<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
- ----
1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
____ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
COMMISSION FILE NUMBER: 0-16601 (FORMERLY 33-16164-LA)
------------------------------
FMG RITA RANCH LIMITED PARTNERSHIP
----------------------------------
(Name of issuer in its charter)
Delaware 23-2466343
- -------------------------- ---------------------
(State of incorporation or (IRS Employer Identification
organization) Number)
250 King of Prussia Road, Radnor, Pennsylvania 19087
- ------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone no., including area code: (610) 964-7234
Securities registered pursuant to Section 12(b) of the Act.
Name of each exchange
Title of each Class on which registered
------------------- -------------------
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units $1,000 Per Unit
-----------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained in this form, and no disclosure will be contained, to the best
of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
<PAGE> 2
FMG RITA RANCH LIMITED PARTNERSHIP
FORM 10-K
TABLE OF CONTENTS
ITEM
- ----
PART I
- ------
Item 1. Business
Background............................................. 4
Material Recent Developments........................... 4
Competition ........................................... 4
Employees ............................................. 5
Trademarks and Patents ................................ 5
Item 2. Property .................................................... 5
Item 3. Legal Proceedings ........................................... 6
Item 4. Submission of Matters to a Vote of Security
Holders ..................................................... 6
PART II
- -------
Item 5. Market for the Partnership's Units of Limited
Partnership Interest and Related Security
Holder Matters .............................................. 6
Item 6. Selected Financial Data ..................................... 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Background ............................................ 7
Results of Operations ................................. 7
Liquidity and Capital Resources ....................... 8
Item 8. Financial Statements and Supplementary Data ................. 8
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ...................... 8
PART III
- --------
Item 10. Directors and Executive Officers of the
Partnership ................................................. 9
2
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Item 11. Executive Compensation ...................................... 10
Item 12. Security Ownership of Certain Beneficial
Owners and Management
(a) Security Ownership of Certain
Beneficial owners ............................... 10
(b) Security Ownership of Management ............... 10
(c) Changes in Control .............................. 11
Item 13. Certain Relationships and Related Transactions .............. 11
PART IV
- -------
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K ......................................... 12
SIGNATURES .............................................................. 14
3
<PAGE> 4
PART I
ITEM 1. BUSINESS
Background
----------
FMG Rita Ranch Limited Partnership (the "Partnership") was formed on
January 30, 1987, as a Delaware limited partnership with FMG Western Region
Acquisitions, Inc. (the "General Partner") as its sole general partner. On March
19, 1987, the Partnership acquired 118 acres of unimproved land (the "Property")
in Tucson, Arizona. The Partnership's primary business objectives is to realize
appreciation in the value of the Property by holding the Property for investment
and eventual sale, although there is no assurance that this will be attained.
The Partnership's public offering of 6,707 Units of limited
partnership interest ("Units") commenced on October 29, 1987 and continued until
June 10, 1988. On June 10, 1988, 6,707 Units had been sold for $6,281,295 to 105
investors, including an affiliate of the General Partner which acquired 5,008.3
Units.
The General Partner has no plans to develop the Property, except for
activities including land planning, market surveys and other activities
necessary to prepare the Property for sale. There can be no assurance that
necessary funds would be available should it be desirable for the Partnership to
improve the Property to facilitate its sale.
Because of the lack of demand for industrial and commercial land in
the Tucson area and the resulting decline in the Property's value, the
Partnership was required to reduce its carrying value on the Property in 1990
and again in 1992. The General Partner believes that it would be necessary for
the Partnership to hold the property for several years, possibly decades, before
the Partnership may be able to sell the Property at a price which approximates
the price paid by the Partnership for the Property. Thus, it is unlikely that
the Property will be sold for a price which approximates the original price paid
by the Partnership for the Property.
