ITEM 1. BUSINESS GENERAL The Company provides a broad range of integrated management services, expense management programs and mortgage banking services to more than 3,000 clients, including many of the world's largest corporations, as well as government agencies and affinity groups. Its primary business service segments consist of vehicle management, real estate and mortgage banking. Information as to revenues, operating income and identifiable assets by business segment is included in the Business Segments note in the Notes to Consolidated Financial Statements. As of June 30, 1995, the Company and its subsidiaries had approximately 5,000 employees. VEHICLE MANAGEMENT SERVICES Vehicle management services consist primarily of the management, purchase, leasing and remarketing of vehicles for corporate clients and government agencies, including fuel and cost management programs and other fee-based services for clients' vehicle fleets. FLEET MANAGEMENT SERVICES The Company provides fully integrated vehicle management and leasing programs through PHH Vehicle Management Services Corporation and other vehicle management services subsidiaries. These programs were developed to address the needs of clients using cars and trucks and consist of managerial, leasing and advisory services, aimed at effectively managing the cost of operating their vehicles and improving the productivity within their organizations. The Company's advisory services for automobile fleet management programs are primarily for cars, vans and light-duty trucks. They include recommendations on the makes and models of vehicles and options best suited to the client's needs, the determination of persons eligible for operating their vehicles, the method of reimbursing their employees for actual expenses, the care and maintenance of their vehicles and the personal use of company-provided vehicles. Managerial services for automobile fleet programs include purchasing automobiles, arranging for their delivery through new car dealers located throughout North America, primarily the United States and Canada, the United Kingdom, the Republic of Ireland and Germany, complying with various local registration, title, tax and insurance requirements, pursuing warranty claims with automobile manufacturers and remarketing used vehicles at replacement time. The Company offers similar programs and services for medium- and heavy-duty truck fleets. Advisory services offered include the determination of the vehicle specifications, makes, models and equipment best suited to perform the functions required by the client. Managerial services include purchasing new trucks, trailers, truck bodies and equipment from manufacturers and franchised dealers, the performance of title, registration, tax and insurance functions, arranging for them to be titled, licensed and delivered to locations designated by clients, verifying invoices and remarketing used vehicles at replacement time. The Company offers various leasing plans for its vehicle leasing programs. Under these plans, the Company provides for the financing primarily through the issuance of commercial paper and medium-term notes and through unsecured borrowings under revolving credit agreements and bank lines of credit. See the Liabilities Under Management Programs note in Notes to Consolidated Financial Statements. The Company leases vehicles for minimum lease terms of twelve months or more under either direct financing or operating lease agreements. The Company's experience indicates that the full term of the leases may vary considerably due to extensions beyond the minimum lease term. Under the direct financing lease agreements, resale of the vehicles upon termination of the lease is generally for the account of the lessee. The Company has two distinct types of operating leases. Under one type, the open-end operating lease, resale of the vehicles upon termination of the lease is for the account of the lessee except for a minimum residual value which the Company has guaranteed. The Company's experience has been that vehicles under this type of lease agreement have consistently been sold for amounts exceeding residual value guarantees. Under the other type of operating lease, the closed-end operating lease, resale of the vehicle on termination of the lease is for the account of the Company.
The Company's fleet management services may be the same whether the client owns or leases the vehicles. In either case, the client generally operates the vehicles on a net basis, paying all the actual costs incidental to their operation, including gasoline, oil, repairs, tires, depreciation, vehicle licenses, insurance and taxes. The fee charged by the Company for its services is based upon either a percentage of the original cost of the vehicle or a stated management fee and, in the case of a leasing client, includes the interest cost incurred in financing the vehicle. FUEL AND COST MANAGEMENT PROGRAMS The Company offers fuel and cost management programs to corporations and government agencies for the control of automotive business expenses in each of the United States, Canada, United Kingdom, Republic of Ireland and Germany. Through a service card and billing service, a client's employees are able to purchase various products and services such as gasoline, tires, batteries, glass and maintenance services at prescribed network providers. The Company also provides a series of safety and accident management related programs, statistical control reports detailing expenses related to the general operation of vehicles, and a program which monitors and controls the type and cost of vehicle maintenance for individual automobiles. The Company also provides fuel and cost management programs and a centralized billing service for companies operating truck fleets in each of the United States, Canada, United Kingdom, Republic of Ireland and Germany. Drivers of the clients' trucks are furnished with courtesy cards together with a directory listing the names of strategically located truck stops and service garages which participate in this program. Service fees are earned for billing, collection and record keeping services and for assuming credit risk. These fees are paid by the truck stop or service garages and/or the fleet operator and are based upon the total dollar amount of fuel purchased or the number of transactions processed. COMPETITIVE CONDITIONS The principal methods of competition within vehicle management services are quality of service, range of product and service offering and price. In the United States and Canada, an estimated 50% of the market for vehicle management services is served by third-party providers. There are 5 major providers of such services in North America, as well as an estimated several hundred local and regional competitors. The Company is the second largest provider of comprehensive vehicle management services in North America. In the United Kingdom, the portion of the fuel card services and vehicle management services markets served by third-party providers is an estimated 37% and 35%, respectively. The Company is the market leader among the 4 major nationwide providers of fuel card services, and the 7 major nationwide providers of vehicle management services. Numerous local and regional competitors serve each such market element. The following sets forth certain statistics concerning automobiles, vans, light, medium and heavy-duty trucks for which the Company provides managerial, leasing and/or advisory services primarily in the United States, Canada, the United Kingdom, the Republic of Ireland and Germany at the end of the fiscal years shown:
REAL ESTATE SERVICES The Company provides employee real estate services principally to large international corporations, government agencies, affinity groups and financial institutions in the United States, Canada, the United Kingdom and the Republic of Ireland through PHH Real Estate Services Corporation and other real estate services subsidiaries. Principal services consist of counseling transferred employees of clients and the purchase, management and resale of
their homes. The Company's real estate services offer clients the opportunity to reduce employee relocation costs and facilitate employee relocation. The Company may pay a transferring employee his/her equity in a home based upon a value determined by independent appraisals or based on a contract to sell which has been agreed with the employee. In most circumstances the employee's mortgage is retired concurrently with the purchase of the equity; otherwise the Company accepts the administrative responsibility for making payments on any mortgages. The corporate client normally pays the Company an advance billing to cover costs to be incurred during the period the home is held for resale, including debt service on any existing mortgage. These costs are paid by the Company and, after ultimate resale, a settlement is made with the corporate client reconciling the advance billing and the expense payments. Under the terms of the client contracts, the Company is generally protected against losses from changes in market conditions. Funds to finance the purchase of homes are provided primarily through the issuance of commercial paper and medium-term notes and through unsecured borrowings under revolving credit agreements and bank lines of credit, or may be provided by the client. Interest costs are billed directly to the Company's clients. See the Liabilities Under Management Programs note in Notes to Consolidated Financial Statements. The Company's real estate services subsidiaries also offer employee programs which provide group move planning and implementation, home marketing assistance, property management, household goods movement, destination services and asset management for financial institutions and government agencies. Through its PHH Fantus Corporation subsidiary, the Company provides strategic facilities planning services, site selection and location consulting for corporate clients and economic development consulting for state and local government agencies. Additionally, the Company provides consulting services in the areas of general business strategy, marketing and management for transnational clients. COMPETITIVE CONDITIONS The principal methods of competition within real estate services are quality of service, range of product and service offering and price. In the United States and Canada, and the United Kingdom, an estimated 25% and 50%, respectively, of the market for real estate services is served by third-party providers. In the United States there are 5 major national providers of such services and in each of Canada and the United Kingdom there are 4 major national providers. In addition, there are an estimated several dozen local, regional and smaller national competitors in each such country. The Company is the market leader in the United States and Canada, and third in the United Kingdom. The following sets forth certain statistics concerning real estate services in the United States, Canada and the United Kingdom for the fiscal years shown:
(1) Revenues for real estate services in the United States are significantly determined based on the value of homes sold, while revenues for the United Kingdom and Canadian segments are not related to the value of homes sold; therefore, this table only includes the average value of U.S. homes sold.
