UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number: 0-17149
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
(Exact name of registrant as specified in its charter)
Delaware 04-2889712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) Zip Code)
Registrant's telephone number, including area code (617) 439-8118
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes .X No. ____
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
BALANCE SHEETS
February 28, 1997 and August 31, 1996 (Unaudited)
(In thousands)
ASSETS
February 28 August 31
----------- ---------
Real estate investments:
Investment properties held for sale, net $ 8,900 $ 8,900
Land 230 230
Mortgage loan receivable 1,270 1,270
------- -------
10,400 10,400
Cash and cash equivalents 2,454 2,637
Interest and land rent receivable 10 10
Accounts receivable 75 87
Prepaid expenses 11 27
Deferred expenses, net 23 25
------- -------
$12,973 $13,186
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - affiliates $ 33 $ 33
Accounts payable and accrued expenses 143 307
Tenant security deposits 92 85
Deferred management fees 245 245
Partners' capital 12,460 12,516
------- -------
$12,973 $13,186
======= =======
See accompanying notes.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
STATEMENTS OF INCOME
For the three and six months ended February 28, 1997 and February 29, 1996
(Unaudited)
(In thousands, except per Unit amounts)
Three Months Ended Six Months Ended
February 28/29, February 28/29,
----------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Interest from mortgage loan $ 28 $ 28 $ 57 $ 57
Land rent 6 10 11 22
Other interest income 30 33 62 68
----- ------- ------ -------
64 71 130 147
Expenses:
Management fees 35 34 69 69
General and administrative 65 102 127 165
Amortization of deferred
expenses 1 1 2 2
----- ------- ------ -------
101 137 198 236
----- ------- ------ -------
Operating loss (37) (66) (68) (89)
Income from operations of
investment properties held
for sale, net 128 236 279 358
----- ------ ------ -------
Net income $ 91 $ 170 $ 211 $ 269
===== ====== ====== =======
Net income per Limited
Partnership Unit $0.12 $0.21 $0.27 $ 0.34
===== ===== ===== ======
Cash distributions per Limited
Partnership Unit $0.17 $0.17 $0.34 $ 0.34
===== ===== ===== ======
The above net income and cash distributions per Limited Partnership Unit are
based upon the 776,988 Units ($50 per Unit) of Limited Partnership Interest
outstanding during each period.
See accompanying notes.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the six months ended February 28, 1997 and February 29, 1996 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at August 31, 1995 $ (90) $13,716
Net income 3 266
Cash distributions (3) (264)
------ -------
Balance at February 29, 1996 $ (90) $13,718
====== =======
Balance at August 31, 1996 $ (101) $12,617
Net income 2 209
Cash distributions (3) (264)
------ -------
Balance at February 28, 1997 $ (102) $12,562
====== =======
See accompanying notes.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended February 28, 1997 and February 29, 1996 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 211 $ 269
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization of deferred expenses 2 2
Changes in assets and liabilities:
Accounts receivable 12 (88)
Prepaid expenses 16 8
Accounts payable and accrued expenses (164) (55)
Tenant security deposits 7 3
-------- -------
Total adjustments (127) (130)
-------- -------
Net cash provided by operating activities 84 139
Cash flows from financing activities:
Distributions to partners (267) (267)
-------- -------
Net decrease in cash and cash equivalents (183) (128)
Cash and cash equivalents, beginning of period 2,637 2,692
-------- -------
Cash and cash equivalents, end of period $ 2,454 $ 2,564
======== =======
See accompanying notes.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
Notes to Financial Statements
(Unaudited)
1. General
The accompanying financial statements, footnotes and discussion should be
read in conjunction with the financial statements and footnotes contained in
the Partnership's Annual Report for the year ended August 31, 1996. In the
opinion of management, the accompanying financial statements, which have not
been audited, reflect all adjustments necessary to present fairly the results
for the interim period. All of the accounting adjustments reflected in the
accompanying interim financial statements are of a normal recurring nature.
The accompanying financial statements have been prepared on the accrual basis
of accounting in accordance with generally accepted accounting principles
which require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities as of February 28, 1997 and August 31, 1996 and
revenues and expenses for the three- and six-month periods ended February 28,
1997 and February 29, 1996. Actual results could differ from the estimates
and assumptions used.