Material Recent Developments
----------------------------
None
Competition
-----------
Rita Ranch is a 2,700 acre master planned development of which
approximately 1,200 acres are designated for industrial use. Properties within
Rita Ranch are subject to conditions, covenants, restrictions and a
master-planned layout which affects zoning and land use patterns. To date, there
are only four improved industrial properties utilizing approximately 50 acres
situated within the Rita Ranch community. While Rita Ranch contains
predominately
4
<PAGE> 5
residential land uses with areas designated for commercial and industrial
development, the majority of the neighborhood is either in use or designated for
industrial related purposes.
The subject property is located in Tucson's southeastern outskirts.
Development in virtually all market sectors can be expected to increase as
Tucson expands to the east. The residential market has recently shown marked
signs of improvement, predominantly within Rita Ranch. Limited commercial growth
serving residents staple needs is anticipated for the Rita Ranch area but
significant retail or office demand will likely continue to be served from
eastside commerce centers until the residential population reaches levels to
support pre-leased development. Additionally, the remote location of Rita Ranch,
restrictive conditions, covenants, and vast amounts of available and affordable
industrially zoned land throughout metropolitan Tucson discourages an overly
optimistic prediction of demand for industrial uses at the present time, but
development is anticipated to occur as population growth continues.
Employees
---------
The Partnership has no employees. The General Partner manages and
controls the affairs of the Partnership. (See Part III, Item 10, Directors and
Executive Officers of the Partnership).
Trademarks and Patents
----------------------
The Partnership has no trademarks or patents.
ITEM 2. PROPERTY
The Partnership owns 118 acres of undeveloped land situated at the
southwest corner of Old Vail and Houghton Roads in the Rita Ranch subdivision of
Tucson, Arizona. It is comprised of two contiguous parcels, one of which is 110
acres and is zoned industrial (the "Industrial Parcel") and the other of which
is eight acres and is zoned commercial (the "Commercial Parcel").
In October 1996, an appraisal was ordered on the subject
property. A summary of the site data indicates that the visibility of the site
from Houghton Road and the location near an entrance to Rita Ranch are both
positive. In addition, the fact that eight acres are zoned commercial at the
corner of Old Vail and Houghton Road could be an advantage in the future. The
property provides rail access, but the topography of the site would require an
estimated 15 foot ballast height and substantial engineering/grading to make
this a reality. The presence of the gas pipeline easement and the below grade
nature along Houghton Road are negative characteristics for future development.
Also, all future site development is subject to restrictions which could lead to
significant screening and landscaping costs relevant to most industrial and
commercial uses. Properties have been marketed for a year to several years in
the area before a transaction closes. Due to the lack of demand for large vacant
land parcels in this submarket of Tucson, the appraiser has estimated the "As
Is" value to be $475,000 or approximately $4,000 per acre.
5
<PAGE> 6
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not a direct party to, nor is the Partnership's
property directly the subject of, any material legal proceedings. However, on
November 6, 1992, the Commonwealth Court of Pennsylvania issued an order placing
Fidelity, the indirect parent of the General Partner, into rehabilitation under
the control and authority of the Pennsylvania Insurance Commissioner pursuant to
the provisions of the Pennsylvania Insurance Department Act, 40 P.S. Section S
221.1 et seq. The Partnership is not a direct party to the order, but ownership
of the stock of the General Partner and the stock of the majority Limited
Partner is vested in the Insurance Commissioner pursuant to the order.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fiscal year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF LIMITED PARTNERSHIP
INTEREST AND RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the Units and it
is not anticipated that any will develop in the future. The Partnership
commenced an offering to the public on October 29, 1987 of 6,707 Units of
limited partnership interests. The offering continued until June 10, 1988 when
all 6,707 Units had been sold to 105 investors, including an affiliate of the
General Partner which acquired 5,008.3 Units.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
December 31 December 31 December 31 December 31 December 31
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating
Revenues $182 $33 $258 $285 $187
Net Income
(Loss)* $(33,130) $(32,560) $(19,621) $(19,470) $(859,538)*
</TABLE>
6
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net Income
(Loss) per
Unit of
Limited
Interest $(4.94) $(4.85) $(2.93) $(2.90) $(128.16)
</TABLE>
<TABLE>
<CAPTION>
December 31 December 31 December 31 December 31 December 31
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $350,267 $350,205 $350,292 $350,615 $353,836*
Long Term
Obligations -0- -0- -0- -0- -0-
Cash Distributions
Declared per Unit
of Limited
Partnership
Interest None None None None None
</TABLE>
(*) Includes a provision for loss on land of $830,000.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Background
----------
The Partnership was formed to acquire and realize appreciation in
the Property by holding it for investment and eventual sale. However, there can
be no assurance that the Partnership's objectives will be realized.