MORTGAGE BANKING SERVICES The Company provides U.S. residential mortgage banking services through PHH Mortgage Services Corporation. These services consist of the origination, sale and servicing of residential first mortgage loans. A variety of first mortgage products are marketed to consumers through relationships with corporations, affinity groups, credit unions, real estate brokerage firms and other mortgage banks. PHH Mortgage Services is a centralized mortgage lender conducting business in all 50 states. It utilizes its computer system and an extensive telemarketing operation to allow the consumer to complete the entire mortgage transaction over the telephone. Through its own network of appraisers, title companies and closing attorneys, the Company can effectively administer its products and services anywhere in the nation. The mortgage unit customarily sells all mortgages it originates to investors (which include a variety of institutional investors) either as individual loans, as mortgage-backed securities or as participation certificates issued or guaranteed by the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), or the Government National Mortgage Association (GNMA) while generally retaining mortgage servicing rights. The guarantees provided by FNMA and FHLMC are on a non-recourse basis to the Company. Guarantees provided by GNMA are to the extent recoverable from certain government insurance programs. Mortgage servicing consists of collecting loan payments, remitting principal and interest payments to investors, holding escrow funds for payment of mortgage-related expenses such as taxes and insurance, and otherwise administering the Company's mortgage loan servicing portfolio. COMPETITIVE CONDITIONS The principal methods of competition in mortgage banking services are quality of service, range of product and service offering and price. There are an estimated 20,000 national, regional or local providers of mortgage banking services across the United States. The Company ranked nineteenth among loan originators for both the calendar year 1994 and the three months ended March 31, 1995. The following sets forth certain statistics concerning mortgage banking services for the fiscal years shown:
SIGNIFICANT CUSTOMERS No customer purchased services totaling 10% or more of consolidated revenues in 1995, 1994, or 1993. ITEM 2.

ITEM 2. PROPERTIES The corporate offices of the Company are located at 11333 McCormick Road, Hunt Valley, Maryland, in an eight-story building which is owned by the Company and contains approximately 163,000 square feet of office space. The offices of PHH Vehicle Management Services North American operations are located throughout the US and Canada. Primary office facilities are located in a six-story, 200,000-square foot office building in Hunt Valley, Maryland, leased until September 2003; and offices in Mississauga, Canada, having 31,600 square feet, leased until February 2003. Other facilities include office space totaling 17,700 square feet in five cities leased as full-service branch offices for fleet management activities for various terms to April 2003; two dealerships, one located in Williamsburg, Virginia, having 101,000 square feet, leased until March 1998 and the other in Edenton, North Carolina, having 337,100 square feet, leased until December 1998; offices in Fort Worth, Texas, having 63,000 square feet, leased until March 2002; and regional offices located in Montreal, Calgary, Vancouver, Mississauga & Quebec, Canada, having a total of 43,100 square feet, leased for various terms to December 2002. The offices of PHH Real Estate Services North American operations are located throughout the US and Canada. Primary office facilities are located in offices located in Wilton, Connecticut, having 42,000 square feet, leased until January 1996 and offices in Danbury, Connecticut, having 92,500 square feet, leased until January 2000. Other facilities include office space totaling
54,000 square feet in Oak Brook, Illinois leased until April 2003; 23,350 square feet in Concord, California leased until October 1998; 42,300 square feet in Dallas, Texas leased until November 1998; 59,000 square feet in ten other cities for various terms to June 2002; and office space totaling 26,500 square feet in Toronto, Montreal, Vancouver, Ottawa and Nova Scotia, leased for various terms to September 1999. The offices of PHH Fantus are located in Florham Park, New Jersey, in offices having 14,200 square feet, leased until May 1996 and offices in Chicago, Illinois, having 8,800 square feet, leased until September 2004. The offices of PHH Mortgage Services are located primarily in a 127,000-square foot building in Mount Laurel, New Jersey, which is owned by the Company; and offices in Englewood, Colorado, having 27,900 square feet, leased until June 1997. The offices of Vehicle Management Services and Real Estate Services operations located in the United Kingdom and Europe are as follows: a 129,000-square foot building which is owned by the Company located in Swindon, United Kingdom; and field offices having 30,400 square feet located in Swindon and Manchester, United Kingdom; Munich, Germany; and Dublin, Ireland, are leased for various terms to February 2016. The Company considers that its properties are generally in good condition and well maintained and are generally suitable and adequate to carry on the Company's business. ITEM 3.

ITEM 3. LEGAL PROCEEDINGS The Company is party to various litigation arising in the ordinary course of business and is plaintiff in several collection matters which are not considered material either individually or in the aggregate. ITEM 4.

ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended April 30, 1995.
PART II ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's common stock is publicly traded on the New York Stock Exchange under the symbol "PHH ". The common stock is entitled to dividends when and as declared by the Board of Directors. The payment of future dividends will depend upon earnings, the financial condition of the Company and other relevant factors. At April 30, 1995, there were 1,902 holders of common stock. The dividends and high and low prices for each quarter during the Company's 1995 and 1994 fiscal years were as follows:
ITEM 6.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS RESULTS OF OPERATIONS
All comparisons within the following discussion are to the previous year, unless otherwise stated.
Consolidated net income increased 11% to $71.7 million in fiscal 1995 while net income per share increased 14% to $4.15. Increased income in the vehicle management services and real estate services business segments was partially offset by a decrease in the mortgage banking services business segment. In fiscal 1994, net income increased 14% to $64.6 million and net income per share increased 12% to $3.64, reflecting increases in the mortgage banking services and vehicle management services business segments partially offset by a decrease in the real estate services business segment.
Consolidated revenues decreased 3% to $2,071 million in fiscal 1995 and increased 6% to $2,135 million in fiscal 1994.
The provision for income taxes reflects effective tax rates of 41% in both fiscal 1995 and 1994 and 40% in fiscal 1993. The fiscal 1995 and 1994 rates reflect the increase in the US federal corporate income tax rate to 35% from 34%.
The Company incurs and pays certain costs on behalf of its clients which include payments to third parties as a component of its service delivery. These direct costs are billed to clients and recognized as both revenue and expense. Additionally, certain other direct costs represent depreciation on vehicles under operating leases and amortization of mortgage servicing fees. Management analyzes its business results in terms of net revenue and total operating expenses. Net revenue, as defined by the Company, includes revenue earned reduced by the direct costs described above and also reduced by related interest required to fund assets. Operating expenses are all other costs incurred in delivering services to clients.
Net revenues were $518.3 million in fiscal 1995, a decrease of 4% from the prior year, while operating income increased 10% to $121.3 million. Vehicle management services and real estate services increased in both net revenue and operating income offset by a decline in mortgage banking services. In fiscal 1994 net revenue increased 9% to $542.1 million due to increases in each business segment, while operating income increased 17% to $109.8 million due to increases in both vehicle management services and mortgage banking services offset slightly by a decline in real estate services. The following discussion is an analysis by business segment for net revenue and operating income.
Vehicle Management Services
Vehicle management services are offered to corporations and government agencies to assist them in effectively managing their vehicle fleet costs, reducing in-house administrative costs and enhancing driver productivity. Asset- based services generally require an investment by the Company and include new vehicle purchasing, open- and closed-end leasing, and used vehicle marketing. Fee-based services include maintenance management programs, expense reporting, fuel management programs, accident and safety programs and other driver services for managing clients' vehicle fleets.
Fiscal 1995 Results
Net revenues for vehicle management services represent revenues earned and billed to clients reduced by depreciation on vehicles under operating leases and related interest. Total net revenues for this segment increased 2% to $240.1 million. Net revenues derived from asset-based products decreased 2% to $137.5 million due to a slight decrease in the number of leased vehicles under management and a reduction in revenue due to the benefit in the prior year of certain vehicle manufacturer incentive programs. The decrease in net revenues was somewhat offset by an increase in management fees per vehicle resulting from a higher average cost of vehicles managed; the effect of interest received from a US federal income tax refund attributable to this segment; as well as the results of a favorable US and UK resale market for disposition of vehicles under closed-end operating leases. Net revenue derived from fee-based services increased 9% to $102.6 million in fiscal 1995. The increase was due to growth in fuel management programs reflecting increased market penetration in the US and UK and increased fuel prices in the UK; growth in accident management programs, primarily in the UK; and growth in other driver services in North America and the UK.