2. Mortgage Loan and Land Investments
The following first mortgage loan was outstanding at February 28, 1997 and
August 31, 1996 (in thousands):
Date of
Property Amount of Loan Interest Rate Loan and Term
-------- -------------- ------------- -------------
Park South Apartments $1,270 9% 12/29/88
Charlotte, North Carolina 13 years
The loan is secured by a first mortgage on the property and an assignment of
all tenant leases. Interest is payable monthly and the principal is due at
maturity.
The fair value of the Park South loan, which does not become prepayable until
December 1997, has been estimated using discounted cash flow analysis and
approximated the loan's carrying value as of February 28, 1997.
In addition to the above mortgage loan, the following land purchase-leaseback
transaction had also been entered into as of February 28, 1997 and August 31,
1996 (in thousands):
Cost of Land
Property to the Partnership Annual Base Rent
-------- ------------------ ----------------
Park South Apartments $ 230 $21 through 12/28/28
The land lease has a term of 40 years. Among the provisions of the lease
agreement, the Partnership is entitled to additional rent based upon gross
revenues in excess of a base amount, as defined. The Partnership received
additional rent of $11,000 during the six-month period ended February 29,
1996. No additional rent was received during the six-month period ended
February 28, 1997. The lessee has the option to repurchase the land for a
specified period of time beginning in December of 1997 at a price based on
the fair market value, as defined, but not less than the original cost to the
Partnership.
<PAGE>
The objectives of the Partnership with respect to its mortgage loan and land
investments are to provide current income from fixed mortgage interest
payments and base land rents, then to provide increases to this current
income through participation in the annual revenues generated by the property
as they increase above a specified base amount. In addition, the
Partnership's investment is structured to share in the appreciation in value
of the underlying real estate. Accordingly, upon either sale, refinancing,
maturity of the mortgage loan or exercise of the option to repurchase the
land, the Partnership will receive a 50% share of the appreciation above a
specified base amount.
3. Investment Properties Held for Sale
At February 28, 1997 and August 31, 1996, the Partnership owned two
operating investment properties directly as a result of foreclosure
proceedings prompted by defaults under the terms of first mortgage loans
held by the Partnership. Descriptions of the transactions through which the
Partnership acquired these properties and of the properties themselves are
summarized below:
Hacienda Plaza
--------------
The Partnership assumed ownership of Hacienda Plaza on June 22, 1990. The
property, which is comprised of 78,415 square feet of leasable office and
retail space in Pleasanton, California, was 85% leased as of February 28,
1997. The combined balance of the land and the mortgage loan investments at
the time title was transferred to the Partnership was $9,789,000. The
estimated fair value of the operating property at the date of foreclosure
was $8,200,000. Accordingly, a write-down of $1,589,000 was recorded in
fiscal 1990. Since the date of the foreclosure, the Partnership has recorded
provisions for possible investment loss totalling $3,300,000 to write down
the net carrying value of the Hacienda Plaza investment property to reflect
additional declines in its estimated fair value, net of selling expenses.
The resulting net carrying value of the Hacienda Plaza investment property
at both February 28, 1997 and August 31, 1996 is $4,900,000.
Spartan Place Shopping Center
-----------------------------
The Partnership assumed ownership of the Spartan Place Shopping Center, in
Spartanburg, South Carolina, on February 12, 1991. The property, which
consists of 151,489 square feet of leasable retail space, was 33% occupied
as of February 28, 1997. The combined balance of the land and the mortgage
loan investment at the time title was transferred, including the unamortized
balance of deferred costs associated with the original acquisition of the
Spartan Place investments, was $8,419,000. Management estimated that the
fair value of the property, net of selling expenses, at the time of the
foreclosure was $7,840,000. Accordingly, a loss of $579,000 was recorded in
fiscal 1991 to adjust the carrying value to this estimate and the investment
was reclassified to investment properties held for sale. Since the date of
the foreclosure, the Partnership has recorded provisions for possible
investment loss totalling $3,840,000 to write down the net carrying value of
the Spartan Place investment property to reflect additional declines in its
estimated fair value, net of selling expenses. The net carrying value of the
investment property was $4,000,000 at both February 28, 1997 and August 31,
1996.
