10-K 1 flif7.txt FLIF 7 10-K 2001 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, 2001 / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to ______________ Commission file number 0-19232 Fidelity Leasing Income Fund VII, L.P. _________________________________________________________________ (Exact name of registrant as specified in its charter) Delaware 23-2581971 _________________________________________________________________ (State of Organization) (I.R.S. Employer Identification No.) 1845 Walnut Street, Suite 1000, Philadelphia, Pennsylvania 19103 _________________________________________________________________ (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, 2001 is 64,773. There is no public market for these securities. The index of Exhibits is located on page 12. 1 PART I Item 1. BUSINESS Fidelity Leasing Income Fund VII, L.P. (the "Fund"), a Delaware limited partnership, was organized in 1989 and acquires computer equipment, including printers, tape and disk storage devices, data communications equipment, com- puter terminals, technical workstations, networking equipment, as well as other electronic equipment 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 or 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 that 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) that 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, 2001, together with information concerning the users of such equipment is contained in Item 2, following. The Fund does not have any employees. All persons who work on the Fund are employees of the General Partner. 2 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, 2001: Operating Leases: Purchase Price Percentage of Type of Equipment of Equipment Total Equipment Network Communications $395,493 53.65% PCB Assembly Equipment 341,619 46.35 ________ ______ Totals $737,112 100.00% ======== ====== Direct Financing Leases: Purchase Price Percentage of Type of Equipment of Equipment Total Equipment Network Communications $ 4,496,680 38.65% Testing Equipment 3,572,201 30.70 Disk Storage Systems 2,741,140 23.55 PCB Assembly Equipment 765,117 6.58 Other 60,025 0.52 ___________ ______ Totals $11,635,163 100.00% =========== ====== 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, 2001: Operating Leases: Purchase Price Percentage of Type of Business of Equipment Total Equipment Retailing/Consumer Goods $395,493 53.65% Manufacturing/Refining 341,619 46.35 ________ ______ Totals $737,112 100.00% ======== ====== Direct Financing Leases: Purchase Price Percentage of Type of Business of Equipment Total Equipment Retailing/Consumer Goods $ 4,968,960 42.71% Manufacturing/Refining 3,786,465 32.53 Computers/Data Processing 2,666,334 22.92 Education 194,913 1.68 Diversified Financial/Banking 18,491 0.16 ___________ ______ Totals $11,635,163 100.00% =========== ====== Average Initial Term of Leases (in months): 36 3 Item 3. LEGAL PROCEEDINGS Not applicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 4 PART II 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, 2001 Limited Partnership Interests 2,326 General Partnership Interest 1 Item 6. SELECTED FINANCIAL DATA

For the Years Ended December 31, 2001 2000 1999 1998 1997 ~~1996~~ Total Income $812,406 $1,814,779 $2,293,932 $4,416,369 $4,846,809 ~~$5,778,248~~ Net Income (Loss) 350,472 639,275 279,122 (185,085) 197,895 ~~604,654~~ Distributions to Partners 600,000 600,000 80600,000 ~~560~~80,000 ~~600~~560,000 Net Income (Loss) per Equivalent Limited Partnership Unit 11.68 21.91 9.45 (6.14) 6.36 ~~19.21~~ Weighted Average Number of Equivalent Limited Partnership Units Outstanding During the Year 28,684 28,884 28,917 29,856 30,302 ~~31,096~~

December 31, 2001 2000 1999 1998 1997 Total Assets $9,690,449 $9,985,958 $10,028,870 $10,394,528 $10,620,394 Equipment under Operating Leases and Equipment Held for Sale or Lease (Net) 539,265 236,345 1,357,657 2,957,392 6,254,336 Net Investment in Direct Financing Leases 4,935,434 7,456,639 6,543,062 4,335,444 295,319 Limited Partnership Units 64,773 64,773 64,773 64,833 65,449 Limited Partners 2,326 2,317 2,316 2,314 2,309