Results of operations
---------------------
The Partnership's revenues for fiscal year 1996 consisted of
interest income of $7 and partnership transfer fees of $175. Expenses for 1996
consisted primarily of general and administrative costs of $8,715, insurance of
$131, real estate taxes of $9,466 and management fees of $15,000.
The Partnership's revenues for fiscal year 1995 consisted of
interest income of $8 and partnership transfer fees of $25. Expenses for 1995
consisted primarily of general and administrative costs of $7,051, insurance of
$127, real estate taxes of $10,415 and management fees of $15,000.
7
<PAGE> 8
The Partnership's revenues for fiscal year 1994 consisted of
interest income of $8 and partnership transfer fees of $250. Expenses for 1994
consisted primarily of general and administrative costs of $4,481, insurance of
$1,801 and real estate taxes of $13,597.
The current real estate forecast for Rita Ranch is that there will
continue to be an absorption of vacant land in other Tucson submarkets, and
improvements in the immediate area, in particular the residential sector which
is one of the fastest growing in Tucson, Arizona. Unfortunately, the commercial
and industrial market growth has been limited.
Liquidity and Capital Resources
-------------------------------
The Partnership has no cash reserve remaining at December 31, 1996.
As shown in the accompanying financial statements, the Partnership has incurred
substantial operating losses in each of the past three years. Such losses will
continue until the Partnership begins to sell land parcels. In the partnership
agreement, the General Partner has committed to contribute up to $600,000 to the
capital of the Partnership as the need for additional working capital arises.
Cumulative amounts funded by the General Partner amounted to $273,181 at
December 31, 1996. Realization of the Partnership's assets is dependent upon the
continued funding of operating deficits by the General Partner and its
affiliate. There can be no assurance, however, that the General Partner or its
affiliate will continue to fund operating deficits.
During 1992 and 1990, the Partnership recorded writedowns of
$830,000 and $6,261,041 respectively.
The weak conditions in both the real estate and industrial sectors
of Tucson are responsible for nearly halting sales of undeveloped industrial
land. These unfavorable conditions have contributed to the substantial decrease
in the value of the Partnership's land.
While the growth in the Rita Ranch Planned Community is encouraging,
we continue to believe that the property should be held until the demand for
industrial land and corresponding values rebound.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the years ended December
31, 1996 and 1995 together with the report of the Partnership's independent
accountant, Ernst & Young LLP, is included in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
8
<PAGE> 9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Partnership does not have any directors or officers. The General
Partner manages and controls the affairs of the Partnership and has
responsibility for all aspects of the Partnership's operations. The current
executive officers and directors of the General Partner are identified and
described below. Officers and directors serve until their successors have been
elected.
Arthur W. Mullin is a Director, President and Treasurer of the
General Partner. Mr. Mullin is also an officer and director of various other
subsidiaries of Fidelity Mutual. Mr. Mullin was appointed senior vice
President and Director of Real Estate for Fidelity Mutual in June 1993 and
served in that capacity until January 31, 1995. He is currently President of
KMR Management, Inc., a management advisory firm which provides advise to
corporations and institutions regarding corporate, financial and real estate
matters. Before joining Fidelity Mutual, Mr. Mullin served as President of
KMR Management, Inc. Mr. Mullin received a B.S. in Political Science and a
M.S. in Education from St. Joseph's University, Philadelphia, Pennsylvania.