Vehicle management services operating income increased 20% to $55.7 million in fiscal 1995. This was due to the increase in net revenue described above as well as an overall reduction in operating expenses. Cost reductions were achieved primarily in the area of information technology, slightly offset by one-time costs associated with office space consolidation, other costs incurred to integrate our US and Canadian operations and higher operating expenses in support of volume growth in fee-based services.
The Company's profitability from vehicle management services is affected by the number of vehicles managed and related services provided for clients. Therefore, profitability can be negatively affected by the general economy as corporate clients exercise a higher degree of fiscal caution by decreasing the size of their vehicle fleets or by extending the service period of existing fleet vehicles. Conversely, operating results are positively affected
as clients increasingly choose to outsource their vehicle management service operations. Results can also be enhanced as the Company expands into new markets, increases its product diversity, broadens its client base and continues its productivity and quality improvement efforts.
Fiscal 1994 Results
Total vehicle management services net revenues increased 3% to $234.8 million. Net revenues derived from asset-based products increased 7% to $140.4 million. This resulted from higher revenues received from manufacturers for vehicle purchases and the benefit of certain vehicle manufacturer incentive programs; increased management fees received due to an increase in the average cost of vehicles managed; as well as the results of a favorable US and UK resale market for disposition of vehicles under closed-end operating leases. There was a slightly offsetting decrease due to a reduced number of vehicles purchased. Net revenue derived from fee-based services decreased 3% to $94.4 million in fiscal 1994. The decrease resulted from a reduction in fuel management programs slightly offset by growth in maintenance management programs in the US and other driver services.
Vehicle management services operating income increased 9% to $46.2 million in fiscal 1994. The increase primarily was due to increases in net revenue described above slightly offset by an increase in operating expenses. Operating expenses increased primarily due to costs related to information technology.
Real Estate Services
Real estate services primarily consist of the purchase, management and resale of homes for transferred employees of corporate clients, government agencies and members of affinity group clients. Asset-based services are defined as relocation services involving the purchase and resale of a home. Fee-based services include assistance in selecting homes in destination locations, marketing homes, moving household goods, property disposition services to financial institutions and other consulting services.
Fiscal 1995 Results
Real estate services net revenues are those earned and billed to clients reduced by direct costs paid on behalf of clients and related interest. Total real estate services net revenues increased 2% to $188.9 million. Asset-based net revenues decreased 6% to $109.4 million. The decrease was primarily due to a reduction in margins reflecting a shift in product mix to more diversified, lower-priced products in response to client demand and to meet clients' changing relocation benefits offered to their transferring employees; a reduction in the number of transferee homes sold; and a lower level of funding provided to clients for equity advances. Asset-based net revenues were affected positively by an increase in the average value of transferee homes sold in the US. Fee- based net revenues increased 15% to $79.6 million primarily due to increased levels of residential properties managed for financial institutions, household goods moves and home finding services for relocating employees and affinity group members.
Real estate services operating income increased 64% to $35.2 million. The increase was due to improvements in net revenues described above and, to a larger extent, a 6% reduction in operating expenses resulting from productivity improvements; a reduction in cost structure corresponding to the changing product mix for relocation services on a global basis; and a decrease in costs associated with the integration of an acquisition in Canada in the prior year.
The Company is generally not at risk on its carrying value of homes should there be a downturn in the housing market. Management anticipates its clients will continue to reassess their relocation plans as part of cost control measures, authorizing fewer home purchase transactions and utilizing a greater portion of fee-based real estate services. At the same time, operating results should be affected positively as clients increasingly choose to outsource their real estate services and as the Company expands into new markets, enhances its product diversity, broadens its client base and continues its productivity and quality improvement efforts.
Fiscal 1994 Results
Real estate services net revenues increased 2% to $185.2 million. Asset- based net revenues decreased 8% to $116.2 million primarily due to a reduction in margins reflecting a shift to more diversified, lower-priced products in response to client demand as well as a lower level of funding provided to clients for equity advances. Asset-based net revenues were affected positively by an increase in the average value of transferee homes sold in the US. Fee- based net revenues increased 28% to $69.0 million primarily due to volume increases in home finding services for relocating employees and affinity groups, increases in home marketing and household goods moves for relocating employees, as well as the positive effect of the Company's acquisition of a relocation services operation in Canada.
In fiscal 1994, operating income decreased 19% to $21.5 million. The decrease was due to the overall increase in net revenues described above offset by an increase in operating expenses. The increase in operating expenses resulted from the Company's efforts to broaden its worldwide consulting business; enhance its information technology capabilities; consolidate office space in North America; and integrate its North American operations resulting from its acquisition in Canada.
Mortgage Banking Services
Mortgage banking services primarily consist of the origination, sale and servicing of residential first mortgage loans. The Company markets a variety of first mortgage products to consumers through relationships with corporations, affinity groups, government agencies, credit unions, real estate brokerage firms and other mortgage banks.
Fiscal 1995 Results
Mortgage banking services net revenues, measured as revenues earned reduced by direct costs for amortization and payments to third-party service providers on behalf of clients, decreased 27% to $89.3 million in fiscal 1995 primarily due to the decline in production net revenue. The sharp increase in mortgage rates greatly reduced refinance and new purchase loan activity creating intense competition within the industry for remaining market share. Such competition, accompanied by a consumer shift to adjustable rate mortgage products, served to reduce margins. As the margins declined on production volume, the Company responded to the market's increased demand for servicing rights and sold $3.6 billion of its servicing portfolio at a gain of $42.1 million. Servicing fee revenue increased as a result of an increase in the average servicing portfolio as well as the significantly reduced effect of portfolio prepayments and payoffs which, in fiscal 1994, required unscheduled amortization of $11.3 million of excess mortgage servicing fees.
Mortgage banking services operating income decreased 28% to $30.4 million. The decrease was due to the decline in net revenues as described above significantly offset by a reduction in operating expenses as the Company responded to the change in loan production volume.
The Company's profitability from mortgage banking services will be affected by such external factors as the level of interest rates, the strength of the economy, and the related condition of residential real estate markets. The Company's broad-based marketing strategies including further penetration of existing affinity groups and credit unions, signing new clients, and maintaining its system of delivering mortgages in a cost-efficient manner, should positively affect operating results in the future.
Fiscal 1994 Results
In fiscal 1994, net revenues increased 40% to $122.1 million. The increase was due to increased production net revenue caused by a reduction in mortgage rates and an increase in loan closing volume reflecting the increased demand for mortgage loans, especially to individuals interested in refinancing their existing residential property at lower mortgage rates and the increase in market penetration of new and existing clients. Servicing fee revenue increased as a result of growth in the average servicing portfolio partially offset by the unscheduled amortization of $11.3 million of excess mortgage servicing fees in fiscal 1994 and $11.9 million in fiscal 1993.
Mortgage banking services operating income increased 66% to $42.1 million in fiscal 1994. The increase in fiscal 1994 reflects increases in net revenues as discussed above partially offset by higher costs incurred to process increased loan closings and to manage the larger servicing portfolio.
NEW ACCOUNTING PRONOUNCEMENTS
In May 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage Servicing Rights." Application of this statement will require, among other provisions, that the Company recognize originated mortgage servicing rights, as well as purchased mortgage servicing rights, as assets. Presently, the cost of originated mortgage servicing rights is included with the cost of the related loans and expensed when the loan is sold, but the cost of purchased mortgage servicing rights is recorded as an asset. The Company intends to adopt SFAS No. 122 in the first quarter of fiscal 1996. The effect of this statement has been initially estimated to increase fiscal 1996 net income by approximately $20 million.
In March 1995, the FASB issued SFAS No. 121, effective in 1997, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Application of this statement will require the Company to review long-lived assets and certain intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This statement is not expected to significantly affect the consolidated financial statements of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company manages its funding sources to ensure adequate liquidity.