5 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 $812,406, $1,814,779 and $2,293,932 for the years ended December 31, 2001, 2000 and 1999, respectively. Earned income from direct financing leases and rental income from the leasing of equipment accounted for 81%, 87% and 91% of total revenues in 2001, 2000 and 1999, respectively. The decrease in revenues in both 2001 and 2000 was primarily attributable to the decrease in rental in- come. In 2001 and 2000, rental income decreased by approximately $916,000 and $671,000, respectively, because of equipment under operating leases that came off lease or terminated and was sold. The decrease in earned income on direct financing leases also accounted for the overall decrease in revenues in 2001. The decrease in this account resulted from the amortization of unearned income using the interest method. However, earned income on direct financing leases increased in 2000 because of investments made in direct financing leases during 2000. The increase in this account mitigated the overall decrease in revenues during the year ended December 31, 2000. Additionally, the variation in interest income also affected the overall decrease in revenues in 2001 and 2000. Interest income increased in 2001 and decreased in 2000 because of fluctuating cash balances available for investment by the Fund as a result of investments made in direct financing leases during late 1999 and 2000. The Fund recorded a net gain on sale of equipment of $31,696, $90,945 and $25,388 in 2001, 2000 and 1999, respectively. The fluctuation in this account contri- buted to the decrease in total revenues in 2001 and served to mitigate the overall decrease in revenues in 2000. Furthermore, the fluctuation in other income also contributed to the decrease in total revenues in 2001 and reduced the overall decrease in revenues in 2000. There were no late charges on delinquent rentals collected in 2001. During the years ended December 31, 2000 and 1999, the Fund recognized approximately $28,000 and $2,000, respec- tively, of late charges on delinquent rentals collected. Approximately $16,000, $24,000 and $14,000, respectively, of transfer fees on investor account transfers were recorded for the years ended December 31, 2001, 2000 and 1999, respectively. These accounts are included in other income and accounted for the change in this account during 2001, 2000 and 1999. Expenses were $461,934, $1,175,504 and $2,014,810 for the twelve months ended December 31, 2001, 2000 and 1999, respectively. Depreciation expense comprised 20%, 67% and 72% of total expenses in 2001, 2000 and 1999, respectively. The decrease in expenses in 2001 and 2000 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 2001 and 2000. There was no write-down of equipment to net realizable value for the year ended December 31, 2001. In 2000 and 1999, approximately $6,000 and $104,000, respectively, was charged to write-down of equipment to net realizable value. Currently, the Fund's practice is to review the recover- ability 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 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 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 af- fecting the types of equipment in the portfolio in subsequent years. Addition- ally, the decrease in general and administrative expense to related party in 6 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations (Continued) 2001 and 2000 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, 2001, 2000 and 1999. Furthermore, management fee to related party decreased in 2001 and 2000 as a result of the decrease in 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, 2001 and 2000. The Fund's net income was $350,472, $639,275 and $279,122 for the years ended December 31, 2001, 2000 and 1999, respectively. The earnings per equivalent limited partnership unit, after earnings allocated to the General Partner, were $11.68, $21.91 and $9.45 based on a weighted average number of equivalent limited partnership units outstanding of 28,684, 28,884 and 28,917 for the years ended December 31, 2001, 2000 and 1999, respectively. The Fund generated cash from operations of $411,349, $1,343,483, and $1,812,604 for the purpose of determining cash available for distribution during the years ended December 31, 2001, 2000 and 1999, respectively The Fund distributed to partners $450,000 of those amounts during each of the periods from April 1 through December 31, 2001, 2000 and 1999. The Fund distributed $1,000,000, $150,000 and $150,000 of those amounts to partners during the first quarter of 2002, 2001 and 2000, respectively. 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. During the years ended December 31, 2001 and 1999, the Fund purchased $395,493 and $60,024, respectively, of equipment subject to operating leases. There was no equipment subject to operating leases purchased in 2000. Additionally, the Fund invested in $911,086, $3,369,964 and $3,522,588 of equipment under direct financing leases during the twelve months ended December 31, 2001, 2000 and 1999, respectively. The cash position of the Fund is reviewed daily and cash is invested on a short-term basis. The Fund's cash from operations is expected to continue to be adequate to cover all operating expenses and contingencies during the next fiscal year. 7 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. 8 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT In December 2001, the General Partner's Certificate of Incorporation was amended to change the name of the General Partner of the Fund from F.L. Partnership Management, Inc. to LEAF Financial Corporation (LEAF). LEAF Financial Corporation is a wholly owned subsidiary of Resource Leasing, Inc. which is a wholly owned subsidiary of Resource America, Inc. (Resource America). The Directors and Executive Officers of LEAF are: CRIT S. DEMENT, age 49, Chairman, President and Chief Executive Officer of LEAF since November 2001. President of Fidelity Leasing, Inc. and its successor, the Technology Finance Group of CitiCapital Vendor Finance from 1996 to 2001. Vice President of Marketing for Tokai Financial Services from 1987 through 1996. EDWARD E. COHEN, age 62, Director of LEAF since November 2001. Chairman of the Board of Resource America since 1990, President of Resource America since 2000 and Chief Executive Officer and a Director of Resource America since 1988. Chairman of the Managing Board of Directors of Atlas Pipeline Partners GP, LLC (a wholly owned subsidiary of Resource America that is the general partner of a publicly traded limited partnership that owns and operates natural gas pipelines) since its formation in 1999. Chairman of the Board of Directors of Brandywine Construction & Management, Inc. (a property management company) since 1994. Mr. Cohen is the father of Jonathan Z. Cohen. JONATHAN Z. COHEN, age 31, Director of LEAF since November 2001. Execu- tive Vice President of Resource America since 2001, Senior Vice President of Resource America from 1999 to 2001. Vice Chairman of the Managing Board of Atlas Pipeline Partners GP, LLC since its formation in 1999. Trustee and Secretary of RAIT Investment Trust (a publicly traded real estate investment trust) since 1997. Mr. Cohen is the son of Edward E. Cohen. MILES HERMAN, age 42, Vice President and a Director of LEAF since November 2001. Held various senior operational offices with Fidelity Leasing, Inc. and its successor from 1998 to 2001. Held several management positions in sales, marketing and operations at Tokai Financial Services from 1983 to 1998. FREDDIE M. KOTEK, age 46, Director of LEAF since 1996. Senior Vice President of Resource America since 1995. President of Resource Leasing, Inc. since 1995. MARIANNE T. SCHUSTER, age 43, Vice President and Treasurer of LEAF since 1984. 9 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, 2001: Name of Individual or Capacities in Number in Group Which Served Compensation LEAF Financial Corporation General Partner $85,279(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) 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 5,466.46 (1) Odd Lot Liquidity Fund, LLC 5,466.46 (2) Sierra Fund 4, LLC 5,466.46 (3) (1) Amount represents beneficial ownership interest through ownership of Odd Lot Liquidity Fund, LLC and Sierra Fund 4, LLC which own 2,825.90 units and 2,640.56 units, respectively, of the outstanding limited partnership units of the Fund. (2) Amount represents direct ownership by Odd Lot Liquidity Fund, LLC of 2,825.90 units and beneficial ownership of 2,640.56 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 2,640.56 units and beneficial ownership of 2,825.90 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 LEAF Financial Corporation 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. 10 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. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the year ended December 31, 2001, the Fund was charged $85,279 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, 2001, the General Partner received $6,000 of cash distributions. The Fund incurred $168,720 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 2001. 11 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. 12 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: LEAF FINANCIAL CORPORATION /s/ Crit S. DeMent By: ___________________________ Crit S. DeMent, Chairman and President Dated March 28, 2002 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/ Crit S. DeMent ____________________________ Chairman of the Board of Directors 3-28-02 Crit S. DeMent and President of LEAF Financial Corporation (Principal Executive Officer) /s/ Miles Herman ____________________________ Vice President and Director of 3-28-02 Miles Herman LEAF Financial Corporation /s/ Freddie M. Kotek ____________________________ Director of LEAF Financial Corporation 3-28-02 Freddie M. Kotek /s/ Marianne T. Schuster ____________________________ Vice President and Treasurer of 3-28-02 Marianne T. Schuster LEAF Financial Corporation (Principal Financial Officer) 13 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Pages Report of Independent Certified Public Accountants F-2 Balance Sheets as of December 31, 2001 and 2000 F-3 Statements of Operations for the years ended December 31, 2001, 2000 and 1999 F-4 Statements of Partners' Capital for the years ended December 31, 2001, 2000 and 1999 F-5 Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 F-6 Notes to Financial Statements F-7 - F-13 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 VII, L.P. We have audited the accompanying balance sheets of Fidelity Leasing Income Fund VII, L.P. as of December 31, 2001 and 2000, and the related state- ments of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 2001. 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, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. Grant Thornton LLP Philadelphia, Pennsylvania February 14, 2002 F-2 FIDELITY LEASING INCOME FUND VII, L.P. BALANCE SHEETS ASSETS

