-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OzzD/espYehA0b2ELxkRNqBIjAFYYmI4zCGjNcUcPG8rQYDJ7DhcPKqjNXQuPzAB ptM4nnk3cfnNpzlakWfZ3A== 0000786470-98-000001.txt : 19980330 0000786470-98-000001.hdr.sgml : 19980330 ACCESSION NUMBER: 0000786470-98-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY LEASING INCOME FUND III LP CENTRAL INDEX KEY: 0000786470 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER RENTAL & LEASING [7377] IRS NUMBER: 510292194 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15765 FILM NUMBER: 98575272 BUSINESS ADDRESS: STREET 1: 250 KING OF PRUSSIA ROAD CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 6109647102 MAIL ADDRESS: STREET 2: 250 KING OF PRUSSIA ROAD CITY: RADNER STATE: PA ZIP: 19087 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the year ended December 31, 1997 / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to ______________ Commission file number 0-15765 Fidelity Leasing Income Fund III, L.P. _________________________________________________________________ (Exact name of registrant as specified in its charter) Delaware 51-0292194 _________________________________________________________________ (State of Organization) (I.R.S. Employer Identification No.) 3 North Columbus Blvd., Philadelphia, Pennsylvania 19106 _________________________________________________________________ (Address of principal executive offices) (Zip Code) (215) 574-1636 _________________________________________________________________ (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: Name of Each Exchange Title of Each Class on Which Registered None Not applicable Securities registered pursuant to Section 12 (g) of the Act: Limited Partnership Interests Title of Class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ The number of outstanding limited partnership units of the Registrant at December 31, 1997 is 61,231. There is no public market for these securities. The index of Exhibits is located on page 9. 1 PART I Item 1. BUSINESS Fidelity Leasing Income Fund III, L.P. (the "Fund"), a Delaware limited partnership, was organized in 1985 and acquired equipment, primarily computer equipment, including printers, tape and disk storage devices, data communications equipment, computer terminals, data processing and office equipment, which was leased to third parties on a short-term basis. The Fund's principal objective was to generate leasing revenues for distribution. The Fund managed equipment, released or disposed of equipment as it came off lease in order to achieve its principal objective. The Fund did not borrow funds to purchase equipment. The Fund closed on April 30, 1987 and raised approximately $35,000,000 of proceeds through the sale of limited partnership units. Equipment of approximately $46,000,000 was purchased through 1997 with the proceeds raised, and also with cash distributions which were reinvested by partners and cash from operations which was not distributed to partners. As of December 31, 1997, the Fund's equipment portfolio has been liquidated. The Fund generally acquired equipment subject to a lease. Purchases of equipment for lease were made through equipment leasing brokers, under a sale-leaseback arrangement directly from lessees owning equipment, from the manufacturer either pursuant to a purchase agreement relating to significant quantities of equipment or on an ad hoc basis to meet the needs of a particular lessee. The equipment acquired was generally leased under operating leases. Operating leases provided the Fund, as lessor, aggregate rental payments in an amount that is less than the purchase price of the equipment. Operating leases represented a greater risk but with the potential for increased returns, depending on the realization of renewal and remarketing results, as compared to full payout leases. Full payout leases were generally for longer initial terms whereby the noncancellable rental payments due during the initial term of the lease are at least sufficient to recover the purchase price of the equipment. Due to technological, competitive, market and economic factors, the Fund experienced renewals and remarketing of leases at lower rental rates and residual values than was forecasted at the inception of the leases. 2 The Fund's ability to attain its investment objectives was subject to the factors discussed above. The Fund competed in the equipment leasing industry with leasing companies, equipment manufacturers and distributors, and entities similar to the Fund (including similar programs sponsored by the General Partner), some of which had greater financial resources than the Fund and more experience in the equipment leasing business than the General Partner. This competition may have been in the position to offer equipment to lessees on financial terms more favorable than those which the Fund could offer. The offer of maintenance contracts, trade-in-privileges and other services which the Fund could not provide may have resulted in the Fund leasing its equipment on a less favorable basis than its