William S. Taylor is Director and Vice President of the General
Partner. Mr. Taylor is also an officer and director of various other
subsidiaries of Fidelity Mutual. Mr. Taylor is the Deputy Insurance
Commissioner for Liquidations, Rehabilitations and Special Funds for the
Commonwealth of Pennsylvania. Mr. Taylor has a bachelor's degree in Economics
fro Elizabethtown College and a masters degree in Governmental Administration
from the University of Pennsylvania.
James W. Kelican, Jr., CPM, is a Director and Vice President of
the General Partner. Mr. Kelican is also an officer and director of various
other subsidiaries of Fidelity Mutual. Mr. Kelican was appointed Vice
President - Real Estate for Fidelity Mutual in July, 1993 and Senior Vice
President and Director of Real Estate in October 1994. Mr. Kelican has a
B.S. in Business Administration from Drexel University, Philadelphia,
Pennsylvania and has the title of Certified Property Manager from the
Institute of Real Estate Management of the National Association of Realtors.
Robert Bixler is Secretary of the General Partner. Mr. Bixler is
also the Secretary of various other subsidiaries of Fidelity Mutual. Mr.
Bixler is a Vice President and Associate Counsel of Fidelity Mutual. Mr.
Bixler received his A.B. degree in Economics from Temple University, and his
J.D. degree from Temple University Law School, Philadelphia, PA. He is a
member of the American Bar Association and the Philadelphia Bar Association.
Margaret Tamasitis is Assistant Secretary of the General
Partner. Ms. Tamasitis is also Assistant Secretary of various other
subsidiaries. Ms. Tamasitis is a Second Vice President of Fidelity Mutual in
the Controller's office and has been with Fidelity Mutual for 26 years. Ms.
Tamasitis received her B.S. degree in Accounting from Temple University,
Philadelphia, PA.
9
<PAGE> 10
ITEM 11. EXECUTIVE COMPENSATION
As of December 31, 1996 the Partnership did not pay remuneration to
any officers of the General Partner. Fees which have been paid or are payable to
the General Partner and affiliates are set forth in Item 13 of this report,
"Certain Relationships and Related Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent
Title of Class Owner Ownership of Class
-------------- ----- --------- --------
<S> <C> <C> <C> <C>
(1) Units of Limited Equity 5,008.3 74.67
Partnership Products Units
Interest Corp.
250 King
of Prussia
Road,
Radnor, PA
19087
</TABLE>
Equity Products Corp., an affiliate of the General Partner,
purchased 5,008.3 General Partnership Units for $4,582,560. The General
Partnership Units are more fully described in the Partnership Agreement. Equity
Products Corp. purchased these units for $915 per Unit, which amount is net of
selling commissions.
As of December 31, 1996, no other person or "group" (as that
term is used in Section 13(d) (3) of the Securities Exchanged Act of 1934) was
known by the Partnership to beneficially own more than five percent of the units
of the Partnership.
- -------------------------------------------------------------------------------
(1) Units of limited partnership interest owned by Equity Products Corp. are
designated in the Partnership Agreement as General Partnership Units.
(b) Security Ownership of Management
The General Partner does not own any of the Partnership's
outstanding limited partnership interests.
10
<PAGE> 11
No individual director or officer of the General Partner nor such
directors or officers as a group, owns any of the Partnership's outstanding
securities. The General Partner owns a general partnership interest which
enables it to receive 1% of cash distributions until the Limited Partners have
received a return of their Capital Contributions plus cumulative distributions
equal to 9% non-compounded Cumulative Annual Return of their Adjusted Capital
Contributions as those terms are defined in the Partnership Agreement.
Thereafter, the General Partner will receive a 9% return on any portion of its
$600,000 capital contribution and the balance, 80% to the limited partners and
20% to the General Partner. The General Partner will share in taxable income to
reflect cash distributions, or to the extent there are losses, 1% of such
losses.