December 31, 2001 2000 ~~1999~~ Cash and cash equivalents $23,~~055~~877,~~814~~912 $ 12,~~769~~055,~~740~~814 Accounts receivable 254,207 234,535 ~~273,492~~ Due from related parties 83,631 2,625 84Net investment in direct financing leases 4,~~919~~935,434 7,456,639 Equipment under operating leases (net of accumulated depreciation of $~~491~~286,~~659~~489 and $4491,~~899~~659,~~775,~~ respectively) 450,623 147,703 ~~1,202,004 Net investment in direct financing leases 7,456,639 6,543,062~~ Equipment held for sale or lease 88,642 ~~155~~88,~~653~~642 __________ ~~___________~~__________ Total assets $9,~~985~~690,~~958~~449 $109,~~028~~985,~~870~~958 ========== =========== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Lease rents paid in advance $ 1364,~~930~~745 $ ~~122~~13,~~331~~930 Accounts payable and accrued expenses 38,433 67,642 ~~49,370~~ Due to related parties 23,~~353~~591 1523,~~411~~353 Security deposits ~~67,825~~- 67,825 __________ ~~___________~~__________ Total liabilities 126,769 172,750 ~~254,937~~ Partners' capital 9,~~813~~563,~~208~~680 9,~~773~~813,~~933~~208 __________ ~~___________~~__________ Total liabilities and partners' capital $9,~~985~~690,~~958~~449 $109,~~028~~985,~~870~~958 ========== ===========