During fiscal 1996, the Partnership entered into a preliminary agreement to
sell the Spartan Place property to a third party. Subsequent to the buyer's
due diligence period, however, the offer was withdrawn. Subsequent to the
termination of this sales contract, the Partnership has remarketed the
property to other interested parties while at the same time examining
potential financing strategies for the capital and tenant improvement costs
to be incurred should the Partnership decide to hold the property through
the required re-leasing period. The property, as noted above, has a
substantial amount of vacant space. Funds for such re-leasing costs would be
provided from a combination of Partnership cash reserves and secured
borrowings.
<PAGE>
The Partnership recognizes income from its investment properties held for
sale in the amount of the excess of the properties' gross revenues over the
sum of property operating expenses (including capital improvement expenses
and leasing commissions), taxes and insurance. Combined summarized operating
results for Hacienda Plaza and Spartan Place for the three- and six-month
periods ended February 28, 1997 and February 29, 1996 are as follows (in
thousands):
Three Months Ended Six Months Ended
February 28/29, February 28/29,
----------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Rental income and
expense reimbursements $ 423 $ 441 $ 817 $ 819
Other income 4 2 6 5
------- ------ ------ -----
427 443 823 824
Expenses:
Property operating expenses 211 163 372 366
Property taxes and insurance 88 44 172 100
------- ------ ------ -----
299 207 544 466
------- ------ ------ -----
Income from operations of
investment properties held
for sale, net $ 128 $ 236 $ 279 $ 358
======= ====== ====== =====
4. Related Party Transactions
The Adviser earned basic management fees of $69,000 for both of the six-month
periods ended February 28, 1997 and February 29, 1996, respectively. Accounts
payable - affiliates at both February 28, 1997 and August 31, 1996 consists
of management fees of $33,000 payable to the Adviser.
Included in general and administrative expenses for the six months ended
February 28, 1997 and February 29, 1996 is $71,000 and $69,000, respectively,
representing reimbursements to an affiliate of the Managing General Partner
for providing certain financial, accounting and investor communication
services to the Partnership.
Also included in general and administrative expenses for the six months ended
February 28, 1997 and February 29, 1996 is $3,000 and $5,000, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L. P.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
-------------------------------
The Spartan Place Shopping Center, in Spartanburg, South Carolina, was 33%
occupied as of February 28, 1997, compared to 35% at the end of last quarter.
This decrease was due to the loss of one of the two remaining non-anchor
tenants. During the quarter, the Center's leasing team continued to focus its
efforts on identifying anchor tenants for the two available anchor spaces at
Spartan Place. Although there has been interest in the available spaces, to date
no leases have been secured. As previously reported, Circuit City vacated one of
the anchor tenant spaces at the property during the quarter ended May 31, 1995
to move to a location they believed to be better suited to their future
operations. Circuit City had occupied 16,412 square feet at the Center and
remains obligated to pay annual base rent of approximately $112,000, plus its
pro rata share of operating expenses, through the end of its lease term in
January 2008. In addition, management of Phar-Mor, another anchor tenant, which
occupied 26% of the leasable space at Spartan Place, closed its store at Spartan
Place and terminated its lease in July 1995 as part of its bankruptcy
reorganization plan. A number of smaller shop space tenants also either went out
of business or failed to renew their leases during fiscal 1995 and 1996.
Re-leasing the Circuit City and Phar-Mor spaces to high-profile, strong credit
tenants will be critical to increasing shopper traffic at the center which will
be necessary to lease the vacant shop space. However, such re-leasing plans
could require a significant expansion and/or repositioning of the shopping
center. Alternatively, management has considered a possible sale of the property
prior to undertaking any major re-leasing commitments and potentially spending
significant funds or assuming financing for capital and tenant improvements.
During fiscal 1996, the Partnership entered into a preliminary agreement to sell
the Spartan Place property to a third party. Subsequent to the buyer's due
diligence period, however, the offer to purchase the property was withdrawn.