competitors. In addition, competitive factors in the computer equipment industry, including pricing, technological innovation and methods of financing, could have adversely affected the Fund in its ability to obtain new leases and renewals or to sell equipment for its anticipated net realizable values. The Fund did not have any employees. All persons who worked on the Fund were employees of the General Partner. Item 2. PROPERTIES During 1997, the General Partner liquidated all remaining properties owned by the Fund. Item 3. LEGAL PROCEEDINGS Not applicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 3 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS (a) The Fund's limited partnership units were not publicly traded. There was no market for the Fund's limited partnership units. (b) Number of Equity Security Holders: Number of Partners Title of Class as of December 31, 1997 Limited Partnership Interests 2,078 General Partnership Interest 1 Item 6. SELECTED FINANCIAL DATA
For the Years Ended December 31, 1997 1996 1995 1994 1993 Total Income $ 626,842 $1,054,992 $2,043,528 $3,819,594 $4,494,595 Net Income 484,172 736,261 925,528 693,878 725,087 Distributions to Partners 1,017,915 1,133,278 2,423,671 4,154,686 5,521,419 Net Income (Loss) Per Equivalent Limited Partnership Unit 53.26 (0.49) 87.50 43.18 27.52 Weighted Average Number of Equivalent Limited Partnership Units Outstanding During the Year 8,191 9,138 10,161 15,240 24,357
December 31, 1997 1996 1995 1994 1993 Total Assets $ - $593,584 $1,351,877 $2,617,225 $6,315,363 Equipment under Operating Leases and Equipment Held for Sale or Lease (Net) - 102,325 323,565 1,641,892 4,283,142 Limited Partnership Units 61,231 61,231 61,743 62,215 63,209 Limited Partners 2,078 2,078 2,098 2,110 2,123
4 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The significant decrease in revenues and expenses in 1997 and 1996 is primarily due to the dissolution process of the Fund that commenced in 1995 and was completed during the fourth quarter of 1997. Equipment was sold to the end user at lease expiration or packaged and sold prior to lease expiration for the present value of the remaining lease payments plus the forecasted future residual value. The Fund had revenues of $626,842, $1,054,992 and $2,043,528 for the years ended December 31, 1997, 1996 and 1995, respectively. The decrease in revenues between 1997, 1996 and 1995 is primarily caused by the decrease in rental income because of lease terminations and sales of equipment. Rental income from the leasing of computer equipment accounted for 56%, 74% and 87% of total income in 1997, 1996 and 1995, respectively. Expenses were $142,670, $318,731 and $1,118,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Depreciation expense comprised 44%, 50% and 63% of total expenses in 1997, 1996 and 1995, respectively. The decrease in expenses between these years is directly related to the decrease in depreciation expense because of equipment which came off lease and was terminated or sold. Additionally, the reduction in management fees to related party, resulting from the decrease in rental income also contributed to the decrease in total expenses in 1997 and 1996. Furthermore, the decrease in general and administrative expenses resulting from the dissolution of the Fund also accounted for the overall decrease in expenses in 1997 and 1996. In 1995, the Fund charged approximately $141,000 to write-down of equipment to net realizable value. In 1997 and 1996, there was no charge to write-down of equipment to net realizable value. The Fund's practice was to review the recoverability of its undepreciated costs of rental equipment quarterly. The Fund's policy, as part of this review, was to analyze such factors as releasing of equipment, technological developments and information provided in third party publications. In accordance with Generally Accepted Accounting Principles, the Fund wrote down its rental equipment to its estimated net realizable value when the amounts were reasonably estimated and only recognized gains upon actual sale of its rental equipment. The Fund's net income was $484,172, $736,261 and $925,528 for the years ended December 31, 1997, 1996 and 1995, respectively. The earnings (loss) per equivalent limited partnership unit, after earnings (loss) allocated to the General Partner, were $53.26, ($0.49) and $87.50 for the years ended December 31, 1997, 1996 and 1995, respectively. The weighted average number of equivalent limited partnership units outstanding were 8,191, 9,138 and 10,161 for 1997, 1996 and 1995, respectively. 