The accompanying notes are an integral part of these financial statements. F-3 FIDELITY LEASING INCOME FUND VII, L.P. STATEMENTS OF OPERATIONS

For the years ended December 31, 2001 2000 1999 ~~1998~~ Income: ~~Rentals $1,027,197 $1,698,640 $3,909,010~~ Earned income on direct financing leases $546,365 $ 560,405 $ 396,265 ~~288~~Rentals 110,~~680~~711 1,027,197 1,698,640 Interest 107,671 83,727 156,774 ~~84,274~~ Gain on sale of equipment, net 31,696 90,945 25,388 ~~116,049~~ Other 15,963 52,505 16,865 ~~18,356~~________ __________ __________ ~~__________~~812,406 1,814,779 2,293,932 ~~4,416,369~~________ __________ __________ ~~__________~~ Expenses: Depreciation 92,573 788,886 1,454,819 ~~3,625,790~~ Write-down of equipment to net realizable value - 6,267 104,051 ~~340,058~~ General and administrative 115,362 100,429 111,692 ~~137,927~~ General and administrative to related party 168,720 171,465 231,221 ~~278,762~~ Management fee to related party 85,279 108,457 113,027 ~~218,917~~________ __________ __________ ~~__________~~461,934 1,175,504 2,014,810 ~~4,601,454~~________ __________ __________ ~~__________~~ Net income ~~(loss)~~$350,472 $ 639,275 $ 279,122 ~~$ (185,085)~~ ========== ========== ========== Net income ~~(loss)~~ per equivalent limited partnership unit $ 11.68 $ 21.91 $ 9.45 ~~$ (6.14)~~ ========== ========== ========== Weighted average number of equivalent limited partnership units outstanding during the year 28,684 28,884 28,917 ~~29,856~~ ========== ========== ==========

