Item 1. Business
Rancon Realty Fund I, a California Limited Partnership, (the Partnership) was organized in accordance with the provisions of the California Uniform Limited Partnership Act for the purpose of acquiring, developing, operating and ultimately selling real property. The general partners of the Partnership are Daniel L. Stephenson and Rancon Financial Corporation (RFC) (General Partners). The Partnership was organized in 1980, and completed its public offerings of limited partnership units (Units) in July, 1983. In 1996, four Units were abandoned as a result of limited partners desiring to longer receive a K-1 from the Partnership. The equity (deficit) balance of the abandoned Units has been allocated to the remaining limited partners. As of December 31, 1996, 18,346 Units were issued and outstanding. The Partnership has no employees.
At December 31, 1996, the Partnership owned two operating properties and two lots, which are more fully described in Item 2.

Item 2. Properties
Rancon Commerce Center
In May, 1981, the Partnership acquired approximately 91.5 gross acres of undeveloped land known as Winchester Commerce Center (WCC) in Temecula, Riverside County, California. In 1985, WCC was renamed Rancon Commerce Center (RCC). The Partnership subdivided RCC into 72 lots, many of which were further developed, and a substantial number of which were sold from 1986 to 1991. In December, 1996, the Partnership sold the Bowling Center, one of the rental properties developed on the RCC land. The Partnership currently owns a total of approximately 18 acres at RCC which consists of the Auto Service Center and seven undeveloped lots.
The Auto Service Center consists of a one story building with a tiltwall exterior with steel frame. The building is approximately 25,761 square feet of leasable space, of which approximately 5% is office space, on approximately 3.96 acres. The property is located in the Temecula/Murrieta trade area region at the intersection of Commerce Center Drive and Via Montezuma, an area characterized by mixed commercial uses including retail centers, restaurants, convenience retail and hotels.
The automotive sector of the commercial real estate market for Temecula has been strengthening primarily due to the addition of several regional and automotive users such as Pep Boys, Midas Mufflers, and AAMCO along with the addition of a Rancho Ford Dealership to the area. The area now has a wide range of automotive dealerships including Honda, Chrysler, Cadillac and Chevrolet that specialize in sales and service.
According to research conducted by the Partnership's property manager, there are only two competitive retail automotive centers within the trade market area of the Partnership's property. The combined Gross Leasable Area of these centers is approximately 55,702 square feet of which approximately 13.28% is vacant. This vacancy rate represents a 40% decrease from 1995. Effective lease rates in these centers vary from $.65 per square foot to $1.00 per square foot gross with Landlords continuing to provide rental incentives of at least one month free rent for each year of the term. The competition in the smaller user market (ranging in size from 900 square feet to 3,000 square feet) is in centers designed strictly for automotive users at significantly less rent in exchange for less parking, inferior location and flawed design. These owners are still offering some rental incentives along with reduced or scaled-down rental rates.
The Auto Service Center is in a unique position in that it competes with two like auto service centers and also multiple converted industrial projects that can offer much lower rates. The high end of the competition is Ynez Car Care Center whose asking rates are $1.00 per square foot modified gross (tenant pays utilities and interior janitorial costs), a change from the previous asking price of $.80 NNN (tenant pays all operating expenses, including taxes, insurance, and non-structural capital improvements), and CO-OP Auto Service Center at $.65 to $.70 per square foot modified gross. Both buildings are newer
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and management believes are in better locations. The industrial buildings have leased automotive space from $.45 per square foot to $.55 per square foot modified gross. These areas are zoned for general and light-industrial business and are currently only partially built-out.
Other industrial areas include several proposed business parks to be located on the east side of I-15 at Winchester Road. The industrial use buildings are primarily situated within planned business parks located in areas away from residential or other sensitive areas. These business parks provide a controlled climate for industrial and office uses to conduct business in an area favorable to commercial/industrial activity.