(c) Changes in Control
There are no arrangements known to the Partnership that would at any
subsequent date result in a change in control of the Partnership. The impact of
Fidelity's rehabilitation and rehabilitation order (as described in Part I, Item
3, Legal Proceedings) on the Partnership or the General Partner cannot be
determined at this time.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, an annual management fee of $15,000 was paid to the
General Partner. This fee is computed as .2% of the cost of the land. The
cumulative amount of such fee may not exceed $128,000, and cumulative fees
charged since inception amounted to $90,000 at December 31, 1996. However, if
the Partnership's reserves are exhausted, the unpaid portion of this fee will be
paid, without interest from the proceeds of the sale of the Property after the
Limited Partners have received distributions equal to their Capital
Contributions and Unpaid Cumulative Return.
The General Partner will also receive 1% of cash distributions until
the Limited Partners have received (i) a return of their Capital Contributions
plus (ii) cumulative distributions equal to a 9% Annual Return on their Adjusted
Capital Contributions (as those terms are defined in the Limited Partnership
Agreement). Thereafter, the General Partner will receive a 9% return on any
portion of its $600,000 capital contribution and the balance, 80% to the limited
partners and 20% to the General Partner. During 1996, 1995 and 1994, the General
Partner received no cash distributions.
11
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) Index to Financial Statements Page
----------------------------- ----
Report of Independent Auditors 1
Balance Sheet at December 31, 1996 and 1995 2
Statements of Operations 3
Statements of Partners' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Schedules have been omitted because they are inappropriate, not required, or the
information is included elsewhere in the financial statements or notes thereto.
(b) Reports on Form 8-K
-------------------
1. None
(c) Exhibits Incorporated by Reference (numbered in accordance with Item 601
------------------------------------------------------------------------
of Regulation S-K
-----------------
Exhibit Numbers Description
- --------------- -----------
3.1 Certificate of Limited Partnership and First
Amended Limited Partnership Certificate.(2)
3.2 & 4 Amended and Restated Limited Partnership Agreement.(3)
9 not applicable
10.1(a) First Deed of Trust and Assignment of Rents dated
December 31, 1985, from South Rita Associates to
Pima Service Corporation, as amended, March 16, 1987,
securing a $3,088,680 obligation.(2)
- -------------------------------------------------------------------------------
(2) Incorporated by reference to Exhibits 3.1, 10.1(a) and (b), and 10.2(a)
and (b) respectively filed as part of the Exhibits to the Partnership's
Registration Statement on Form S-18, Registration No. 33-16164-LA.
(3) Incorporated by reference to Exhibit 3.2 filed as part of the
Partnership's Registration Statement on Form S-18, Registration No.
33-16164-LA.
12
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Exhibit Numbers Description
- --------------- -----------
10.1(b) $3,088,680 Promissory Note, dated July 24, 1987, from
South Rita Associates to Pima Service Corporation.(2)
10.2(a) First Deed of Trust and Assignment of Rents dated
December 31, 1985, from South Rita Associates to Pima
Service Corporation, as amended, March 16, 1987,
securing a $221,200 obligation.(2)
10.2(b) $221,200 Promissory Note, dated July 24, 1987, from
South Rita Associates to Pima service Corporation.(2)
11 not applicable
12 not applicable
13 not applicable
16 not applicable
18 not applicable
19 not applicable
22 not applicable
23 not applicable
24 not applicable
25 not applicable
29 not applicable
- -------------------------------------------------------------------------------
(2) Incorporated by reference to Exhibits 3.1, 10.1(a) and (b), and 10.2(a)
and (b) respectively filed as part of the Exhibits to the
Partnership's Registration Statement on Form S-18, Registration No.
33-16164-LA.
13
<PAGE> 14
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.