The accompanying notes are an integral part of these financial statements. F-4 FIDELITY LEASING INCOME FUND VII, L.P. STATEMENT OF PARTNERS' CAPITAL

For the years ended December 31, ~~2000~~2001, ~~1999~~2000 and ~~1998~~1999 General Limited Partners Partner Units Amount Total ________ ___________________ _____ Balance, January 1, ~~1998~~1999 $(3033,~~664~~315) 6564,~~449~~833 $10,~~399~~137,~~498~~064 $10,~~368~~103,~~834~~749 ~~Cash~~Redemptions ~~distributions~~- (~~800~~60) - (798,~~200~~938) (808,~~000~~938) ~~Net~~Cash ~~loss~~distributions (16,~~851~~000) - (~~183~~594,~~234~~000) (~~185~~600,~~085~~000) Net income 6,000 - 273,122 279,122 ________ ______ ___________ ___________ Balance, December 31, ~~1998~~1999 (33,315) 6564,~~449~~773 109,~~137~~807,~~064~~248 109,~~103~~773,~~749~~933 ~~Redemptions - (60) (8,938) (8,938)~~ Cash distributions (6,000) - (594,000) (600,000) Net income 6,~~000~~393 - ~~273~~632,~~122~~882 ~~279~~639,~~122~~275 ________ ______ ___________ ___________ Balance, December 31, ~~1999~~2000 (3332,~~315~~922) 6564,~~389~~773 9,~~807~~846,~~248~~130 9,~~773~~813,~~933~~208 Cash distributions (6,000) - (594,000) (600,000) Net income 615,~~393~~500 - ~~632~~334,~~882~~972 ~~639~~350,~~275~~472 ________ ______ ___________ ___________ Balance, December 31, ~~2000~~2001 $(3223,~~922~~422) 6564,~~389~~773 $ 9,~~846~~587,~~130~~102 $ 9,~~813~~563,~~208~~680 ======== ====== =========== ===========

The accompanying notes are an integral part of this financial statement. F-5 FIDELITY LEASING INCOME FUND VII, L.P. STATEMENTS OF CASH FLOWS

