Item 1. BUSINESS
Fidelity Leasing Income Fund VIII, L.P. (the "Fund"), a Delaware limited partnership, was organized in 1990 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 that 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 which 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 which 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.
Item 2.
Item 2. PROPERTIES
The following schedules detail the type, aggregate purchase price and percentage of the various types of equipment 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
Technical Workstations and Terminals $1,074,786 62.41% Tape Storage Systems 426,714 24.78 Other 220,638 12.81 __________ ______ Totals $1,722,138 100.00% ========== ======
Direct Financing Leases: Purchase Price Percentage of Type of Equipment of Equipment Total Equipment
Technical Workstations and Terminals $1,912,760 44.54% Network Communications 1,704,047 39.68 PCB Assembly Equipment 293,687 6.84 Printers 68,531 1.59 Tape Storage Systems 7,663 0.18 Other 308,114 7.17 __________ ______ Totals $4,294,802 100.00% ========== ======
The following schedules detail the type of business, aggregate purchase price and percentage of equipment usage by industrial classification for equipment 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
Consumer Products/Retailing $ 656,670 38.13% Computers/Data Processing 646,919 37.56 Manufacturing/Refining 418,549 24.31 __________ ______ Totals $1,722,138 100.00% ========== ======
Direct Financing Leases: Purchase Price Percentage of Type of Business of Equipment Total Equipment
Consumer Products/Retailing $3,613,866 84.14% Manufacturing/Refining 338,001 7.87 Telecommunications 293,687 6.84 Diversified Financial/Banking/Insurance 49,248 1.15 __________ ______ Totals $4,294,802 100.00% ========== ======
Average Initial Term of Leases (in months): 35
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 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 952 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 VIII, L.P. had revenues of $1,051,009, $2,790,169 and $2,273,084 for the years ended December 31, 1999, 1998 and 1997, respectively. Rental income from the leasing of equipment accounted for 56%, 90% and 90% of total revenues in 1999, 1998 and 1997, respectively. The decrease in total revenues in 1999 and the increase in total revenues in 1998 was primarily attributable to the change in rental income. Rental income decreased by approximately $1,207,000 in 1999 because of equipment that terminated and sold during both 1999 and 1998. Additionally, the Fund entered into transactions in which it collected the remaining rents owed on certain leases resulting in the recognition of $712,000 of rental income during the last quarter of 1998 which also contributed to the decrease in rental income in 1999 and the increase in this account in 1998. In 1998, rental income also increased by approximately $220,000 because of equipment purchased during the year as well as rents earned on 1997 equipment purchases for which a full year of rental income was earned in 1998 and only a partial year was earned in 1997. This increase in rental income, however, was reduced by approximately $464,000 because of equipment that came off lease and was released at lower rental rates or sold. The Fund recognized a net gain on sale of equipment of $49,407, $85,228 and $142,890 for the years ended December 31, 1999, 1998 and 1997, respectively. The decrease in this account also contributed to the total decrease in income in 1999 and lowered the total increase in income in 1998. The Fund also invested in $1.9 million of direct financing leases during the year ended December 31, 1999 and $3.3 million during the year ended December 31, 1998. There were no investments made in direct financing leases in 1997. For the twelve months ended December 31, 1999 and 1998, the Fund recognized $304,000 and $128,000 of earned income on these direct financing leases which mitigated the overall decrease in revenues in 1999 and contributed to the increase in total revenues in 1998.
Expenses were $686,370, $2,696,271 and $1,890,787 for the years ended December 31, 1999, 1998 and 1997, respectively. Depreciation expense comprised 53%, 78% and 84% of total expenses during the years ended December 31, 1999, 1998 and 1997, respectively. The decrease in total expenses in 1999 and the increase in total expenses in 1998 was primarily related to the change in depreciation expense. In 1999, depreciation expense decreased because of equipment that terminated and sold. Further, in the last quarter of 1998, the Fund recorded additional depreciation of $762,000 on equipment discussed above for which the Fund entered into transactions to collect the remaining rents owed on certain leases. This additional depreciation also accounted for the decrease in depreciation expense in 1999 and the increase in depreciation expense in 1998. The changes in total expenses in 1999, 1998 and 1997 are also related to the fluctuation in write-down of equipment to net realizable value. Based upon the quarterly review of the recoverability of the undepreciated cost of rental equipment, $80,267, $246,318 and $32,282 was charged to operations to write down equipment to its estimated net realizable value during the years ended December 31, 1999, 1998 and 1997, respectively. 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, technological developments and infor- mation provided in third party publications. In accordance with Generally Accepted Accounting Principles, the Fund writes down its rental equipment to
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
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, the variation in management fee to related party resulting from the variation in rental income in 1999 and 1998 also contributed to the overall decrease in expenses during this year and the increase in expenses in 1998. The Fund also paid lower management fees of 2% of rentals on full pay-out leases. Many of the leases purchased in 1999 and 1998 were direct financing leases which meet the requirements of full pay-out leases for the purpose of calculating management fees.
The Fund's net income was $364,639, $93,898 and $382,297 for the years ended December 31, 1999, 1998 and 1997, respectively. The earnings per equiv- alent limited partnership unit, after earnings allocated to the General Partner, were $27.55, $6.87 and $28.53 based on a weighted average number of equivalent limited partnership units outstanding of 13,105, 13,312 and 13,264 for the years ended December 31, 1999, 1998 and 1997, respectively.