5 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations (Continued) The Fund generated funds from operations, for the purpose of determining cash available for distribution, of $325,865, $672,902 and $1,556,199 and declared distributions of $967,915, $933,278 and $1,892,377 to partners for 1997, 1996 and 1995, respectively. The distributions for 1997, 1996 and 1995 include $642,050, $260,376 and $336,178, respectively, of sales proceeds and cash available from previous years which had not been distributed. For financial statement purposes, the Fund recorded cash distributions to partners on a cash basis in the period in which they were paid. During the fourth quarter of 1996, the General Partner revised its policy regarding cash distributions so that the distributions more accurately reflected the net income of the Fund over the most recent twelve months. Analysis of Financial Condition The Fund's equipment portfolio was liquidated as of December 31, 1997. The cash position of the Fund was reviewed daily and cash was invested on a short-term basis. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this Item is submitted as a separate section of this report commencing on page F-1. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 6 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT F.L. Partnership Management, Inc.(FLPMI) is a wholly owned subsidiary of Resource Leasing, Inc., a wholly owned subsidiary of Resource America, Inc. The Directors and Executive Officers of FLPMI are: FREDDIE M. KOTEK, age 41, Chairman of the Board of Directors, President, and Chief Executive Officer of FLPMI since September 1995 and Senior Vice President of Resource America, Inc. since 1995. President of Resource Leasing, Inc. since September 1995. Executive Vice President of Resource Properties, Inc. (a wholly owned subsidiary of Resource America, Inc.) since 1993. Senior Vice President and Chief Financial Officer of Paine Webber Properties from 1990 to 1991. MICHAEL L. STAINES, age 48, Director and Secretary of FLPMI since September 1995 and Senior Vice President and Secretary of Resource America, Inc. since 1989. SCOTT F. SCHAEFFER, age 35, Director of FLPMI since September 1995 and Senior Vice President of Resource America, Inc. since 1995. Vice President-Real Estate of Resource America, Inc. and President of Resource Properties, Inc. (a wholly owned subsidiary of Resource America, Inc.) since 1992. Vice President of the Dover Group, Ltd. (a real estate investment company) from 1985 to 1992. Others: STEPHEN P. CASO, age 42, Vice President and General Counsel of FLPMI since 1992. MARIANNE T. SCHUSTER, age 39, Vice President and Controller of FLPMI since 1984. KRISTIN L. CHRISTMAN, age 30, Portfolio Manager of FLPMI since December 1995 and Equipment Brokerage Manager since 1993. 7 Item 11. EXECUTIVE COMPENSATION The following table sets forth information relating to the aggregate compensation earned by the General Partner of the Fund during the year ended December 31, 1997: Name of Individual or Capacities in Number in Group Which Served Compensation F.L. Partnership Management, Inc. General Partner $20,957(1) ======= (1) This amount does not include the General Partner's share of cash distributions made to all partners. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) As of December 31, 1997, there was no person or group known to the Fund that owned more than 5% of the Fund's outstanding securities either beneficially or of record. (b) In 1985, the General Partner contributed $1,000 to the capital of the Fund but it does not own any of the Fund's outstanding securities. No individual director or officer of F.L. Partnership Management, Inc. nor such directors or officers as a group, owns more than one percent of the Fund's outstanding securities. The General Partner owns a general partnership interest which entitles it to receive 5% of cash distributions until the Limited Partners have received an amount equal to the purchase price of their Units plus a 10% compounded Priority Return; thereafter 10%. The General Partner will also share in net income equal to the greater of its cash distributions or 1% of net income or to the extent there are losses, 1% of such losses. (c) There are no arrangements known to the Fund that would, at any subsequent date, result in a change in control of the Fund. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the year ended December 31, 1997, the Fund was charged $20,957 of management fees by the General Partner. During the year ended December 31, 1997, the General Partner received $49,790 of cash distributions. The Fund incurred $26,927 of reimbursable costs to the General Partner and its parent company for services and materials provided in connection with the administration of the Fund during 1997. 8 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) and (2). The response to this portion of Item 14 is submitted as a separate section of this report commencing on page F-1. (a) (3) and (c) Exhibits (numbered in accordance with Item 601 of Regulation S-K) Exhibit Numbers Description Page Number 3(a) & (4) Amended and Restated Agreement * of Limited Partnership (9) not applicable (10) not applicable (11) not applicable (12) not applicable (13) not applicable (18) not applicable (19) not applicable (22) not applicable (23) not applicable (24) not applicable (25) not applicable (28) not applicable * Incorporated by reference. 