For the years ended December 31, 2001 2000 1999 ~~1998~~ Cash flows from operating activities: Net income ~~(loss)~~$ 350,472 $ 639,275 $ 279,122 ~~$ (185,085)~~ __________ __________ __________ Adjustments to reconcile net income ~~(loss)~~ to net cash provided by operating activities: Depreciation 92,573 788,886 1,454,819 ~~3,625,790~~ Write-down of equipment to net realizable value - 6,267 104,051 ~~340,058 (~~Gain) ~~loss~~ on sale of equipment, net (31,696) (90,945) (25,388) (~~116,049) (~~Increase) decrease in accounts receivable (19,672) 38,957 (203,882) ~~371,220~~ (Increase) decrease in due from related parties (81,006) 82,294 (20,000) ~~379,978~~ Increase (decrease) in lease rents paid in advance 50,815 (108,401) 91,656 ~~(70,629)~~ Increase (decrease) in accounts payable and accrued expenses (29,209) 18,272 (14,399) ~~(37,116)~~ Increase (decrease) in due to related parties 238 7,942 (113,099) ~~86,189~~ Increase (decrease) in ~~other,~~security ~~net~~deposits ~~- -~~ (767,~~050~~825) - - __________ __________ __________ (85,782) 743,272 1,273,758 ~~4,572,391~~ __________ __________ __________ Net cash provided by operating activities 264,690 1,382,547 1,552,880 ~~4,387,306~~ __________ __________ __________ Cash flows from investing activities: Acquisition of equipment (395,493) - (60,024) ~~(999,749)~~ Investment in direct financing leases (911,086) (3,369,964) (3,522,588) ~~(6,066,963)~~ Proceeds from direct financing leases, net of earned income 3,432,291 2,516,412 1,386,595 ~~2,026,837~~ Proceeds from sale of equipment 31,696 357,079 54,652 ~~446,895 Security deposits received - - 67,825~~ __________ __________ __________ Net cash provided by (used in) investing activities 2,157,408 (496,473) (2,141,365) ~~(4,525,155)~~ __________ __________ __________ Cash flows from financing activities: Distributions (600,000) (600,000) (80600,000) Redemptions of capital - - (8,938) -__________ ~~_________~~ __________ __________ Net cash used in financing activities (600,000) (~~608~~600,~~938~~000) (80608,~~000~~938) __________ __________ __________ Increase (decrease) in cash and cash equivalents 1,822,098 286,074 (1,197,423) ~~(217,849)~~ Cash and cash equivalents, beginning of year 2,055,814 1,769,740 2,967,163 ~~3,185,012~~ __________ __________ __________ Cash and cash equivalents, end of year $3,877,912 $2,055,814 $1,769,740 ~~$2,967,163~~ ========== ========== ==========

The accompanying notes are an integral part of these financial statements. F-6 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. In December 2001, the General Partner's Certificate of Incorporation was amended to change the name of the General Partner of the Fund from F.L. Partnership Management, Inc. to LEAF Financial Corporation (LEAF). LEAF Financial Corporation is a wholly owned subsidiary of Resource Leasing, Inc., which is a wholly owned subsidiary of Resource America, Inc. (Resource Amer- ica). The Fund is managed by the General Partner. The Fund's limited partner- ship 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 storage devices, data communications equipment, computer terminals, technical workstations and net- working 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 that 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. F-7 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 direct financing and operating leases. 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. 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 accumulated de- preciation are removed from the accounts and the resulting gain or loss, if any, is 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. 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. F-8 FIDELITY LEASING INCOME FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 3. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS (Continued) 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 The Fund's direct financing leases are for initial lease terms ranging from 7 to 60 months. 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 approximate net investment in direct financing leases as of Decem- ber 31, 2001 is as follows: Minimum lease payments to be received $4,076,000 Unguaranteed residuals 1,181,000 Unearned rental income (252,000) Unearned residual income (70,000) __________ $4,935,000 ========== 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 47 to 59 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, there was no charge to write-down of equipment to net realizable value for the year ended December 31, 2001. For the years ended December 31, 2000 and 1999, approxi- mately $6,000 and $104,000, 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. F-9 FIDELITY LEASING INCOME FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 4. EQUIPMENT LEASED (Continued) The future approximate minimum rentals to be received on noncancellable direct financing and operating leases as of December 31 are as follows: Direct Financing Operating 2002 $3,091,000 $192,000 2003 795,000 129,000 2004 190,000 - __________ ________ $4,076,000 $321,000 ========== ======== 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. 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: 2001 2000 1999 Management fee $ 85,279 $108,457 $113,027 Reimbursable costs 168,720 171,465 231,221 During 2001, the Fund transferred its checking and investment accounts from Hudson United Bank to The Bancorp.com, Inc. (TBI). The son and the spouse of the Chairman of Resource America, Inc. are the Chairman and Chief Executive Officer, respectively, of TBI. The Fund maintains a normal banking relation- ship with TBI. Amounts due from related parties at December 31, 2001 and 2000 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. F-10 FIDELITY LEASING INCOME FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 5. RELATED PARTY TRANSACTIONS (Continued) Amounts due to related parties at December 31, 2001 and 2000 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, 2001, three customers accounted for approximately 57%, 16% and 13% of the Fund's rental income. For the year ended December 31, 2000, one customer accounted for approximately 48% of the Fund's rental income and two customers accounted for approximately 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. 7. CASH DISTRIBUTIONS Below is a summary of the cash distributions paid to partners during the years ended December 31: For the Quarter Ended 2001 2000 1999