The RCC Auto Service Center occupancy level at December 31, expressed as a percentage of the total net rentable square feet, and the average annual effective rent per square foot for the last four years were:
Occupancy Level Average Annual Effective Percentage Rent per Square Foot ---------- -------------------- 1996 91% $ 7.37 1995 78% $ 8.31 1994 100% $ 7.50 1993 90% $ 7.50
The current annual effective rental rates range from $4.26 to $9.03 per square foot.
Average annual effective rent decreased in 1996, despite the increase in occupancy, due to four months of free rent given to a new tenant of the Auto Service Center which tenant's lease began May 1, 1996.
Five tenants occupy ten percent or more of the net rentable square footage of the building. The principal terms of the leases and the nature of the tenants' businesses are as follows:
Rancho Smog & Repair Thrifty Transmission Nature of Business: Smog testing & repair Automotive repair Lease Term: 7 years 4 years Expiration Date: March 31, 2000 April 30, 2001 Square Feet: 4,920 5,724 (% of rentable total): 19% 22% Annual Rent: $42,000 $49,000 Rent Increase: Annual-CPI Annual-CPI Renewal Options: None None
Durango, Inc. Enterprise Automotive Nature of Business: Automotive repair Automotive repair Lease Term: 4 years 6 years Expiration Date: September 30, 1998 November 30, 1999 Square Feet: 2,673 2,640 (% of rentable total): 10% 10% Annual Rent: $22,500 $21,000 Rent Increase: Annual-CPI Annual-CPI Renewal Options: None None
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Mufflers West Nature of Business: Muffler installation & repair Lease Term: 5 years Expiration Date: July 14, 1998 Square Feet: 2,640 (% of rentable total): 10% Annual Rent: $24,000 Rent Increase: Annual-CPI Renewal Options: None
In the opinion of management, the property is adequately covered by insurance.
At December 31, 1996, the RCC Auto Service Center is unencumbered.
During 1996, the RCC Auto Service Center property was assessed property taxes of approximately $15,000 based on a tax rate of 1.35%.
The undeveloped lots have entitlements in place for commercial or industrial use within the Rancon Commerce Center. The lots are located in Temecula, California on the west side of Commerce Center Drive and east of the Murrietta Creek in a light industrial and commercial area adjacent to the California Highway Patrol area headquarters. In November 1996, a new 100 year flood plan map was completed and released as part of the Murrieta Creek Flood Control Project. The Partnership's undeveloped lots are shown to be outside the flood plan although at this time the city of Temecula is not issuing building permits in this area. The proposed channel design that benefits the Partnership's lots must still be approved and this may take as long as three years. The property is held in fee by the Partnership, and is subject to covenants, conditions and restrictions recorded in 1982.
During 1996, the RCC unimproved lots were assessed property taxes of approximately $17,000 based on a tax rate of 2.12%
Mountain View Plaza Shopping Center
In July, 1981, the Partnership acquired approximately 21.7 gross acres of undeveloped land located in Mojave, Kern County, California. The purchase price was approximately $1,625,000. Of the 21.7 acres acquired, the Partnership developed approximately 12.8 acres as a neighborhood shopping center consisting of a detached 30,000-square foot retail building, two single-story multi-tenant retail buildings (9,534 square feet and 12,000 square feet, respectively), a 1,872-square foot fast food building and a 4,050-square foot family restaurant. A sixth free-standing building, consisting of approximately 1,584 square feet, was built and later sold to an unaffiliated purchaser on September 30, 1987. The Partnership operates the neighborhood shopping center as rental property and holds the balance of the land (approximately 8.9 acres) for sale.
Mountain View Plaza Shopping Center is constructed with masonry/concrete block with stucco store fronts and Mexican tile overhangs, and is the only large retail strip center in Mojave. The property is located in a very unpopulated area of Kern County. The population of Mojave is estimated at 4,000 (based on Census information) with 1,500 households. Statistics project this number to increase at approximately 4% per year.
