Year
2000 compliant.
The costs incurred to make the software systems Year 2000 compliant were
not material as of December 31, 1999.
Furthermore, all significant outside suppliers have been contacted to
ensure that their systems are Year 2000 compliant. The Fund has not experi-
enced any problems with outside suppliers regarding Year 2000 compliance
issues.
4. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
Cash distributions, if any, are made monthly as follows: 99% to the
Limited Partners and 1% to the General Partner, until the Limited Partners
have received an amount equal to the purchase price of their Units, plus a
12% compounded priority return (an amount equal to 12% compounded annually
on the portion of the purchase price not previously distributed); thereafter,
90% to the Limited Partners and 10% to the General Partner.
Net Losses are allocated 99% to the Limited Partners and 1% to the
General Partner. The General Partner is allocated Net Income equal to its
cash distributions, but not less than 1% of Net Income, with the balance
allocated to the Limited Partners.
F-9
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS (Continued)
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.
5. EQUIPMENT LEASED
Equipment on lease consists of equipment under operating leases. The
lessees have agreements with the manufacturer to provide maintenance for the
leased equipment. The Fund's operating leases are for initial lease terms of
21 to 60 months.
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 1999, 1998 and 1997, approxi-
mately $104,000, $340,000 and $102,000, respectively was charged to write-
down of equipment to net realizable value. Any future losses are dependent
upon unanticipated technological developments affecting the equipment in sub-
sequent years.
Unguaranteed residuals for direct financing leases represent the
estimated amounts recoverable at lease termination from lease extensions or
disposition of the equipment. The Fund reviews these residual values
quarterly. If the equipment's fair market value is below the estimated
residual value, an adjustment is made.
The net investment in direct financing leases as of December 31, 1999
is as follows:
Minimum lease payments to be received $6,385,000
Unguaranteed residuals 980,000
Unearned rental income (635,000)
Unearned residual income (187,000)
__________
$6,543,000
==========
The future approximate minimum rentals to be received on noncancellable
operating and direct financing leases as of December 31 are as follows:
Direct
Operating Financing
2000 $713,000 $2,487,000
2001 81,000 2,332,000
2002 28,000 1,532,000
2003 13,000 34,000
________ __________
$835,000 $6,385,000
======== ==========
F-10
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. RELATED PARTY TRANSACTIONS
The General Partner receives 5% or 2% of rental payments on equipment
under operating leases and full pay-out leases, respectively, for administra-
tive and management services performed on behalf of the Fund. Full pay-out
leases are noncancellable leases for which rental payments during the initial
term are at least sufficient to recover the purchase price of the equipment,
including acquisition fees. This management fee is paid monthly only if and
when the Limited Partners have received distributions for the period from
January 1, 1991 through the end of the most recent quarter equal to a return
for such period at a rate of 12% per year on the aggregate amount paid for
their units.
The General Partner may also receive up to 3% of the proceeds from the
sale of the Fund's equipment for services and activities to be performed in
connection with the disposition of equipment. The payment of this sales fee
is deferred until the Limited Partners have received cash distributions equal
to the purchase price of their units plus a 12% cumulative compounded priority
return. Based on current estimates, it is not expected that the Fund will be
required to pay this sales fee to the General Partner.
Additionally, the General Partner and its parent company are reimbursed
by the Fund for certain costs of services and materials used by or for the
Fund except those items covered by the above-mentioned fees. The following
is a summary of fees and costs charged by the General Partner or its parent
company during the years ended December 31:
1999 1998 1997
Management fee $113,027 $218,917 $231,067
Reimbursable costs 231,221 278,762 263,767
During 1999, the Fund maintained its checking and investment accounts in
Jefferson Bank, a subsidiary of JeffBanks, Inc. in which the Chairman of
Resource America, Inc. served as a director. In November 1998, Hudson United
Bancorp acquired JeffBanks, Inc. The Fund maintains its banking relationship
with Hudson United Bancorp. The Chairman of Resource America, Inc. does not
hold a position with Hudson United Bancorp.
Amounts due from related parties at December 31, 1999 and 1998 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, 1999 and 1998 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.
F-11
<PAGE>
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
7. MAJOR CUSTOMERS
For the year ended December 31, 1999, four customers accounted for approx-
imately 33%, 16%, 13%, and 11% of the Fund's rental income. For the year
ended December 31, 1998, one customer accounted for approximately 29%, and
three customers accounted for 14% of the Fund's rental income. For the year
ended December 31, 1997, two customers accounted for approximately 16% each
and one customer accounted for 15% of the Fund's rental income.
8. CASH DISTRIBUTIONS
Below is a summary of the cash distributions paid to partners during the
years ended December 31:
<TABLE>
For the Quarter Ended 1999 1998 1997
<CAPTION>
<S> <C> <C> <C>
March $150,000 $80,000 $170,000
June 200,000 - 200,000
September 150,000 - 100,000
December 100,000 - 90,000
________ _______ ________
$600,000 $80,000 $560,000
======== ======= ========
</TABLE>
In addition, the General Partner declared and paid three cash distri-
butions of $50,000 each in January and February 2000 for each of the months
ended October 31, November 30 and December 31, 1999 to all admitted partners
as of October 31, November 30 and December 31, 1999.
F-12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,769,740
<SECURITIES> 0
<RECEIVABLES> 358,411
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,128,151
<PP&E> 6,257,432
<DEPRECIATION> 4,899,775
<TOTAL-ASSETS> 10,028,870
<CURRENT-LIABILITIES> 254,937
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,773,933
<TOTAL-LIABILITY-AND-EQUITY> 10,028,870
<SALES> 1,698,640
<TOTAL-REVENUES> 2,293,932
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,014,810
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 279,122
<INCOME-TAX> 0
<INCOME-CONTINUING> 279,122
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 279,122
<EPS-BASIC> 9.45
<EPS-DILUTED> 9.45
</TABLE>