Subsequent to the termination of this sales contract, the Partnership has
remarketed the property to other interested parties while at the same time
examining potential financing strategies for the capital and tenant improvement
costs to be incurred should the Partnership decide to hold the property through
the required re-leasing period.
Over the past several months, the Partnership has received preliminary
inquiries from several parties interested in buying the Spartan Place property.
If firm commitments to lease the vacant anchor spaces at Spartan Place cannot be
obtained in the near term, management may conclude that a sale of the property
in an "as-is" condition would be in the best interests of the Limited Partners.
At the present time, real estate values for retail shopping centers in certain
markets are being adversely impacted by the effects of certain consolidations
and bankruptcies among retailers which have resulted in an oversupply of space
and by the generally flat rate of growth in overall retail sales. Such
conditions resulted in management revising downward its estimate of the fair
value of the Spartan Place property as of August 31, 1996.
The wholly-owned Hacienda Plaza office and retail complex was 85% leased as
of February 28, 1997, up from 84% as of November 30, 1996. As previously
reported, overall occupancy levels for the local Pleasanton, California office
market have improved considerably over the past 12-to 18- months, reaching the
mid to high-90% range. Such improvement is primarily the result of the
resurgence in the growth of the high technology industries. As a result, rental
rates in the Pleasanton office market have improved in recent months. In
addition, a significant amount of build-to-suit office and multi-family
residential properties have been constructed within the past year in the planned
development area in which Hacienda Park is located which has substantially
reduced the amount of available land which could be developed for competing
speculative office properties. As a result of these conditions, operations of
the Hacienda Plaza investment property have stabilized after several years of
intense local office and retail market competition. The occupancy in the retail
portion of the property increased to 81% during the quarter from 78% last
quarter. The increase occurred in January 1997 and was due to a new tenant that
opened a beauty shop in 1,080 square feet of space. The leasing team is
currently negotiating with another potential retail tenant that would occupy
approximately 2,600 square feet of space. A lease with this tenant is expected
to be signed during the third fiscal quarter. This prospective tenant would
bring the occupancy level in the retail portion of the property to 89%.
Occupancy of the office portion of the property remained at 89% as of February
28, 1997. Only one space was vacated during the quarter and it was immediately
re-leased to a new tenant at a higher rental rate.
Occupancy at the Park South Apartments in Charlotte, North Carolina, was
90% for the quarter ended February 28, 1997. Operations of the property continue
to fully support the debt service and ground lease payments owed to the
Partnership despite a recent weakening in market conditions for existing
properties in the greater Charlotte area. Over the past year, more than 3,900
new apartment units have been added to the overall Charlotte market.
Approximately 1,500 of these new units are in southeast Charlotte, where Park
South is located, and 708 of these new units are in Park South's submarket. In
addition, a new rental community is under construction within one mile of Park
South which will include 400 rental units, a retail center and a movie theater.
This property's pre-leasing program began in late August. In order to remain
competitive with these new units, Park South currently offers reduced rental
rates and/or discounted move-in rates to prospective tenants. As an incentive to
renew leases, current tenants are offered minimal increases at the expiration of
their leases. The use of rental concessions and renewal incentives is expected
to continue throughout fiscal 1997.
At February 28, 1997, the Partnership had available cash and cash
equivalents of $2,454,000. Such cash and cash equivalents will be used for the
working capital requirements of the Partnership, distributions to the partners
and, if necessary, for leasing costs related to the Spartan Place and Hacienda
Plaza properties. The Partnership's quarterly distribution rate is currently
equivalent to a 2% per annum return on remaining invested capital. Distributions
are expected to remain at this level until Spartan Place is either sold or its
operations have been stabilized. The source of future liquidity and
distributions to the partners is expected to be from the operations and future
sale of the two wholly-owned investment properties, mortgage interest and land
rent payments from the Partnership's mortgage loan and ground lease investments,
interest income on the Partnership's cash reserves, the repayment of the
mortgage loan receivable and the sale of the underlying parcel of land.