The sources of liquidity fall into three general areas: ongoing liquidation of assets under management, global capital markets, and committed credit agreements with various high-quality domestic and international banks. In the ordinary course of business, the liquidation of assets under management programs, as well as cash flows generated from operating activities, provide the cash flow necessary for the repayment of existing liabilities. (See Operating Activities and Investing Activities in the Company's Consolidated Statements of Cash Flows.)
Using historical information, the Company projects the time period that a client's vehicle will be in service or the length of time that a home will be held in inventory before being sold on behalf of a client. Once the relevant asset characteristics are projected, the Company generally matches the projected dollar amount, interest rate and maturity characteristics of the assets within the overall funding program. This is accomplished through stated debt terms or effectively modifying such terms through other instruments, primarily interest rate swap agreements and revolving credit agreements. (See Note to Liabilities Under Management Programs in Notes to Consolidated Financial Statements.) Within mortgage banking services, the Company funds the mortgage loans on a short-term basis until sale to unrelated investors, which generally occurs within sixty days. Interest rate risk on mortgages originated for sale is managed through the use of forward delivery contracts, financial futures and options.
The Company has maintained broad access to global capital markets by maintaining the quality of its assets under management. This is achieved by establishing credit standards to minimize credit risk and the potential for losses. Depending upon asset growth and financial market conditions, the Company utilizes the United States, Euro, Canadian and Sterling commercial paper markets, as well as other cost-effective, short-term instruments. In addition, the Company utilizes the public and private debt markets to issue unsecured senior corporate debt. Augmenting these sources, the Company has reduced outstanding debt by the sale or transfer of managed assets to third parties while retaining fee-related servicing responsibility. The Company's aggregate commercial paper outstanding totaled $2.3 and $2.1 billion at April 30, 1995, and April 30, 1994, respectively. At April 30, 1995, $1.4 billion in medium-term notes and $153 million in other debt securities were outstanding compared to $1.2 billion and $185 million, respectively, in fiscal 1994. (See Financing Activities in the Company's Consolidated Statements of Cash Flows.) From a risk management standpoint, borrowings not in the local currency of the business unit are converted to the local currency through the use of foreign currency forward contracts. The Company has maintained a leverage ratio between 7 to 1 and 8 to 1 over each of the last three years.
To provide additional financial flexibility, the Company's current policy is to ensure that minimum committed bank facilities aggregate 80% of the average amount of outstanding commercial paper. Committed revolving credit agreements totaling $2.1 billion and uncommitted lines of credit aggregating $346 million are currently in place with 31 domestic and international banks. Management closely evaluates not only the credit quality of the banks but the maturity of the various agreements to ensure ongoing availability. Of the Company's $2.1 billion in committed facilities at April 30, 1995, the full amount was undrawn and available. Management believes that its current policy provides adequate protection should financial stress occur in the commercial paper or medium-term note markets.
These established means of effectively matching floating and fixed interest rate and maturity characteristics of funding to related assets, the variety of short- and long-term domestic and international funding sources, and the committed banking facilities enable the Company to service its debt and offer a broad spectrum of service products to its clients.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT AND CONSENT OF INDEPENDENT AUDITORS The Stockholders and Board of Directors PHH Corporation: We have audited the consolidated financial statements of PHH Corporation and subsidiaries as listed in the accompanying index on page 28. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of PHH Corporation and subsidiaries at April 30, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended April 30, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Baltimore, Maryland May 22, 1995 To the Stockholders and Board of Directors PHH Corporation: We consent to incorporation by reference in the Registration Statements on Form S-3 (No. 2-90026, No. 33-48125, No. 33-52669 and No. 33-59376) and Form S-8 (No. 33-38309 and No. 33-53282) of PHH Corporation of our report dated May 22, 1995, relating to the consolidated balance sheets of PHH Corporation and subsidiaries as of April 30, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended April 30, 1995, and all related schedules, which report appears in the April 30, 1995 annual report on Form 10-K of PHH Corporation. KPMG Peat Marwick LLP Baltimore, Maryland July 25, 1995
Consolidated Statements of Income
See Notes to Consolidated Financial Statements.
Consolidated Balance Sheets
See Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows
See Notes to Consolidated Financial Statements.
Consolidated Statements of Stockholders' Equity
See Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements (In thousands except per share data)
ACCOUNTING POLICIES
The accounting policies of PHH Corporation conform to generally accepted accounting principles. The consolidated financial statements include the accounts of PHH Corporation and its wholly owned domestic and foreign subsidiaries (the Company). Policies outlined below include all policies considered significant. All significant intercompany balances and transactions have been eliminated.
Vehicle Management Services
Vehicle management services primarily consist of the management, purchase, leasing, and resale of vehicles for corporate clients and government agencies, including fuel, maintenance, accident and safety management programs and other fee-based services for clients' vehicle fleets. Revenues from these services other than leasing are taken into income over the periods in which the services are provided and the related expenses are incurred.
The Company leases vehicles to corporate fleet users under operating and direct financing lease arrangements. The initial lease term typically covers a period of twelve months or more and thereafter may be extended at the option of the lessee. The Company records the cost of leased vehicles as an "investment in leases and leased vehicles." Amounts charged to lessees for interest on the unrecovered investment are credited to income on a level yield method which approximates the contractual terms.
Real Estate Services
Real estate services primarily consist of the purchase, management and resale of homes for transferred employees of corporations and government agencies. The Company pays transferring employees their equity based on an appraised value of their homes, determined by independent appraisers, after deducting any outstanding mortgages. In certain circumstances the mortgages may be retired concurrently with the purchase of the equity; otherwise, the Company normally accepts administrative responsibility for making payments on any mortgages. These mortgages are either retired at settlement or assumed by the purchaser when the homes are resold, which generally is within six months.
The client normally pays an advance billing for a portion of the costs to be incurred during the period the home is held for resale. These advances are included in "advances from clients." These costs are paid by the Company and are identified as "carrying costs on homes under management" until resale. After resale, a settlement of actual costs and the advance billing is made with the client.
Revenues and the related "costs, including interest, of carrying and reselling homes" are recognized at closing for the resale of the home. Under the terms of contracts with clients, the Company is generally protected against losses from changes in market conditions.
The Company also offers fee-based programs such as home marketing assistance, household goods moves, destination services, property dispositions for financial institutions and government agencies and strategic management consulting. Revenues from these fee-based services are taken into income over the periods in which the services are provided and the related expenses are incurred.
Mortgage Banking Services
Mortgage banking services primarily include the origination, sale and servicing of residential first mortgage loans. The Company markets a variety of first mortgage products to consumers through relationships with corporations, affinity groups, credit unions, real estate brokerage firms and other mortgage banks. Loan origination fees, commitment fees paid in connection with the sale of loans, and direct loan origination costs associated with loans held for resale, are deferred until the loan is sold. Fees received for servicing loans owned by investors are based on the difference between the weighted average yield received on the mortgages and the amount paid to the investor, or on a stipulated percentage of the outstanding monthly principal balance on such loans. Servicing fees are credited to income when received. Costs associated with loan servicing are charged to expense as incurred.
Sales of mortgage loans are generally recorded on the date a loan is delivered to an investor. Sales of mortgage securities are recorded on the settlement date. Gains or losses on sales of mortgage loans are recognized based upon the difference between the selling price and the carrying value of the related mortgage loans sold. Such gains and losses are increased or decreased by the amount of deferred mortgage servicing fees recorded.
Gains or losses on the sale of mortgage servicing rights are recognized when title and all risks and rewards have irrevocably passed to the buyer and there are no significant unresolved contingencies.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation of property and equipment is provided by charges to income over the estimated useful lives of such assets. Buildings are depreciated on the straight-line method (25 to 45 years); building improvements, on the straight-line method (10 to 20 years); equipment and leasehold improvements, on either the double-declining balance or straight-line method (3 to 10 years); and externally developed software is capitalized and amortized on the straight-line method (5 years). Expenditures for improvements that increase value or that extend the life of the assets are capitalized; maintenance and repairs are charged to operations. Gains or losses from retirements and disposals of property and equipment are included in selling, general and administrative expense.