9 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIDELITY LEASING INCOME FUND III, L.P. A Delaware limited partnership By: F.L. PARTNERSHIP MANAGEMENT, INC. Freddie M. Kotek, Chairman By: ___________________________ Freddie M. Kotek, Chairman and President Dated March 26, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons, on behalf of the Registrant and in the capacities and on the date indicated: Signature Title Date Freddie M. Kotek ___________________________ Chairman of the Board of Directors 3-26-98 Freddie M. Kotek and President of F.L. Partnership Management, Inc. (Principal Executive Officer) Michael L. Staines ___________________________ Director of F.L. Partnership 3-26-98 Michael L. Staines Management, Inc. Marianne T. Schuster ___________________________ Vice President and Controller 3-26-98 Marianne T. Schuster of F.L. Partnership Management, Inc. (Principal Financial Officer) 10 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Pages Report of Independent Certified Public Accountants F-2 Balance Sheets as of December 31, 1997 and 1996 F-3 Statements of Operations for the years ended F-4 December 31, 1997, 1996 and 1995 Statements of Partners' Capital for the years ended F-5 December 31, 1997, 1996 and 1995 Statements of Cash Flows for the years ended F-6 December 31, 1997, 1996 and 1995 Notes to Financial Statements F-7 - F-11 All schedules have been omitted because the required information is not applicable or is included in the Financial Statements or Notes thereto. F-1 Report of Independent Certified Public Accountants The Partners Fidelity Leasing Income Fund III, L.P. We have audited the accompanying balance sheets of Fidelity Leasing Income Fund III, L.P. as of December 31, 1997 and 1996 and the related statements of operations, changes in partners' capital and cash flows for each of the three years in the period ending December 31, 1997. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fidelity Leasing Income Fund III, L.P. as of December 31, 1997 and 1996 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Grant Thornton LLP Philadelphia, Pennsylvania February 17, 1998 F-2 FIDELITY LEASING INCOME FUND III, L.P. BALANCE SHEETS ASSETS
December 31, 1997 1996 Cash and cash equivalents $ - $462,633 Accounts receivable - 27,153 Due from related parties - 1,473 Equipment under operating leases (net of accumulated depreciation of $- and $4,102,935, respectively) - 102,325 ________ _______ Total assets $ - $593,584 ======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities: Lease rents paid in advance $ - $ 19,702 Accounts payable and accrued expenses - 30,249 Due to related parties - 9,890 ________ ________ Total liabilities - 59,841 Partners' capital - 533,743 ________ ________ Total liabilities and partners' capital $ - $593,584 ======== ========
The accompanying notes are an integral part of these financial statements. F-3 FIDELITY LEASING INCOME FUND III, L.P. STATEMENTS OF OPERATIONS
For the years ended December 31, 1997 1996 1995 Income: Rentals $349,279 $ 785,705 $1,775,370 Interest 36,080 26,343 38,394 Gain on sale of equipment, net 220,793 221,231 215,441 Other 20,690 21,713 14,323 ________ __________ __________ 626,842 1,054,992 2,043,528 ________ __________ __________ Expenses: Depreciation 62,486 157,872 704,856 Write-down of equipment to net realizable value - - 141,256 General and administrative 32,300 76,299 118,098 General and administrative to related party 26,927 37,418 47,576 Management fee to related party 20,957 47,142 106,214 ________ __________ __________ 142,670 318,731 1,118,000 ________ __________ __________ Net income $484,172 $ 736,261 $ 925,528 ======== ========== ========== Net income (loss) per equivalent limited partnership unit $ 53.26 $ (0.49) $ 87.50 ======== ========== ========== Weighted average number of equivalent limited partnership units outstanding during the year 8,191 9,138 10,161 ======== ========== ==========
The accompanying notes are an integral part of these financial statements. F-4 FIDELITY LEASING INCOME FUND III, L.P. STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1997, 1996 and 1995 General Limited Partners Partner Units Amount Total _______ ___________________ _____ Balance, January 1, 1995 $ 7,154 62,215 $2,437,480 $2,444,634 Redemptions - (472) (9,959) (9,959) Cash distributions (31,706) - (2,391,965) (2,423,671) Net income 36,393 - 889,135 925,528 ________ _______ __________ __________ Balance, December 31, 1995 11,841 61,743 924,691 936,532 Redemptions - (512) (5,772) (5,772) Cash distributions (750,778) - (382,500) (1,133,278) Net income (loss) 740,778 - (4,517) 736,261 ________ _______ __________ __________ Balance, December 31, 1996 1,841 61,231 531,902 533,743 Cash distributions (49,790) (61,231) (968,125) (1,017,915) Net income 47,949 - 436,223 484,172 ________ _______ __________ __________ Balance, December 31, 1997 $ 0 0 $ 0 $ 0 ======== ======= ========== ==========