Results of Operations
Three Months Ended February 28, 1997
- ------------------------------------
The Partnership's net income decreased by $79,000 for the three months
ended February 28, 1997 when compared to the same period in the prior year. The
reason for this decline in net income is a $108,000 decrease in income from
operations of investment properties held for sale, which was partially offset by
a $29,000 decrease in the Partnership's operating loss. Income from operations
of investment properties held for sale decreased due to declines in net
operating income at Spartan Place and Hacienda Plaza of $60,000 and $48,000,
respectively, for the current three-month period. Net operating income at
Spartan Place decreased mainly due to a reduction in rental income of $56,000.
Rental income decreased due to a 4% decline in the average occupancy rate when
compared to the same period in the prior year. In addition, expense
reimbursements decreased significantly due to the decline in occupancy. Net
operating income at Hacienda Plaza decreased mainly due to increases in capital
expenditures and leasing commissions in the aggregate amount of $95,000. Under
the Partnership's accounting policy with respect to assets held for sale,
capital and tenant improvement costs and leasing commissions are expensed as
incurred. The increases in capital improvements and leasing commissions were
partially offset by an increase in rental revenue of $37,000 and a decrease in
real estate taxes of $15,000 for the current three-month period. Rental revenue
increased mainly due to an increase in average rental rates. Real estate taxes
decreased due to a reduction in the property's tax assessment.
The Partnership's operating loss decreased mainly due to a decrease mainly
due to a decline in general and administrative expenses which resulted from a
reduction in certain required professional services. The decrease in general and
administrative expenses was partly offset by a decrease in land rent revenue of
$4,000. Land rent revenue decreased because the Partnership did not receive any
additional rent in excess of the specified base amount from the Park South
Apartments pursuant to the terms of the ground lease during the current
three-month period.
Six Months Ended February 28, 1997
- ----------------------------------
The Partnership's net income decreased by $58,000 for the six months ended
February 28, 1997 when compared to the same period in the prior year. The reason
for this decline in net income is a $79,000 decrease in income from operations
of investment properties held for sale, which was partially offset by a $21,000
decrease in the Partnership's operating loss. Income from operations of
investment properties held for sale declined due to reductions in net operating
income at Spartan Place and Hacienda Plaza of $64,000 and $15,000, respectively,
for the current six-month period. Net operating income at Spartan Place declined
mainly due to a decrease in rental income of $52,000. Rental income decreased
due to a 4% decline in the average occupancy rate when compared to the same
period in the prior year. In addition, expense reimbursements decreased
significantly due to the decline in occupancy. Net operating income at Hacienda
Plaza decreased mainly due to an increase in capital expenditures and leasing
commissions in the aggregate amount of $95,000. Under the Partnership's
accounting policy with respect to assets held for sale, capital and tenant
improvement costs and leasing commissions are expensed as incurred. The increase
in the capital improvements expense was partially offset by an increase in
rental revenue of $50,000 and a decrease in real estate taxes of $13,000. Rental
revenue increased primarily due to an increase in average rental rates. Real
estate taxes decreased due to a reduction in the property's tax assessment.
The Partnership's operating loss decreased mainly due to a decline in
general and administrative expenses which resulted from a reduction in certain
required professional services. The decrease in general and administrative
expenses was partly offset by declines in land rent revenue and other interest
income of $11,000 and $5,000, respectively. Land rent revenue decreased because
the Partnership did not receive any additional rent in excess of the specified
base amount from the Park South Apartments pursuant to the terms of the ground
lease during the current six-month period. Other interest income decreased
mainly due to a decline in the average outstanding balance of the Partnership's
invested cash reserves.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As previously reported, in November 1994 a series of purported class
actions (the "New York Limited Partnership Actions") were filed in the United
States District Court for the Southern District of New York concerning
PaineWebber Incorporated's sale and sponsorship of various limited partnership
investments, including those offered by the Partnership. The lawsuits were
brought against PaineWebber Incorporated and Paine Webber Group Inc. (together
"PaineWebber"), among others, by allegedly dissatisfied partnership investors.