Unamortized Goodwill
Unamortized goodwill represents the excess of cost over the net tangible and intangible assets of businesses acquired. It is being amortized by the straight- line method over various periods up to 40 years and is included in selling, general and administrative expense.
Assets Under Management Programs
Assets under management programs are held subject to leases or other client contracts. The effective interest rates and maturity characteristics of the leases and other contracts are generally matched with the characteristics of the overall funding program.
Translation of Foreign Currencies
Assets and liabilities of the foreign subsidiaries are translated at the exchange rates as of the balance sheet dates; equity accounts are translated at historical exchange rates. Revenues, expenses and cash flows are translated at the average exchange rates for the periods presented. Translation gains and losses are included in stockholders' equity including, for years prior to 1991,
transaction gains and losses resulting from forward exchange contracts on foreign equity amounts net of income tax effects. Gains and losses resulting from the change in exchange rates realized upon settlement of foreign currency transactions are substantially offset by gains and losses realized upon settlement of forward exchange contracts. Therefore, the resulting net income effect of transaction gains and losses in fiscal years 1993 through 1995 was not significant.
Interest
Interest expense consists of interest on debt incurred to fund working capital requirements and to finance vehicle leasing activities, real estate services and mortgage banking operations. Interest used to finance equity advances on homes is included in "costs, including interest, of carrying and reselling homes" and was $21,102 in 1995, $23,491 in 1994, and $43,041 in 1993. Total interest paid, including amounts within "costs, including interest, of carrying and reselling homes," was $211,206 in 1995, $165,406 in 1994, and $170,628 in 1993.
Income Taxes
The provision for income taxes includes deferred income taxes resulting from items reported in different periods for income tax and financial statement purposes. The Company computes deferred income taxes using the liability method. No provision has been made for US income taxes on cumulative undistributed earnings of foreign subsidiaries since it is the present intention of management to reinvest the undistributed earnings indefinitely in foreign operations. Undistributed earnings of the foreign subsidiaries at April 30, 1995, were $93,567. The determination of unrecognized deferred US tax liability for unremitted earnings is not practicable. However, it is estimated that foreign withholding taxes of $5,882 may be payable if such earnings were remitted.
Net Income Per Share
Net income per share is based on the weighted average number of shares of common stock outstanding during the year and common stock equivalents arising from the assumed exercise of outstanding stock options under the treasury stock method. The number of shares used in the calculations were 17,252,843 for 1995, 17,741,034 for 1994, and 17,356,824 for 1993.
Derivative Financial Instruments
As a matter of policy, the Company does not engage in derivatives trading or market-making activities. Rather, derivative financial instruments such as interest rate swaps are used by the Company principally in the management of its interest rate exposures and foreign currency exposures on intercompany borrowings. Additionally, the Company enters into forward delivery contracts, financial futures programs and options to reduce the risks of adverse price fluctuation with respect to both mortgage loans held for sale and anticipated mortgage loan closings arising from commitments issued.
Amounts to be paid or received under interest rate swap agreements are accrued as interest rates change and are recognized over the life of the swap agreements as an adjustment to interest expense. The fair value of the swap agreements is not recognized in the consolidated financial statements since they are accounted for as hedges. Market value gains and losses on the Company's foreign currency transaction hedges are recognized in income and substantially offset the foreign exchange gains and losses on the underlying transactions. Market value gains and losses on positions used as hedges in the mortgage banking services operation are deferred and considered in the valuation of lower of cost or market value of mortgage loans held for sale.
Reclassifications
Certain reclassifications have been made to the prior years' financial statements for comparative purposes.
NEW ACCOUNTING PRONOUNCEMENTS
In May 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 122, "Accounting for Mortgage Servicing Rights", effective for fiscal years beginning after December 15, 1995. Application of this statement will require that the Company recognize originated mortgage servicing rights, as well as purchased mortgage servicing rights, as assets. Presently, the cost of originated mortgage servicing rights is included with the cost of the related loans and recognized when the loan is sold, but the cost of purchased mortgage servicing rights is recorded as an asset. SFAS No. 122 also requires capitalized mortgage servicing rights, stratified based on the risk characteristics of the underlying loans, to be assessed for impairment based on the fair value of those rights. Impairment is to be recognized through a valuation allowance for each impaired stratum. The Company intends to adopt this statement in the first quarter of 1996. The effect of this statement has been initially estimated to increase net income in 1996 by approximately $20 million.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", effective in 1997. Application of this statement will require the Company to review long- lived assets and certain intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This statement is not expected to significantly affect the consolidated financial statements of the Company.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale represent mortgage loans originated by the Company and held pending sale to permanent investors. Such mortgage loans are recorded at the lower of cost or market value as determined by outstanding commitments from investors or current investor yield requirements calculated on the aggregate loan basis.
The Company issues mortgage-backed certificates insured or guaranteed by the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA) and other private insurance agencies. The insurance provided by FNMA and FHLMC and other private insurance agencies are on a non-recourse basis to the Company. However, the guarantee provided by GNMA is only to the extent recoverable from insurance programs of the Federal Housing Administration and the Veterans Administration. The outstanding principal balance of mortgages backing GNMA certificates issued by the Company aggregated approximately $1,699,233 and $1,139,199 at April 30, 1995 and 1994, respectively. Additionally, the Company sells mortgage loans as part of various mortgage-backed security programs sponsored by FNMA, FHLMC and GNMA. Certain of these sales are subject to recourse or indemnification provisions in the event of default by the borrower. As of April 30, 1995, mortgage loans sold with recourse amounted to $43,383. The Company believes adequate reserves are maintained to cover all potential losses.
PROPERTY AND EQUIPMENT
Property and equipment at April 30 consisted of the following:
OTHER ASSETS Other assets at April 30 consisted of the following:
The unamortized mortgage servicing fees represent the value of purchased servicing rights and excess servicing fees which are deferred. Such servicing rights and fees are charged to income over the estimated effective life of the related mortgages, estimated to average seven years. Mortgage loans serviced were $16,017,416 and $16,644,730 at April 30, 1995 and 1994, respectively. Mortgage-related notes receivable are loans secured by real estate. Residential properties held for resale are located primarily in the US and are carried at the lower of cost or net realizable value.
ASSETS UNDER MANAGEMENT PROGRAMS
Net Investment in Leases and Leased Vehicles
The net investment in leases and leased vehicles at April 30 consisted of the following:
The Company leases vehicles for initial periods of twelve months or more under either operating or direct financing lease agreements. The Company's experience indicates that the full term of the leases may vary considerably due to extensions beyond the minimum lease term. Lessee repayments of investments in leases and leased vehicles for 1995 and 1994 were $1,452,330 and $1,358,156, respectively; and the ratio of such repayments to the average net investment in leases and leased vehicles was 50% in 1995 and 49% in 1994.
The Company has two types of operating leases. Under one type, open-end operating leases, resale of the vehicles upon termination of the lease is generally for the account of the lessee except for a minimum residual value which the Company has guaranteed. The Company's experience has been that vehicles under this type of lease agreement have consistently been sold for amounts exceeding the residual value guarantees. Maintenance and repairs of vehicles under these agreements are the responsibility of the lessee. The original cost of vehicles under this type of operating lease at April 30, 1995 and 1994, was $3,898,000 and $3,538,000, respectively.
Under the other type of operating lease, closed-end operating leases, resale of the vehicles on termination of the lease is for the account of the Company. The lessee generally pays for or provides maintenance, vehicle licenses and servicing. The original cost of vehicles under these agreements at April 30, 1995 and 1994, was $391,000 and $367,000, respectively. The Company believes adequate reserves are maintained in the event of loss on vehicle disposition.
Under the direct financing lease agreements, resale of the vehicles upon termination of the lease is generally for the account of the lessee. Maintenance and repairs of these vehicles are the responsibility of the lessee.