FMG RITA RANCH LIMITED PARTNERSHIP, a Delaware limited
partnership
By: FMG WESTERN REGION ACQUISITIONS, INC., General
Partner
Dated: 3/26/97 By: /s/ Arthur W. Mullin
------- ----------------------------------
Arthur W. Mullin
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 date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Arthur W. Mullin President, 3/26, 1997
- ------------------------- Treasurer, ------------
Arthur W. Mullin Director of
FMG Western
Region
Acquisitions, Inc.
/s/ William S. Taylor Vice President, 3/26, 1997
- ------------------------- Director of ------------
William S. Taylor FMG Western
Region
Acquisitions, Inc.
/s/ James W. Kelican Jr. Vice President, 3/26, 1997
- ------------------------- Director of ------------
James W. Kelican Jr. FMG Western
Region
Acquisitions, Inc.
14
<PAGE> 15
Financial Statements
FMG Rita Ranch Limited Partnership
Years ended December 31, 1996 and 1995
with Report of Independent Auditors
<PAGE> 16
Financial Statements
FMG Rita Ranch Limited Partnership
Years ended December 31, 1996 and 1995
CONTENTS
Report of Independent Auditors........................................1
Audited Financial Statements
Balance Sheets........................................................2
Statements of Operations..............................................3
Statements of Partners' Equity........................................4
Statements of Cash Flows..............................................5
Notes to Financial Statements.........................................6
<PAGE> 17
Report of Independent Auditors
To the Partners of
FMG Rita Ranch Limited Partnership
We have audited the accompanying balance sheets of FMG Rita Ranch Limited
Partnership (a Delaware Limited Partnership) as of December 31, 1996 and 1995,
and the related statements of operations, partners' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Partnership'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 FMG Rita Ranch Limited
Partnership as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that FMG Rita
Ranch Limited Partnership will continue as a going concern. As more fully
discussed in Note 1, the Partnership lacks adequate working capital to meet its
future obligations as they become due and must continue to rely on the General
Partner and its ultimate parent to provide these funds. On November 6, 1992, due
to continuing significant operating difficulties, the Commonwealth Court of
Pennsylvania placed Fidelity Mutual Life Insurance Company, the ultimate parent
of the General Partner, into Rehabilitation. Because of this Rehabilitation,
there is no assurance that continued financing of the Partnership will be
permitted. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements of the
Partnership do not include any adjustments to reflect the possible future
effects on the recoverability of assets or the amounts of liabilities that may
result from the possible inability of FMG Rita Ranch Limited Partnership to
continue as a going concern.
March 7, 1996
1
<PAGE> 18
FMG Rita Ranch Limited Partnership
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------
<S> <C> <C>
ASSETS
Land, net $ 350,000 $ 350,000
Cash 267 205
==============================
$ 350,267 $ 350,205
==============================
LIABILITIES AND PARTNERS' EQUITY
Accrued expenses $ 9,661 $ 9,842
Due to affiliates 3,750 3,750
Partners' equity:
General partner 112,254 79,212
Limited partners 224,602 257,401
------------------------------
$ 350,267 $ 350,205
==============================
</TABLE>
See accompanying notes.
2
<PAGE> 19
FMG Rita Ranch Limited Partnership
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
Revenues $ 182 $ 33 $ 258
Expenses:
Real estate taxes 9,466 10,415 13,597
General and administrative 8,715 7,051 4,481
Management fee 15,000 15,000 -
Insurance 131 127 1,801
----------------------------------------
33,312 32,593 19,879
----------------------------------------
Net loss:
Allocated to General Partner (331) (326) (196)
Allocated to Limited Partners (32,799) (32,234) (19,425)
----------------------------------------
$(33,130) $(32,560) $(19,621)
========================================
Net loss per limited partnership unit $ (4.94) $ (4.85) $ (2.93)
========================================
</TABLE>
See accompanying notes.