The Fund generated cash from operations of $760,331, $2,358,458 and $1,863,778, for the purpose of determining cash available for distribution, and distributed 24%, 8% and 11% to partners in 1999, 1998 and 1997, respec- tively, and 8%, 2% and 2% 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 began the process of dissolution during 1999. 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 continued to purchase equipment for lease with cash available from operations which was not distributed to partners. During the years ended December 31, 1998 and 1997, the Fund purchased $231,262 and $1,066,561, respectively, of equipment subject to operating leases. The Fund also invested in $1,857,519 and $3,312,383 of direct financing leases during the years ended December 31, 1999 and 1998, 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 twelve month period.
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. DISAGREEMENTS 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 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.
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, 1999:
Name of Individual or Capacities in Number in Group Which Served Compensation
F.L. Partnership Management, Inc. General Partner $57,784(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) 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 1990, 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 part- nership interest which entitles it to receive 1% of cash distributions until the Limited Partners have received an amount equal to the purchase price of their Units plus an 11% cumulative 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.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1999, the Fund was charged by the General Partner $57,784 of management fees. The General Partner will continue to receive 4% or 2% of rental payments on equipment under operating leases and full pay-out leases, respectively, for administrative and manage- ment services performed on behalf of the Fund. Full pay-out leases are noncancellable leases for which rental payments during the initial term of the lease are at least sufficient to recover the purchase price of the equip- ment, 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 the initial closing through the end of the most recent calendar quarter equal to a return for such period at a rate of 11% 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
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
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 an 11% 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 receives 1% of cash distributions until the Limited Partners have received an amount equal to the purchase price of their Units plus an 11% cumulative compounded priority return. Thereafter, the General Partner will receive 10% of cash distributions. During 1999, the General Partner received cash distributions of $2,400.
The Fund incurred $113,635 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.
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
(27) Financial Data Schedule
(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 VIII, 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)
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Certified Public Accountants
Balance Sheets as of December 31, 1999 and 1998
Statements of Operations for the years ended December 31, 1999, 1998 and 1997
Statements of Partners' Capital for the years ended December 31, 1999, 1998 and 1997
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997
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 VIII, L.P.
We have audited the accompanying balance sheets of Fidelity Leasing Income Fund VIII, L.P. as of December 31, 1999 and 1998, and the related statements 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 VIII, 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
FIDELITY LEASING INCOME FUND VIII, L.P.
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND VIII, L.P.
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND VIII, L.P.
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND VIII, L.P.
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Fidelity Leasing Income Fund VIII, L.P. (the "Fund") was formed on November 21, 1990. 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 partner- ship interests and it is unlikely that any will develop. The Fund acquires equipment, including printers, tape and disk storage devices, data communi- cations equipment, computer terminals, technical workstations and networking equipment, as well as other electronic equipment. This equipment 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.
Organization Costs
Organization costs were amortized over a five year period.
FIDELITY LEASING INCOME FUND VIII, 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 con- sists 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 accumulated 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.
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
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Fourth Quarter Adjustments (Continued)
for the year ended December 31, 1999. However, the Fund recorded an adjustment of approximately $73,000 and $18,000 or $5.48 and $1.36 per equivalent 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 an 11% compounded priority return (an amount equal to 11% 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.
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
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 11 to 36 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 $80,000, $246,000 and $32,000, 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 $3,192,000 Unguaranteed residuals 221,000 Unearned rental income (275,000) Unearned residual income (35,000) __________ $3,103,000 ==========
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 $182,000 $1,526,000 2001 51,000 1,223,000 2002 34,000 380,000 2003 - 63,000 ________ __________ $267,000 $3,192,000 ======== ==========
6. RELATED PARTY TRANSACTIONS
The General Partner receives 4% or 2% of rental payments from equipment under operating leases and full pay-out leases, respectively, for adminis- trative and management services performed on behalf of the Fund. Full pay-out leases are noncancellable leases for which the rental payments due during the initial term of the lease are at least sufficient to recover the purchase price
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. RELATED PARTY TRANSACTIONS (Continued)
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 the initial closing through the end of the most recent calendar quarter equal to a return for such period at a rate of 11% 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 an 11% 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. Following is a summary of fees and costs of services and materials charged by the General Partner and its parent company during the years ended December 31:
1999 1998 1997
Management fee $ 57,784 $113,022 $ 81,039 Reimbursable costs 113,635 145,328 124,149
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 1999, 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.
7. MAJOR CUSTOMERS
For the year ended December 31, 1999, four customers accounted for approximately 34%, 16%, 14% and 12% of the Fund's rental income. For the year ended December 31, 1998, two customers accounted for approximately 32% and 14% of the Fund's rental income. For the year ended December 31, 1997, three customers generated approximately 29%, 15% and 13% of the Fund's rental income.
FIDELITY LEASING INCOME FUND VIII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. 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 $20,000 each in January and February 2000 for each of the months ended October 31, November 30 and December 31, 1999, for an aggregate of $60,000 to all admitted partners as of October 31, November 30 and December 31, 1999.