March $150,000 $150,000 $80150,000 June 150,000 150,000 200,000 - September 200,000 150,000 150,000 - December 100,000 150,000 100,000 -________ ________ ________ ~~_______~~ $600,000 $600,000 $80600,000 ======== ======== ========

In addition, the General Partner declared and paid two cash distri- butions of $50,000 each in January and February 2002 for the months ended October 31 and November 30, 2001, respectively, to all admitted partners as of October 31 and November 30, 2001. The General Partner also paid a cash distribution of $1,000,000 in February 2002 for the month ended December 31, 2001 to all admitted partners as of December 31, 2001. F-11 FIDELITY LEASING INCOME FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 8. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) The following table summarizes the results of operations on a quarterly basis during 2001 and 2000: 2001 ---------------------------------------- Fourth Third Second First Quarter Quarter Quarter Quarter ------- ------- ------- ------- Income: Earned income on direct financing leases $113,788 $129,528 $148,779 $154,270 Rentals 34,691 23,139 27,377 25,504 Interest 30,041 32,006 25,109 20,515 Gain on sale of equipment, net 1 - 110 31,585 Other 4,432 7,725 2,166 1,640 ________ ________ ________ ________ Total income 182,953 192,398 203,541 233,514 ________ ________ ________ ________ Expenses: Depreciation 37,268 18,435 18,435 18,435 General and administrative 23,434 33,668 34,429 23,831 General and administrative to related party 48,620 44,971 36,722 38,407 Management fee to related party 22,280 21,600 21,181 20,218 ________ ________ ________ ________ Total expenses 131,602 118,674 110,767 100,891 ________ ________ ________ ________ Net income $ 51,351 $ 73,724 $ 92,774 $132,623 ======== ======== ======== ======== Net income per equivalent limited partnership unit $ 1.45 $ 2.53 $ 3.17 $ 4.53 ======== ======== ======== ========

F-12 FIDELITY LEASING INCOME FUND VII, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 8. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) (Continued) 2000 ---------------------------------------- Fourth Third Second First Quarter Quarter Quarter Quarter ------- ------- ------- ------- Income: Earned income on direct financing leases $157,742 $134,736 $143,194 $124,733 Rentals 91,024 236,100 299,539 400,534 Interest 16,974 22,806 19,216 24,731 Gain on sale of equipment, net 2,045 - 38,093 54,948 Other 2,924 21,368 17,876 10,337 ________ ________ ________ ________ Total income 270,709 415,010 517,918 615,283 ________ ________ ________ ________ Expenses: Depreciation 61,752 167,857 242,350 316,927 Write-down of equipment to net realizable value - - - 6,267 General and administrative 25,163 23,011 14,077 38,178 General and administrative to related party 51,924 41,957 37,015 40,569 Management fee to related party 21,959 26,111 29,497 30,890 Loss on sale of equipment, net - 4,141 - - ________ ________ ________ ________ Total expenses 160,798 263,077 322,939 432,831 ________ ________ ________ ________ Net income $109,911 $151,933 $194,979 $182,452 ======== ======== ======== ======== Net income per equivalent limited partnership unit $ 3.75 $ 5.20 $ 6.69 $ 6.27 ======== ======== ======== ========

F-13

Filing Compare · FIDELITY LEASING INCOME FUND VII L P