In March 1995, after the actions were consolidated under the title In re
PaineWebber Limited Partnership Litigation, the plaintiffs amended their
complaint to assert claims against a variety of other defendants, including
Fifth Mortgage Partners, Inc. and Properties Associates 1985, L.P. ("PA1985"),
which are the General Partners of the Partnership and affiliates of PaineWebber.
On May 30, 1995, the court certified class action treatment of the claims
asserted in the litigation.
The amended complaint in the New York Limited Partnership Actions alleged
that, in connection with the sale of interests in PaineWebber Mortgage Partners
Five, L.P., PaineWebber, Fifth Mortgage Partners, Inc. and PA1985 (1) failed to
provide adequate disclosure of the risks involved; (2) made false and misleading
representations about the safety of the investments and the Partnership's
anticipated performance; and (3) marketed the Partnership to investors for whom
such investments were not suitable. The plaintiffs, who purported to be suing on
behalf of all persons who invested in PaineWebber Mortgage Partners Five, L.P.,
also alleged that following the sale of the partnership interests, PaineWebber,
Fifth Mortgage Partners, Inc. and PA1985 misrepresented financial information
about the Partnership's value and performance. The amended complaint alleged
that PaineWebber, Fifth Mortgage Partners, Inc. and PA1985 violated the
Racketeer Influenced and Corrupt Organizations Act ("RICO") and the federal
securities laws. The plaintiffs sought unspecified damages, including
reimbursement for all sums invested by them in the partnerships, as well as
disgorgement of all fees and other income derived by PaineWebber from the
limited partnerships. In addition, the plaintiffs also sought treble damages
under RICO.
In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the New York Limited Partnership Actions outlining the terms under
which the parties agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and plan of allocation. On July 17, 1996,
PaineWebber and the class plaintiffs submitted a definitive settlement agreement
which provides for the complete resolution of the class action litigation,
including releases in favor of the Partnership and the General Partners, and the
allocation of the $125 million settlement fund among investors in the various
partnerships at issue in the case. As part of the settlement, PaineWebber also
agreed to provide class members with certain financial guarantees relating to
some of the partnerships. The details of the settlement are described in a
notice mailed directly to class members at the direction of the court. A final
hearing on the fairness of the settlement was held in December 1996, and in
March 1997 the court issued a final approval of the settlement.
In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests, including those
offered by the Partnership. The complaint alleges, among other things, that
PaineWebber and its related entities committed fraud and misrepresentation and
breached fiduciary duties allegedly owed to the plaintiffs by selling or
promoting limited partnership investments that were unsuitable for the
plaintiffs and by overstating the benefits, understating the risks and failing
to state material facts concerning the investments. The complaint seeks
compensatory damages of $15 million plus punitive damages against PaineWebber.
In September 1996, the court dismissed many of the plaintiffs' claims as barred
by applicable securities arbitration regulations. Mediation with respect to the
Abbate action was held in December 1996. As a result of such mediation, a
settlement between PaineWebber and the plaintiffs was reached which provides for
the complete resolution of such action. Final releases and dismissals with
regard to this action are expected to be received in April 1997.
Under certain limited circumstances, pursuant to the Partnership Agreement
and other contractual obligations, PaineWebber affiliates could be entitled to
indemnification for expenses and liabilities in connection with the litigation
described above. However, PaineWebber has agreed not to seek indemnification for
the amounts it is required to pay in connection with the settlement of the New
York Limited Partnership Actions. At the present time, the General Partners
believe that the resolution of these matters will not have a material impact on
the Partnership's financial statements, taken as a whole.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
SIGNATURES
Pursuant to the requirements 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.
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
By: FIFTH MORTGAGE PARTNERS, INC.
Managing General Partner
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Dated: April 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the quarter ended February 28,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 2,454
<SECURITIES> 0
<RECEIVABLES> 1,355
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,550
<PP&E> 9,130
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,973
<CURRENT-LIABILITIES> 268
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 12,460
<TOTAL-LIABILITY-AND-EQUITY> 12,973
<SALES> 0
<TOTAL-REVENUES> 409
<CGS> 0
<TOTAL-COSTS> 198
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 211
<INCOME-TAX> 0
<INCOME-CONTINUING> 211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