The accompanying notes are an integral part of these financial statements. F-5 FIDELITY LEASING INCOME FUND III, L.P. STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997 1996 1995 Cash flows from operating activities: Net income $ 484,172 $ 736,261 $ 925,528 __________ __________ __________ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 62,486 157,872 704,856 Write down of equipment to net realizable value - - 141,256 Gain on sale of equipment, net (220,793) (221,231) (215,441) (Increase) decrease in accounts receivable 27,153 274,601 (133,587) Increase (decrease) in lease rents paid in advance (19,702) (355,946) 261,045 Increase (decrease) in other, net (38,666) 9,508 6,499 __________ __________ __________ (189,522) (135,196) 764,628 __________ __________ __________ Net cash provided by operating activities 294,650 601,065 1,690,156 __________ __________ __________ Cash flows from investing activities: Acquisition of equipment - - (1,984) Proceeds from sale of equipment 260,632 284,599 689,640 __________ __________ __________ Net cash provided by investing activities 260,632 284,599 687,656 __________ __________ __________ Cash flows from financing activities: Distributions (1,017,915) (1,133,278) (2,423,671) Redemptions of capital - (5,772) (9,959) __________ __________ __________ Net cash used in financing activities (1,017,915) (1,139,050) (2,433,630) __________ __________ __________ Decrease in cash and cash equivalents (462,633) (253,386) (55,818) Cash and cash equivalents, beginning of year 462,633 716,019 771,837 __________ __________ __________ Cash and cash equivalents, end of year $ - $ 462,633 $ 716,019 ========== ========== ========== The accompanying notes are an integral part of these financial statements. F-6 FIDELITY LEASING INCOME FUND III, L.P. NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND DISSOLUTION Fidelity Leasing Income Fund III, L.P. (the "Fund") was formed in December 1985. The General Partner of the Fund is F.L. Partnership Management, Inc. (FLPMI), which is a wholly owned subsidiary of Resource Leasing Inc., a wholly owned subsidiary of Resource America, Inc. The Fund was managed by the General Partner. The Fund's limited partnership interests were not publicly traded. There was no market for the Fund's limited partnership interests. During 1997, the General Partner completed the dissolution process of the Fund. The remaining equipment was sold during the year and all remaining cash was distributed to partners. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Concentration of Credit Risk Financial instruments which potentially subject the Fund to concentrations of credit risk consisted principally of temporary cash investments. The Fund placed its temporary investments in bank repurchase agreements. Concentrations of credit risk with respect to accounts receivables were limited due to the dispersion of the Fund's lessees over different industries and geographies. Impairment of Long-Lived Assets Effective January 1, 1996, the Fund adopted Statement of Financial Accounting Standard (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." This standard provides guidance on when to recognize and how to measure impairment losses of long-lived assets and how to value long-lived assets to be disposed of. The adoption of SFAS No. 121 had no impact on the net income of the Fund. Use of Estimates In preparing financial statements in conformity with Generally Accepted Accounting Principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. F-7 FIDELITY LEASING INCOME FUND III, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounting for Leases The Fund's leasing operations consisted only of operating leases. The cost of the leased equipment was recorded as an asset and depreciated on a straight-line basis over its estimated useful life, up to six years. Acquisition fees associated with lease placements were allocated to equipment when purchased and depreciated as part of equipment cost. Rental income consisted primarily of monthly periodic rentals due under the terms of the leases. Generally, during the remaining terms of existing operating leases, the Fund would not recover all of the undepreciated cost and related expenses of its rental equipment and was prepared to remarket the equipment in future years. Upon sale or other disposition of assets, the cost and related accumulated depreciation was removed from the accounts and the resulting gain or loss, if any, was reflected in income. Income Taxes Federal and State income tax regulations provide that taxes on the income or benefits from losses of the Fund are reportable by the partners in their individual income tax returns. Accordingly, no provision for such taxes has been made in the accompanying financial statements. Statements of Cash Flows For purposes of the statements of cash flows, the Fund considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Net Income per Equivalent Limited Partnership Unit Net income per equivalent limited partnership unit is computed by dividing net income allocated to limited partners by the weighted average number of equivalent limited partnership units outstanding during the year. The weighted average number of equivalent units outstanding during the year is computed based on the weighted average monthly limited partners' capital account balances, converted into equivalent units at $500 per unit. Reclassification Certain amounts on the 1996 and 1995 financial statements have been reclassified to conform to the presentation in 1997. F-8 FIDELITY LEASING INCOME FUND III, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 3. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS Cash distributions (except for the period from January 1, 1992 through June 30, 1995), if any, were made quarterly as follows: 95% to the Limited Partners and 5% to the General Partner, until the Limited Partners have received an amount equal to the purchase price of their Units, plus a 10% compounded Priority Return (an amount equal to 10% compounded annually on the portion of the purchase price not previously distributed); thereafter, 90% to the Limited Partners and 10% to the General Partner. During the year ended December 31, 1996, the General Partner received cash distribu- tions of $730,646 representing the remaining portion of the 5% of cash distributions which the General Partner was entitled to receive in accordance with the Partnership Agreement for prior periods. Net Losses were allocated 99% to the Limited Partners and 1% to the General Partner. The General Partner was allocated Net Income equal to its cash distributions, but not less than 1% of Net Income, with the balance allocated to the Limited Partners. Net Income (Losses) allocated to the Limited Partners were allocated to individual limited partners based on the ratio of the daily weighted average partner's net capital account balance (after deducting related commission expense) to the total daily weighted average of the Limited Partners' net capital account balances. 4. EQUIPMENT UNDER OPERATING LEASES Equipment on lease consisted primarily of computer equipment under operating leases. A majority of the equipment was manufactured by IBM. The lessees had agreements with the manufacturer to provide maintenance for the leased equipment. In accordance with Generally Accepted Accounting Principles, the Fund writes down its rental equipment to its estimated net realizable value when the amounts are reasonably estimated and only recognizes gains upon actual sale of its rental equipment. There was no charge to write-down of equipment to net realizable value during the twelve months ended December 31, 1997 and 1996. In 1995, approximately $141,000 was charged to write-down of equipment to net realizable value. 5. RELATED PARTY TRANSACTIONS The General Partner received 6% of gross rental payments from equipment under operating leases for administrative and management services performed on behalf of the Fund. F-9 FIDELITY LEASING INCOME FUND III, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 5. RELATED PARTY TRANSACTIONS (Continued) Additionally, the General Partner and its parent company were reimbursed by the Fund for certain costs of services and materials used by or for the Fund except those items covered by the above-mentioned fees. Following is a summary of fees and costs charged by the General Partner and its parent company during the years ended December 31: 1997 1996 1995 Management fee $20,957 $47,142 $106,214 Reimbursable costs 26,927 37,418 47,576 During 1997, the Fund maintained its checking and investment accounts in Jefferson Bank, a subsidiary of JeffBanks, Inc. in which the Chairman of Resource America, Inc. serves as a director. Amounts due from related parties at December 31, 1996 represent monies due to the Fund from the General Partner and/or other affiliated funds for rentals and sales proceeds collected and not yet remitted to the Fund. Amounts due to related parties at December 31, 1996 represent monies due to the General Partner for the fees and costs mentioned above, as well as, rentals and sales proceeds collected by the Fund on behalf of other affiliated funds. 6. MAJOR CUSTOMERS For the year ended December 31, 1997, four customers accounted for approxi- mately 38%, 17%, 15% and 13% of the Fund's rental income. For the year ended December 31, 1996, two customers accounted for approximately 25% and 17% and two customers accounted for approximately 12% each of the Fund's rental income. For the year ended December 31, 1995, three customers accounted for approximately 21%, 19% and 11% of the Fund's rental income. F-10 FIDELITY LEASING INCOME FUND III, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 7. CASH DISTRIBUTIONS Below is a summary of the quarterly cash distributions made to partners during the years ended December 31:
Month of Distribution 1997 1996 1995
February $ 50,000 $ 250,000 $ 781,294 May - 254,587 973,400 August - 314,346 482,233 November 967,915 314,345 186,744 __________ __________ __________ $1,017,915 $1,133,278 $2,423,671 ========== ========== ==========
F-11 EX-27 2
5 12-MOS DEC-31-1997 DEC-31-1997 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 349,279 626,842 0 0 142,670 0 0 484,172 0 484,172 0 0 0 484,172 53.26 53.26
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