Leasing revenues are included in revenues from vehicle management services. Following is a summary of leasing revenues for years ended April 30:
The Company has transferred existing managed vehicles and related leases to unrelated investors and has retained servicing responsibility. Credit risk for such agreements is retained by the Company to a maximum extent in one of two forms: excess assets transferred, which were $8,389 and $12,836 at April 30, 1995 and 1994, respectively; or guarantees to a maximum extent of $907 and $2,749 at April 30, 1995 and 1994, respectively. All such credit risk has been included in the Company's consideration of related reserves. The outstanding balances under such agreements aggregated $166,379 and $189,480 at April 30, 1995 and 1994, respectively.
Other managed vehicles with balances aggregating $175,111 and $206,740 at April 30, 1995 and 1994, respectively, are included in special purpose entities whose ownership is deemed unrelated to the Company and whose credit and residual value risk characteristics are ultimately not the Company's responsibility.
Equity Advances on Homes
Equity advances on homes represent advances paid to transferring employees of clients for their equity based on appraised values of their homes.
OTHER DEBT
Other debt at April 30 consisted of the following:
Commercial paper programs are more fully described in the Note for Liabilities Under Management Programs. The medium-term note represents an unsecured obligation having a fixed interest rate of 6.5% with interest payable semi-annually and a term of seven years payable in full in fiscal 2000.
INCOME TAXES
Provisions (credits) for income taxes for the years ended April 30, were comprised as follows:
Deferred income taxes are recorded based upon differences between the financial statements and the tax bases of assets and liabilities and available tax credit carryforwards. There was no valuation allowance relating to deferred tax assets. Deferred tax assets (liabilities) as of April 30 were comprised as follows:
The portions of the 1995 income tax liability and provision classified as current and deferred are subject to final determination based on the actual 1995 income tax returns. The liability and provision amounts for 1994 have been reclassified to reflect the final determination made in filing the 1994 income tax returns.
The Company paid income taxes of $26,049 in 1995, $35,739 in 1994, and $50,092 in 1993.
A summary of the reasons for differences between the statutory federal income tax rate and the Company's effective income tax rate follows:
The Company's US federal income tax returns have been examined by the Internal Revenue Service through April 30, 1991.
LIABILITIES UNDER MANAGEMENT PROGRAMS
Borrowings to fund assets under management programs are classified as "liabilities under management programs" and, at April 30, consisted of the following:
Commercial paper, all of which matures within ninety days, is supported by committed revolving credit agreements described below and short-term lines of credit. The weighted average interest rates on the Company's outstanding commercial paper were 6.3% and 4.0% at April 30, 1995 and 1994, respectively.
Medium-term notes represent unsecured loans which mature as follows: $1,161,000 in 1996, and $100,000 in 1997. The weighted average interest rates on medium-term notes were 5.7% and 4.1% at April 30, 1995 and 1994, respectively.
Limited recourse debt and secured notes payable on vehicles under lease primarily consist of secured loans arranged for certain clients for their convenience. The lenders hold a security interest in the lease payments and the clients' leased vehicles. The debt and notes payable mature concurrently with the related lease payments. The aggregate lease payments due from the lessees exceed the loan repayment requirements. The weighted average interest rates on secured debt were 6.4% and 4.2% at April 30, 1995 and 1994, respectively.
The Company has unsecured committed credit agreements with various banks totaling $2,111,000. These agreements have both fixed and evergreen maturities ranging from May 1, 1995, to April 30, 1998. The evergreen revolving credit agreements require a notice of termination of one to three years. Interest rates under all revolvers are either at fixed rates or vary with the prime rate or the London Interbank Offered Rate. Under these agreements, the Company is obligated to pay annual commitment fees which were $2,904 and $3,975 in 1995 and 1994, respectively. The Company has other unused lines of credit of $262,000 and $223,000 at April 30, 1995 and 1994, respectively, with various banks.
Other unsecured debt, all of which matures in 1996, includes other borrowings under short-term lines of credit and other bank facilities. The weighted average interest rates on unsecured debt were 6.2% and 5.2% at April 30, 1995 and 1994, respectively.
Although the period of service for a vehicle is at the lessee's option, and the period a home is held for resale varies, management estimates, by using historical information, the rate at which vehicles will be disposed and the rate at which homes will be resold. These projections of estimated liquidations of assets under management programs and the related estimated repayment of liabilities under management programs as of April 30, 1995, as set forth in the table below, indicate that the actual repayments of liabilities under management programs will be different than required by contractual maturities.
DERIVATIVE FINANCIAL INSTRUMENTS The Company employs interest rate swap agreements to match effectively the fixed or floating rate nature of liabilities to the assets funded. A key assumption in the following information is that rates remain constant at April 30, 1995 levels. To the extent that rates change, both the maturity and variable interest rate information will change. However, the net rate the Company pays remains matched with the assets funded.
The following table summarizes the maturity and weighted average rates of the Company's interest rate swaps employed at April 30, 1995. These characteristics are effectively offset within the portfolio of assets funded by the Company.
For the year ended April 30, 1995, the Company's hedging activities increased interest expense $1,496 and had no effect on its weighted average borrowing rate. For the same periods in 1994 and 1993, hedging activities increased interest expense by $12,632 and $16,382, and increased the weighted average borrowing rate 0.3% and 0.5%, respectively.
The Company enters into foreign exchange contracts as hedges against currency fluctuation on certain intercompany loans. Such contracts effectively offset the currency risk applicable to approximately $80,600 and $85,852 of obligations at April 30, 1995 and 1994, respectively.
The Company is exposed to credit-related losses in the event of non- performance by counterparties to certain derivative financial instruments. The Company manages such risk by periodically evaluating the financial condition of counterparties and spreading its positions among multiple counterparties. The Company presently does not expect non-performance by any of the counterparties.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:
(bullet)Cash, accounts receivable, certain other assets and commercial paper borrowings. Due to the short-term nature of these financial instruments, the carrying value equals or approximates fair value.
(bullet)Mortgage loans held for sale. Fair value is estimated using the quoted market prices for securities backed by similar types of loans and current dealer commitments to purchase loans. These loans are priced to be sold with servicing rights retained. Gains (losses) on mortgage-related positions, used to reduce the risks of adverse price fluctuations, for both mortgage loans held for sale and anticipated mortgage loan closings arising from commitments issued, are included in the carrying amount of mortgage loans held for sale.
(bullet)Deferred mortgage servicing fees. Fair value is estimated by discounting future excess cash flows of fees associated with the underlying securities backing this asset using discount rates that approximate market rates and externally published prepayment rates, adjusted, if appropriate, for individual portfolio characteristics.
(bullet)Borrowings. Fair value of borrowings, other than commercial paper, is estimated based on quoted market prices or market comparables.
(bullet)Interest rate swaps, foreign exchange contracts, forward delivery commitments, futures contracts and options. The fair value of interest rate swaps, foreign exchange contracts, forward delivery commitments, futures contracts and options is estimated, using dealer quotes, as the amount that the Company would receive or pay to execute a new agreement with terms identical to those remaining on the current agreement, considering interest rates at the reporting date.
The following table sets forth information about financial instruments, except for those noted above for which the carrying value approximates fair value, at April 30, 1995 and 1994:
* Gains (losses) on mortgage-related positions are already included in the determination of market value of mortgage loans held for sale.
STOCK OPTION, INVESTMENT AND INCENTIVE PLANS
The Company's employee stock option plans allow for options to be granted to key employees for the purchase of common stock at prices not less than fair market value on the date of grant. Either incentive stock options or non- statutory stock options may be granted under the plans. The Company's Directors' stock option plan allows for options to be granted to outside Directors of the Company for the purchase of common stock at prices not less than fair market value on the date of grant. Options become exercisable after one year from date of grant on a vesting schedule provided by the plans, and expire ten years after the date of the grant. Option transactions during 1995, 1994, and 1993 were as follows:
In addition to outstanding options, at April 30, 1995, there were 1,036,196 shares of common stock reserved, including 856,872 shares for issuance under future employee stock option plan awards, 118,324 shares for future issuance under the employee investment plan and 61,000 shares for future issuance under the Director's stock option plan.