Due to the remote location of Mojave, the size of the trade area and the fact that this is the only traditional retail center in Mojave, it is difficult to identify a retail property which directly competes with Mountain View Plaza. According to research conducted by the Partnership's property manager, the trade market has approximately 325,000 square feet of leasable space, of which approximately 12% is vacant. This vacancy rate is 2% higher than the average vacancy rate of approximately 10% for grocery/drug anchored centers in Kern County. The average asking rent of competitive centers is approximately $1.00
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per square foot per month with landlords achieving $.80-$.95 effective rental rates plus operating expenses. The average effective rental rate at Mountain View Plaza Shopping Center at December 31, 1996 was approximately $0.80.
The occupancy level at December 31, (including tenants with ground leases) expressed as a percentage of the total net rentable square feet, and the average annual effective rent per square foot for the last four years were:
Occupancy Level Average Annual Effective Percentage Rent per Square Foot 1996 89% $ 6.61 1995 91% $ 7.39 1994 85% $ 7.56 1993 93% $ 7.56
Mountain View Plaza Shopping Center property has two ground leases totaling 49,701 square feet. These tenants are only obligated to pay their pro-rata share of the common area expenses of the property.
In February 1996, the property lost a tenant due to financial instability. The tenant occupied 1,872 square feet of space and had an average annual effective rental rate of $25.31. Management continues to market the space for rent but has been unsuccessful.
The current annual rental rates range from $4.53 to $12.94 per square foot.
One tenant occupies more than ten percent of the net rentable square footage of the building. The principal terms of the lease and the nature of the tenant's business is as follows:
K-Mart Nature of Business: Retail Lease Term: 25 years Expiration Date: October 31, 2007 Square Feet: 30,000 (% of rentable total): 28% Annual Rent: $136,000 Rent Increase: Annual-CPI Renewal Options: None
In 1993, K-Mart Corporation vacated the space at Mountain View Plaza Shopping Center but has continued to meet its monthly rental obligations as set forth in the lease agreement.
In the opinion of management, the property is adequately covered by insurance.
At December 31, 1996, the Partnership has a single note payable secured by the Mountain View Plaza Shopping Center in the amount of $1,821,000. The note matures June 1, 2002.
During 1996, the Mountain View Plaza Shopping Center property was assessed property taxes of approximately $23,000 based on a tax rate of 1.11%.
The unimproved lots include 7.7 acres located behind the Mountain View Shopping Center, and 1.2 acres on two retail pads in front of the Center. The 1.2 acres are suitable for fast food restaurants. There are no entitlements in place for the 7.7 unimproved acres, and the Partnership has no plans to obtain them, since current demand for office or industrial property in this market is minimal. The property was acquired in 1982, and is zoned commercial. It suffers from poor access and a significant drainage problem which limits current usage.
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During 1996, the Mountain View Plaza unimproved lots were assessed property taxes approximately $5,000 based on a tax rate of 1.11%.
Item 3.

Item 4. Submission of Matters to a Vote of Security Holders
None.
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PART II
Item 5.

Item 5. Market for Partnership's Common Equity and Related Stock Holder Matters
Market Information
There is no established trading market for the Units.
Holders
As of December 31, 1996, a total of 2,507 persons (Limited Partners) held Units.
Distributions
Distributions are paid from either Sale or Refinancing Proceeds or Cash Available for Distribution.
Cash Available for Distribution is defined in the Partnership Agreement as all cash flow of the Partnership, after deducting such funds used to pay debt service, capital improvements and operating expenses, less adequate cash reserves for obligations of the Partnership for which there is no provision. All distributions of Cash Available for Distribution are divided in the ratio of 98% to the Limited Partners and 2% to the General Partners.
Sale or Refinancing Proceeds is defined in the Partnership Agreement as the net cash realized by the Partnership from the sale, disposition or refinancing of any property after retirement of applicable mortgage debt and all expenses related to the transaction. All distributions of Sale or Refinancing Proceeds are allocated generally as follows (a more explicit statement of these distribution policies is set forth in the Partnership Agreement):
(i) 100% to Limited Partners until they have received distributions from Sale or Refinancing Proceeds totaling 100% of their capital contributions, plus distributions from all sources equal to a 15% per annum cumulative noncompounded return on their unreturned capital contributions and (ii) thereafter 80% to the Limited Partners and 20% to the General Partners.
