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, 2000, together with information concerning the users of such equipment is contained in Item 2, following.
The Fund does not have any employees. All persons who work on the Fund are employees of the General Partner.
Item 2.
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, 2000:
Operating Leases: Purchase Price Percentage of Type of Equipment of Equipment Total Equipment
PCB Assembly Equipment $341,619 53.43% Printers 293,172 45.85 Communication Controllers 4,571 0.72 ________ ______ Totals $639,362 100.00% ======== ======
Direct Financing Leases: Purchase Price Percentage of Type of Equipment of Equipment Total Equipment
Network Communications $ 4,633,981 40.87% Testing Equipment 3,572,202 31.50 Disk Storage Systems 2,241,269 19.76 PCB Assembly Equipment 719,947 6.35 Other 172,233 1.52 ___________ ______ Totals $11,339,632 100.00% =========== ======
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, 2000:
Operating Leases: Purchase Price Percentage of Type of Business of Equipment Total Equipment
Manufacturing/Refining $639,362 100.00% ________ ______ Totals $639,362 100.00% ======== ======
Direct Financing Leases: Purchase Price Percentage of Type of Business of Equipment Total Equipment
Retailing/Consumer Goods $ 4,822,977 42.53% Manufacturing/Refining 4,296,965 37.89 Computers/Data Processing 2,165,813 19.10 Education 34,736 0.31 Diversified Financial/Banking 19,141 0.17 ___________ ______ Totals $11,339,632 100.00% =========== ======
Average Initial Term of Leases (in months): 33
Item 3.
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 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, 2000
Limited Partnership Interests 2,317 General Partnership Interest 1
Item 7.
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 $1,814,779, $2,293,932 and $4,416,369 for the years ended December 31, 2000, 1999 and 1998, respectively. Rental income from the leasing of equipment accounted for 57%, 74% and 89% of total revenues in 2000, 1999 and 1998, respectively. The decrease in revenues in both 2000 and 1999 was primarily attributable to the decrease in rental income. In 2000, rental income decreased by approxi- mately $671,000 because of equipment under operating leases that came off lease or teminated and was sold. In 1999, rental income decreased by approximately $1,111,000 because of equipment that terminated and was 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 rec- ognized 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. Additionally, the variation in interest income also affected the overall decrease in revenues in 2000 and 1999. Interest income decreased in 2000 and increased in 1999 because the Fund had larger cash balances available for investment during the first nine months of 1999 compared to 2000 and 1998. During 2000, the Fund invested in $3,369,964 of direct financing leases compared to $3,522,588 in 1999 and $6,066,963 in 1998. As a result, the Fund recognized $560,405, $396,265 and $288,680 of earned income on direct financing leases in 2000, 1999 and 1998, respectively, which served to lower the overall decrease in revenues in 2000 and 1999. The Fund recorded a net gain on sale of equipment of $90,945, $25,388 and $116,049 in 2000, 1999 and 1998, respectively. The fluctuation in this account served to mitigate the decrease in total revenues in 2000 and contributed to the overall decrease in revenues in 1999. Further- more, the increase in other income also reduced the amount of the decrease in total revenues in 2000. During the years ended December 31, 2000, 1999 and 1998, the Fund recognized approximately $28,000, $2,000 and $-0-, respectively, of late charges on delinquent rentals collected and approximately $24,000, $14,000 and $14,000, respectively, of transfer fees on investor account transfers. These accounts are included in other income and contributed to the increase in other income during the year ended December 31, 2000.
Expenses were $1,175,504, $2,014,810 and $4,601,454 for the twelve months ended December 31, 2000, 1999 and 1998, respectively. Depreciation expense comprised 67%, 72% and 79% of total expenses in 2000, 1999 and 1998, respectively. The decrease in expenses in 2000 and 1999 was primarily related to the decrease in depreciation expense due to equipment that came off lease or terminated and was sold. The decrease in write-down of equipment to net realizable value also accounted for the decrease in total expenses in 2000 and 1999. In 2000, 1999 and 1998, approximately $6,000, $104,000 and $340,000 respectively, was charged to write-down of equipment to net realizable value. 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, techno- logical developments and information provided in third party publications. In accordance with accounting principles generally accepted in the United States of America, the Fund writes down its rental equipment to its estimated
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
net realizable value when the amounts are reasonably estimated and only recognizes gains, if any, 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. Additionally, the decrease in general and administrative expense to related party in 2000 and 1999 also contributed to the overall decrease in expenses during these years. The decrease in this account resulted from a decrease in the expenses charged by the General Partner or its parent company for services and materials provided to the Fund during the years ended December 31, 2000 and 1999. Furthermore, management fee to related party decreased in 2000 and 1999 in proportion to the rental income recognized on operating leases. The decrease in this account also accounted for the decrease in total expenses during the twelve months ended December 31, 2000 and 1999.