Under provisions of the Company's employee investment plan, a qualified retirement plan, eligible employees may generally have up to 10% of their base salaries withheld and placed with an independent custodian and elect to invest in common stock of the Company, an index equity fund, a growth equity fund, an international equity fund, a fixed income fund, an asset allocation fund and/or a money market fund. The Company's contributions vest proportionately in accordance with an employee's years of vesting service, with an employee being 100% vested after three years of vesting service. The Company matches, in common stock of the Company, employee contributions to 3% of their base salaries, with an additional 3% match available at the end of the year based on the Company's operating results. In the three years presented the Company made additional matches of 50% of employee contributions greater than 3% up to 6%. The additional match, initially invested in a money market fund, can be redirected by the employee into any of the investment elections noted above. The Company's expenses for contributions were $4,483, $4,020, and $3,662 for the years ended April 30, 1995 and the two preceding years, respectively.
The Company has incentive compensation plans for certain key employees. The plans provide for the payment of cash bonuses or, in some instances, stock incentives, based upon the achievement of predetermined performance objectives. The related expense included in selling, general and administrative expenses for 1995, 1994 and 1993 was $5,581, $6,086 and $5,659, respectively.
STOCK RIGHTS
On March 17, 1986, the Company declared a dividend of one preferred share purchase right for each share of common stock outstanding on April 11, 1986. The Company adopted an amendment to its rights agreement January 16, 1989. Each right entitles the holder to purchase 1/100th of a share of series A Junior Participating Preferred Stock at an exercise price of $120. The rights become exercisable in the event any party acquires or announces an offer to acquire 20% or more of the Company's common stock. The rights expire April 10, 1996, and are redeemable at $.05 per right prior to the time any party owns 20% or more of the Company's outstanding common stock. In the event the Company enters into a consolidation or merger after the time rights are exercisable, the rights provide that the holder will receive, upon exercise of the right, shares of common stock of the surviving company having a market value of twice the exercise price of the right. Until the earlier of the time the rights become exercisable, are redeemed or expire, the Company will issue one right with each new share of common stock issued. The Company has designated 200,000 shares of the authorized preferred shares as series A Junior Participating Preferred Stock for issuance upon exercise of the rights.
PENSION AND OTHER EMPLOYEE BENEFIT PLANS
Pension and Supplemental Retirement Plans
The Company has a non-contributory defined benefit pension plan covering substantially all US employees of the Company and its subsidiaries. The Company's subsidiary located in the UK has a contributory defined benefit pension plan, with participation at the employee's option. Under both the US and UK plans, benefits are based on an employee's years of credited service and a percentage of final average compensation. The Company's policy for both plans is to contribute amounts sufficient to meet the minimum requirements plus other amounts as the Company deems appropriate from time to time. The Company also sponsors two unfunded supplemental retirement plans to provide certain key executives with benefits in excess of limits under the federal tax law and to include annual incentive payments in benefit calculations.
Net costs included the following components for the years ended April 30:
A summary of the plans' status and the Company's recorded liability recognized in the Consolidated Balance Sheets at April 30 follows:
Assumptions
Certain assumptions were used in determining the cost and related obligations under the US pension and unfunded supplemental retirement plans as follows:
Postretirement Benefits Other Than Pensions
The Company provides healthcare and life insurance benefits for certain retired employees up to the age of 65. Such postretirement benefits costs, determined in accordance with SFAS No.106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," for 1995 and 1994, were $1,474 and $1,551, respectively. Prior to adoption of SFAS No. 106, the Company recognized the costs of these benefits by expensing the benefits as paid. The aggregate costs of such benefits did not exceed $500 in 1993.
LEASE COMMITMENTS
Total rental expenses relating to office facilities and equipment were $24,195, $27,264, and $25,368 for 1995, 1994 and 1993, respectively. Minimum rental commitments under non-cancelable leases with remaining terms in excess of one year are as follows:
These leases provide for additional rentals based on the lessors' increased property taxes, maintenance and operating expenses.
CONTINGENT LIABILITIES
The Company and its subsidiaries are involved in pending litigation of the usual character incidental to the business transacted by them. In the opinion of management, such litigation will not have a material effect on the Company's consolidated financial statements.
The Company is contingently liable under the terms of an agreement involving its discontinued aviation services segment for payment of Industrial Revenue Bonds issued by local governmental authorities operating at three airports. The Company believes its allowance for disposition loss is sufficient to cover all potential liability.
BUSINESS SEGMENTS
The Company operations are classified into three business segments: vehicle management services, real estate services and mortgage banking services. Vehicle management services and real estate services are provided in North America and Europe. Mortgage banking services are provided in the US. Selected information by business segment and geographic area follows:
Business Segments
Geographic Areas
Quarterly Financial Data (Unaudited)
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to the Directors is contained on pages 2 through 6 of the Registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders, which information is hereby incorporated by reference. EXECUTIVE OFFICERS OF THE REGISTRANT
Officers are elected by the Board of Directors to serve at the pleasure of the Board. There is no family relationship between any of such persons. Each of the persons named above has been employed by the Company or one of its subsidiaries for more than the past five years. ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION Information with respect to executive compensation is contained on pages 9 through 18 of the Registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders, which information is hereby incorporated by reference. ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to security ownership of certain beneficial owners and management is contained on pages 7 and 8 of the Registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders, which information is hereby incorporated by reference. ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable.
PART IV ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K -- There were no filings on Form 8-K during the fourth quarter of fiscal 1995.
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. PHH CORPORATION By ROBERT D. KUNISCH Robert D. Kunisch Chairman of the Board, Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Principal Executive Officer:
ROBERT D. KUNISCH Robert D. Kunisch Chairman of the Board, Chief Executive Officer and President
Principal Financial Officer:
ROY A. MEIERHENRY Roy A. Meierhenry Senior Vice President and Chief Financial Officer
Principal Accounting Officer:
NAN A. GRANT Nan A. Grant Controller
Majority of the Board of Directors: Robert D. Kunisch, James S. Beard, Andrew F. Brimmer, George L. Bunting, Jr., Alan P. Hoblitzell, Jr., Paul X. Kelley, L. Patton Kline, Francis P. Lucier, Kent C. Nelson, Donald J. Shepard, Alexander B. Trowbridge
ROBERT D. KUNISCH Robert D. Kunisch As Attorney-in-fact
PHH CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
NOTES:(a) Amounts relate to acquisitions, divestitures and reclassifications of prior year amounts. (b) Deductions from reserves represent accounts charged off, less recoveries, and foreign translation gains and losses. (c) Amounts have been restated for comparative purposes.


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 peripheral 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 is to generate leasing revenues for distribution. 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 closed on April 30, 1987 and raised $34,985,398 of proceeds through the sale of limited partnership units. Equipment of approximately $42,586,000 was purchased through December 31, 1995 with these 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, 1995, the Fund has equipment on lease and equipment held for sale or lease with an approximate total net book value of $324,000. The General Partner intends to liquidate the remaining equipment by December 31, 1996.
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 represent 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 are 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.
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.
A brief description of the types of equipment in which the Fund has invested as of December 31, 1995 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 and aggregate purchase price of the various types of equipment acquired and leased by the Fund as of December 31, 1995, along with the percentage of total equipment represented by each type of equipment, a breakdown of equipment usage by industrial classification and the average initial term of leases:
Purchase Price Percentage of Type of Equipment Acquired of Equipment Total Equipment
Communication Controllers $ 2,662,644 43.29% Disk Storage Systems 867,962 14.11 Network Communications 619,568 10.07 Personal Computers, Terminals and Work Stations 200,737 3.26 Printers 1,350,386 21.95 Tape Storage Systems 438,035 7.12 Other 12,514 0.20 ___________ ______
Totals $ 6,151,846 100.00% =========== ======
Breakdown of Equipment Usage By Industrial Classification
Purchase Price Percentage of Type of Business of Equipment Total Equipment
Computers/Data Processing $ 1,327,647 21.58% Diversified Financial/Banking/ Insurance 915,912 14.89 Manufacturing/Refining 1,856,787 30.18 Publishing/Printing 563,309 9.16 Retailing/Consumer Goods 937,092 15.23 Telephone/Telecommunications 546,907 8.89 Utilities 4,192 0.07 __________ ______
Totals $ 6,151,846 100.00% ========== ======
Average Initial Term of Leases (in months): 39
All of the above equipment is currently leased under operating leases.