3
<PAGE> 20
FMG Rita Ranch Limited Partnership
Statements of Partners' Equity
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
---------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1994 $ 20,949 $ 309,060 $ 330,009
Capital contributions 28,808 - 28,808
Net loss (196) (19,425) (19,621)
---------------------------------------------
Balance, December 31, 1994 49,561 289,635 339,196
Capital contributions 29,977 - 29,977
Net loss (326) (32,234) (32,560)
---------------------------------------------
Balance, December 31, 1995 79,212 257,401 336,613
Capital contributions 33,373 - 33,373
Net loss (331) (32,799) (33,130)
---------------------------------------------
Balance, December 31, 1996 $ 112,254 $ 224,602 $ 336,856
=============================================
</TABLE>
See accompanying notes.
4
<PAGE> 21
FMG Rita Ranch Limited Partnership
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (33,130) $ (32,560) $(19,621)
Adjustments to reconcile net loss to
net cash used in operating activities:
Changes in operating assets
and liabilities:
Due to affiliates -- 3,750 --
Accrued expenses (181) (1,254) (9,510)
-------------------------------------------
Net cash used in operating activities (33,311) (30,064) (29,131)
FINANCING ACTIVITIES
Cash contributions from general partner 33,373 29,977 28,808
-------------------------------------------
Net cash provided by financing activities 33,373 29,977 28,808
-------------------------------------------
Net increase (decrease) in cash 62 (87) (323)
Cash, beginning of year 205 292 615
-------------------------------------------
Cash, end of year $ 267 $ 205 $ 292
===========================================
</TABLE>
See accompanying notes.
5
<PAGE> 22
FMG Rita Ranch Limited Partnership
Notes to Financial Statements
December 31, 1996
1. DESCRIPTION OF BUSINESS
FMG Rita Ranch Limited Partnership is a Delaware Limited Partnership. The
General Partner (FMG Western Region Acquisitions, Inc.) is an indirect wholly
owned subsidiary of The Fidelity Mutual Life Insurance Company (in
Rehabilitation). There are 6,707 limited partnership units outstanding at
December 31, 1996. Per the Partnership Agreement, the Partnership shall exist
for a term ending December 31, 2026, at which time it shall be dissolved.
The Partnership owns approximately 118 acres of unimproved land in Tucson,
Arizona. The Property is held for investment and eventual sale as conditions
warrant.
As the Partnership lacks working capital it has been and is dependent upon the
General Partner honoring its agreement to fund operating needs up to $600,000.
As the General Partner does not have the necessary funds to meet this obligation
it has been dependent upon its ultimate parent, Fidelity Mutual Life Insurance
Company, to provide such funds.
On November 6, 1992, the Commonwealth Court of Pennsylvania placed Fidelity
Mutual Life Insurance Company (the Company) into Rehabilitation. The
Rehabilitator was granted immediate exclusive possession and control of, and
title to, the business and assets of the Company. The Rehabilitator has been
directed to conduct the business of the Company and to begin taking such steps
as deemed appropriate toward removing the cause and conditions that have made
the rehabilitation necessary.
The ultimate impact of the Rehabilitation of the Company on the Partnership
cannot be determined at this time. As discussed in Note 4, the General Partner
has agreed to fund the Partnership's obligations up to $600,000. There is no
assurance that this agreement can be honored under the Rehabilitation. The
Partnership's financial statements are presented on the basis of a going concern
and do not include any adjustments relating to the possible future effects on
the recoverability of assets or amount of liabilities that may result from the
possible inability of the Partnership to continue as a going concern. The
General Partner, however, at this time does not expect that the Rehabilitation
of the Company will negatively impact the operation of either the General
Partner or the Partnership. The Company filed its Rehabilitation Plan in June
1994 and subsequently amended it in January 1995 and again in June 1996.
6
<PAGE> 23
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Partnership maintains its accounting records on the accrual basis of
accounting.
LAND
Land is carried at the lower of cost or fair value. The carrying value of land,
as disclosed on the balance sheet, is shown net of write-downs of $830,000 and
$6,261,041 in 1992 and 1990, respectively.