The Fund's net income (loss) was $639,275, $279,122 and ($185,085) for the years ended December 31, 2000, 1999 and 1998, respectively. The earnings (loss) per equivalent limited partnership unit, after earnings (loss) allocated to the General Partner, were $21.91, $9.45 and ($6.14) based on a weighted average number of equivalent limited partnership units outstanding of 28,884, 28,917 and 29,856 for the years ended December 31, 2000, 1999 and 1998, respectively.
The Fund generated cash from operations of $1,343,483, $1,812,604 and $3,664,714 for the purpose of determining cash available for distribution during the years ended December 31, 2000, 1999 and 1998, respectively. The Fund distributed $450,000, $450,000 and $-0- of those amounts during the period from April 1 through December 31, 2000, 1999 and 1998, respectively, and during each of the first quarters of 2001, 2000 and 1999, the Fund distributed $150,000 of those amounts. The Fund also paid $80,000 of cash distributions to partners during the first quarter of 1998 for the last quarter of the previous year. 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 will continue to look for opportunities to purchase equipment under operating leases or invest in direct financing leases for lease terms consistent with the plan of dissolution. There was no equipment pur- chased during the year ended December 31, 2000. During the years ended December 31, 1999 and 1998, the Fund purchased $60,024 and $999,749, re- spectively, of equipment subject to operating leases. Additionally, the Fund invested in $3,369,964, $3,522,588 and $6,066,963 of equipment under direct financing leases during the twelve months ended December 31, 2000, 1999 and 1998, respectively.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Analysis of Financial Condition (Continued)
The cash position of the Fund is reviewed daily and cash is invested on a short-term basis.
The Fund's cash from operations is expected to continue to be adequate to cover all operating expenses and contingencies during the next fiscal year.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted as a separate section of this report commencing on page.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10.
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 45, 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. President of Resource Properties, Inc. (a wholly owned subsidiary of Resource America) since 2000. Executive Vice President of Resource Properties, Inc. from 1993 to 2000.
MICHAEL L. STAINES, age 51, Director and Secretary of FLPMI since September 1995. Director of Resource America from 1989 to 2000 and Senior Vice President of Resource America since 1989. Chief Operating Officer, Secretary and Managing Board Member of Atlas Pipeline Partners G.P., LLC since its formation in 1999. President, Secretary and a direc- tor of Resource Energy, Inc. (a wholly owned subsidiary of Resource America) since 1993.
SCOTT F. SCHAEFFER, age 38, Director of FLPMI since September 1995. President of RAIT Investment Trust (a publicly traded real estate invest- ment trust) since October 2000. Vice Chairman of the Board of Resource America from 1998 to September 2000 and Executive Vice President of Re- source America from 1997 to 1998. Prior thereto, Senior Vice President of Resource America since 1995. President of Resource Properties, Inc. (a wholly owned subsidiary of Resource America) from 1992 to September 2000.
Others:
MARIANNE T. SCHUSTER, age 42, Vice President and Controller of FLPMI since 1984.
KRISTIN L. CHRISTMAN, age 33, Portfolio Manager of FLPMI since December 1995 and Equipment Brokerage Manager since 1993.
Item 11.
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, 2000:
Name of Individual or Capacities in Number in Group Which Served Compensation
F.L. Partnership Management, Inc. General Partner $108,457(1) ======== (1) This amount does not include the General Partner's share of cash distributions made to all partners.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Based upon a review of Schedule 13D as filed with the Securities and Exchange Commission, the table set forth below outlines the persons or groups known to the Fund that own more than 5% of the Fund's outstanding securities either beneficially or of record.
Name of Individual Number of or Group Units Owned
James S. and Danea T. Riley 4,167.732 (1)
Odd Lot Liquidity Fund, LLC 4,167.732 (2)
Sierra Fund 4, LLC 4,167.732 (3)
(1) Amount represents beneficial ownership interest through ownership of Odd Lot Liquidity Fund, LLC and Sierra Fund 4, LLC which own 1,556.176 units and 2,611.556 units, respectively, of the outstanding limited partnership units of the Fund.
(2) Amount represents direct ownership by Odd Lot Liquidity Fund, LLC of 1,556.176 units and beneficial ownership of 2,611.556 units by virtue of group membership and affiliate status with Sierra Fund 4, LLC.