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, 1995
Limited Partnership Interests 2,098
General Partnership Interest 1
Item 7.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Fund had revenues of $2,043,528, $3,819,594 and $4,494,595 for the years ended December 31, 1995, 1994 and 1993, respectively. The decrease in revenues between 1995, 1994 and 1993 is primarily caused by the decrease in rental income generated from equipment on operating leases. Rental income from the leasing of computer peripheral equipment accounted for 87%, 94% and 92% of total income in 1995, 1994 and 1993, respectively. In 1995, rental income decreased by approximately $1,850,000 because of equipment which came off lease and was re-leased at lower rental rates or sold. This decrease, however, was offset by rental income of approximately $53,000 generated from 1994 equipment purchases for which a full year of rental income was earned in 1995 and only a partial year was earned in 1994. In 1994, rental income decreased by approximately $733,000 because of equipment which came off lease and was re-leased at lower rental rates or sold. This decrease, however, was offset by rental income of $166,000 generated from 1994 equipment purchases and rents realized on 1993 equipment purchases for which only a partial year was earned in 1993 but a full year was earned in 1994. In addition, the Fund recognized a net gain on sale of equipment of $215,441, $190,212 and $243,108 for the years ended December 31, 1995, 1994 and 1993, respectively which affected the decrease in total revenues for these years. Furthermore, interest income decreased in 1995 and 1994 due to a decrease in cash available for investment and, in 1994, the decline in interest rates also accounts for the decline in interest income. The decrease in interest income contributed to the decrease in total revenues for these years, as well.
Expenses were $1,118,000, $3,125,716 and $3,769,508 for the years ended December 31, 1995, 1994 and 1993, respectively. Depreciation expense comprised 63% of total expenses in 1995, 80% of total expenses in 1994 and 78% of total expenses in 1993. The decrease in expenses between these years is primarily attributable to the decrease in depreciation expense because of equipment which came off lease and was terminated or sold. 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 information provided in third party publications. In 1995, 1994 and 1993, approximately $141,000, $148,000 and $359,000, respectively, was charged to write-down of equipment to net realizable value which also accounts for the decrease in total expenses in 1995 and 1994. 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. The General Partner believes, after analyzing the current equipment portfolio, that there are impending gains to be recognized upon the sale of certain of its equipment in future years. Additionally, the decline in management fees, resulting from the decrease in rental income contributed to the decrease in total expenses in 1995 and 1994.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
The Fund's net income was $925,528, $693,878 and $725,087 for the years ended December 31, 1995, 1994 and 1993, respectively. The earnings per equivalent limited partnership unit, after earnings allocated to the General Partner, were $87.50, $43.18 and $27.52 for the years ended December 31, 1995, 1994 and 1993, respectively. The weighted average number of equivalent limited partnership units outstanding were 10,161, 15,240 and 24,357 for 1995, 1994 and 1993, respectively.
The Fund generated funds from operations, for the purpose of determining cash available for distribution, of $1,556,199, $3,164,239 and $3,763,637 and declared distributions of $1,892,377, $3,573,922 and $5,470,813 to partners for 1995, 1994 and 1993, respectively. The distributions for 1995, 1994 and 1993 include $336,178, $409,683 and $1,707,176, respectively, of sales proceeds and cash available from previous years which was not distributed. For financial statement purposes, the Fund records cash distributions to partners on a cash basis in the period in which they are paid. During the fourth quarter of 1995, the General Partner revised its policy regarding cash distributions so that the distributions more accurately reflect the net income of the Fund over the most recent twelve months.
Analysis of Financial Condition
The General Partner has commenced the dissolution process for the Fund with the intent of fully liquidating the Fund by the end of 1996. Therefore, as leases expire, the General Partner will seek to sell the equipment at its market value or extend the equipment for lease terms consistent with the plan of liquidation. The Fund purchased $1,984, $181,144 and $828,475 of equipment during the years ended December 31, 1995, 1994 and 1993 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.
Item 8.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted as a separate section of this report commencing on page.
Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Effective September 1, 1995, The Fidelity Mutual Life Insurance Company (in Rehabilitation) sold Fidelity Leasing Corporation (FLC), the General Partner of the Fund, to Resource Leasing, Inc., a wholly owned subsidiary of Resource America, Inc. The Directors and Executive Officers of FLC are:
FREDDIE M. KOTEK, age 39, Chairman of the Board of Directors, President, and Chief Executive Officer of FLC 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 46, Director and Secretary of FLC since September 1995 and Senior Vice President and Secretary of Resource America, Inc. since 1989.
SCOTT F. SCHAEFFER, age 33, Director of FLC 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.
MARK A. MAYPER, age 42, Senior Vice President of FLC overseeing the lease syndication business since 1987.
Others:
STEPHEN P. CASO, age 40, Vice President and Counsel of FLC since 1992.
MARIANNE T. SCHUSTER, age 37, Vice President and Controller of FLC since 1984.
KRISTIN L. CHRISTMAN, age 28, Portfolio Manager of FLC 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, 1995:
Name of Individual or Capacities in Number in Group Which Served Compensation
Fidelity Leasing Corporation General Partner $106,214(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, 1995, 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 Fidelity Leasing 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 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.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1995, the Fund was charged $106,214 of management fees by the General Partner. The General Partner will continue to receive 6% of rental payments on equipment under operating leases for administrative and management services performed on behalf of the Fund.
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 10% cumulative compounded Priority Return. Based on current estimates, it is not expected that the Fund will be required to pay the General Partner a sales fee.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
The General Partner also receives 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, the General Partner will receive 10% of cash distributions. During the year ended December 31, 1995, the General Partner received $31,706 of cash distributions.
The Fund incurred $32,766 of reimbursable costs to the General Partner for services and materials provided in connection with the administration of the Fund during 1995.
PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2). The response to this portion of Item 14 is submitted as a separate section of this report commencing on page .
(a) (3) and (c) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Exhibit Numbers Description Page Number
3(a) & (4) Amended and Restated Agreement * of Limited Partnership
(9) not applicable
(10) not applicable
(11) not applicable
(12) not applicable
(13) not applicable
(18) not applicable
(19) not applicable
(22) not applicable
(23) not applicable
(24) not applicable
(25) not applicable
(28) not applicable
* Incorporated by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FIDELITY LEASING INCOME FUND III, L.P. A Delaware limited partnership
By: FIDELITY LEASING CORPORATION
Freddie M. Kotek, Chairman By: ___________________________ Freddie M. Kotek, Chairman and President
Dated March 26, 1996
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 3-26-96 Freddie M. Kotek and President of Fidelity Leasing Corporation (Principal Executive Officer)
Michael L. Staines ___________________________ Director of Fidelity Leasing 3-26-96 Michael L. Staines Corporation
Marianne T. Schuster ____________________________ Vice President and Controller 3-26-96 Marianne T. Schuster of Fidelity Leasing Corporation (Principal Financial Officer)
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of Independent Certified Public Accountants
Balance Sheets as of December 31, 1995 and 1994
Statements of Operations for the years ended December 31, 1995, 1994 and 1993
Statements of Partners' Capital for the years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
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 III, L.P.
We have audited the accompanying balance sheets of Fidelity Leasing Income Fund III, L. P. as of December 31, 1995 and 1994, and the related statements of operations, changes in partners' capital and cash flows for each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles.
Grant Thornton, LLP Philadelphia, Pennsylvania February 2, 1996
FIDELITY LEASING INCOME FUND III, L.P.
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND III, L.P.
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND III, L.P.
The accompanying notes are an integral part of these financial statements.
FIDELITY LEASING INCOME FUND III, L.P.
In addition, the General Partner declared a cash distribution of $250,000 in February 1996 for the three months ended December 31, 1995, to all admitted partners as of December 31, 1995.