INCOME TAXES
In conformity with the Internal Revenue Code and applicable state and local tax
statutes, taxable income or loss of the Partnership is required to be reported
in the tax returns of the partners in accordance with the terms of the
Partnership Agreement. Accordingly, no provision has been made in the
accompanying financial statements for any federal, state, or local income taxes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect various amounts reported in the financial statements and accompanying
notes.
3. RELATED PARTY TRANSACTIONS
In 1996 and 1995, the Partnership was charged an annual management fee of
$15,000 by the General Partner. The cumulative amount of such fee may not exceed
$128,000, and cumulative fees charged since inception amounted to $90,000 at
December 31, 1996. For 1994, the General Partner waived its management fee
charges.
7
<PAGE> 24
4. PARTNERS' EQUITY
The Partnership received cash equity contributions totaling $6,281,294 through
the sale of limited partnership units, of which $4,583,560 was contributed by an
affiliate of the General Partner.
The General Partner has agreed to contribute up to $600,000 to the capital of
the Partnership if the need for additional funding arises. Cumulative amounts
funded by the General Partner amounted to $273,181 at December 31, 1996.
CASH DISTRIBUTIONS
Except for distributable proceeds from capital transactions and distributable
proceeds from refinancings, as defined in the partnership agreement, and upon
liquidation of the Partnership, cash distributions, if any, will be made 99% to
the limited partners and 1% to the General Partner. Distributable proceeds from
capital transactions involving less than all or substantially all of the
Partnership's assets and distributable proceeds from refinancings will be
distributed in the following order of priority: (i) to limited partners with
positive balances in their capital accounts as maintained for federal tax
purposes ("Capital Accounts") in proportion to and to the extent of such
positive balances but not to exceed the amount required to compensate the
limited partners for federal taxes incurred as a result of the capital
transaction, (ii) to all partners with positive balances in their Capital
Accounts after the capital transaction, in proportion to and to the extent of
such positive balances; (iii) to the partners until they have received a return
of their capital contributions ($6,413,757 at December 31, 1996); (iv) to the
limited partners until they have received their unpaid cumulative (i.e., a 9%
(noncompounded)) annual return on their adjusted capital contributions
($5,018,240 at December 31, 1996), and to the General Partner until it has
received a 9% return on any portion of its $600,000 capital contribution that it
has made; and (vi) the balance, 80% to the limited partners and 20% to the
General Partner. Distributions in connection with the sale of all or
substantially all of the Partnership's assets or the Partnership's liquidation
will be made in accordance with the positive balances in the partners' Capital
Accounts.
8
<PAGE> 25
4. PARTNERS' EQUITY (CONTINUED)
CASH DISTRIBUTIONS (CONTINUED)
Although all cash flow from operations will be distributed (and not reinvested),
the General Partner does not anticipate that cash distributions will be made
other than from capital transactions and as a result of refinancings prior to
liquidation of the Partnership.
PROFITS AND LOSSES
Profits from capital transactions will be allocated in the following order: (i)
to those partners having negative capital accounts, pro rata, to the extent of
their negative capital accounts; and (ii) the balance in those proportions as
will produce capital account balances, which would result in distributions of
distributable proceeds from capital transactions as described above. Profits
which arise other than from capital transactions will, to the extent of cash
distributions (other than those which represent proceeds from capital
transactions), be allocated to reflect cash distributions and to the extent
those profits exceed those cash distributions, the excess will be allocated as
if it was profit from a capital transaction. Generally, losses will be allocated
99% to the limited partners in proportion to their units and 1% to the General
Partner to reduce any positive balances in the partners' capital accounts. In no
event will the General Partner be allocated less than 1% of profit or loss for
any year.
9
<TABLE> <S> <C>
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<CIK> 0000820047
<NAME> FMG. RITA RANCH LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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<PP&E> 350,000
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0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 350,267
<SALES> 182
<TOTAL-REVENUES> 182
<CGS> 0
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<INCOME-PRETAX> (33,130)
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<NET-INCOME> (33,130)
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</TABLE>