(3) Amount represents direct ownership by Sierra Fund 4, LLC of 2,611.556 units and beneficial ownership of 1,556.176 units by virtue of group membership and affiliate status with Odd Lot Liquidity Fund, LLC.
(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.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (Continued)
(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.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 2000, the Fund was charged $108,457 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 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, 2000, the General Partner received $6,000 of cash distributions.
The Fund incurred $171,465 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 2000.
PART IV
Item 14.
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.
(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.
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.
/s/ Freddie M. Kotek By: ___________________________ Freddie M. Kotek, Chairman and President
Dated March 29, 2001
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
/s/ Freddie M. Kotek _________________________ Chairman of the Board of Directors 3-29-01 Freddie M. Kotek and President of F.L. Partnership Management, Inc. (Principal Executive Officer)
/s/ Michael L. Staines _________________________ Director of F.L. Partnership 3-29-01 Michael L. Staines Management, Inc.
/s/ Marianne T. Schuster _________________________ Vice President and Controller 3-29-01 Marianne T. Schuster of F.L. Partnership Management, Inc. (Principal Financial Officer)
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Certified Public Accountants
Balance Sheets as of December 31, 2000 and 1999
Statements of Operations for the years ended December 31, 2000, 1999 and 1998
Statements of Partners' Capital for the years ended December 31, 2000, 1999 and 1998
Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998
Notes to Financial Statements -
All schedules have been omitted because the required information is not applicable or is included in the Financial Statements or Notes thereto.
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, 2000 and 1999, and the related state- ments of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 2000. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the finan- cial statements are free of material misstatement. An audit includes examin- ing, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting princi- ples 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 VII, L.P. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.
Grant Thornton LLP Philadelphia, Pennsylvania February 16, 2001
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND VII, L.P.
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND VII, L.P.
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND VII, L.P.
The accompanying notes are an integral part of these financial statements.
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. (Resource America). 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 communica- tions equipment, computer terminals, technical workstations, networking equip- ment 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 money market 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 accounting principles generally accepted in the United States of America, 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.
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.
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 years ended December 31, 2000 and 1999. However, the Fund re- corded an adjustment of approximately $27,000 or $0.90 per equivalent limited partnership unit to write down its rental equipment in the fourth quarter of 1998.
3. 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.
Net Income (Losses) allocated to the Limited Partners are allocated to individual limited partners based on the ratio of the daily weighted average partner's net capital account balance (after deducting related commission expense) to the total daily weighted average of the Limited Partners' net capital account balances.
4. EQUIPMENT 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 24 to 58 months.
In accordance with accounting principles generally accepted in the United States of America, the Fund writes down its rental equipment to its estimated net realizable value when the amounts are reasonably estimated and only recog- nizes gains upon actual sale of its rental equipment. As a result, in 2000, 1999 and 1998, approximately $6,000, $104,000 and $340,000, 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 subsequent years.
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. EQUIPMENT LEASED (Continued)
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, 2000 is as follows:
Minimum lease payments to be received $7,175,000 Unguaranteed residuals 1,102,000 Unearned rental income (676,000) Unearned residual income (144,000) __________ $7,457,000 ==========
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
2001 $ 90,000 $3,618,000 2002 28,000 2,638,000 2003 13,000 729,000 2004 - 190,000 ________ __________ $131,000 $7,175,000 ======== ==========
5. 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.
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. RELATED PARTY TRANSACTIONS (Continued)
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:
2000 1999 1998
Management fee $108,457 $113,027 $218,917 Reimbursable costs 171,465 231,221 278,762
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 served as a director. In November 1999, Hudson United Bancorp acquired JeffBanks, Inc. The Fund maintains a normal banking relationship with Hudson United Bancorp. As of December 31, 2000 and 1999, the Chairman of Resource America did not hold any position with Hudson United Bancorp.
Amounts due from related parties at December 31, 2000 and 1999 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, 2000 and 1999 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, 2000, one customer accounted for approx- imately 48% of the Fund's rental income and two customers accounted for approx- imately 11% each of the Fund's rental income. For the year ended December 31, 1999, four customers accounted for approximately 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% each of the Fund's rental income.
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
7. CASH DISTRIBUTIONS
Below is a summary of the cash distributions paid to partners during the years ended December 31:
In addition, the General Partner declared and paid three cash distri- butions of $50,000 each in February 2001 for each of the months ended October 31, November 30 and December 31, 2000 to all admitted partners as of October 31, November 30 and December 31, 2000.