There were no distributions during the three most recent fiscal years.
Item 6.

Item 6. Selected Financial Data
The financial data should be read in conjunction with the financial statements and related notes contained elsewhere in this report. This financial data is not covered by the reports of the independent public accountants.
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Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL COMMITMENTS:
As of December 31, 1996, the Partnership had cash of $467,000. The remainder of the Partnership's assets consists primarily of it's investments in real properties, all held for sale, which totaled approximately $4,357,000 at December 31, 1996.
On February 12, 1997, the General Partners adopted a plan of orderly liquidation of the Partnership's assets. Accordingly, all investments in real estate are currently being marketed for sale. These investments are classified as rental property and land held for sale on the accompanying December 31, 1996 balance sheet and are recorded at the estimated fair value of the respective assets. The carrying value of the investments in real estate at December 31, 1996 does not purport to represent the ultimate sales price the Partnership will realize from the disposition of these assets nor are the amounts reflected in the accompanying financial statements intended to represent the ultimate amount to be distributed to partners.
The Partnership's sources of funds have included mortgage indebtedness, property operations, and property sales. Funds from property operations consist of cash generated from rental activities reduced by related rental expenses and costs associated with obtaining tenants. Net cash generated by property operations as well as the Partnership's cash reserves and interest income thereon have been used to pay expenses related to the Partnership's administrative operations.
All of the Partnership's assets are located within the Inland Empire, a submarket of Southern California, and have been directly affected by the economic weakness of the region. Management believes, however, that the market has flattened and is no longer falling in terms of sales prices. While prices have not increased significantly, the Southern California real estate market appears to be improving.
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On December 11, 1996, the Partnership sold the Bowling Center to an unaffiliated third party for $700,000. The sale resulted in a gain of $138,000 and cash proceeds of $636,000. The Partnership used the proceeds to payoff an unsecured note payable of $144,000 and replenish cash reserves. The sale was an all cash sale and the Partnership has no continuing obligations or involvement with the property. Accordingly, the Partnership recognized the sale of the Bowling Center property under the full accrual method of accounting.
On February 3, 1997, the Partnership entered into a letter of intent with an unaffiliated third party for the sale of Mountain View Plaza Shopping Center and the adjacent land. The sale is expected to be completed by April 15, 1997 for a purchase price of approximately $2,150,000. The Partnership would pay-off the related debt on the Mountain View Shopping Center property with the proceeds from the sale.
The Partnership has a single note payable, in the amount of $1,821,000 as of December 31, 1996, which is secured by Mountain View Plaza Shopping Center. The note does not mature until 2002.
Management believes that the Partnership's available cash together with the cash generated by the operations prior to sales of the real estate and net proceeds upon the sales of the assets will be sufficient to finance the cash requirements of the Partnership until an orderly liquidation is completed.
RESULTS OF OPERATIONS:
Rental revenue decreased $83,000, or 14% in 1996 compared to 1995. The decrease is a result of the slight decrease in occupancy at the Mountain View Plaza resulting in vacancy loss of $17,000, combined with a $17,000 decrease in the billing of prior year recoveries from 1995 to 1996. Recoverable expenses were higher than budgeted in 1994 resulting in reconciliation of recoveries of $33,000 in 1995 where as in 1996 the recoveries relating to 1995 expenses were calculated to be $16,000. In addition, there was $12,000 of bad debt at Mountain View Plaza recorded as a reduction to rental revenue in 1996. The $34,000, or 5%, decrease in rental revenue in 1995 compared to 1994 is a result of the vacancy at the Bowling Center in late 1994.
As discussed in Note 3 of the Notes to Financial Statements, the sale of the Bowling Center resulted in a gain of $138,000 and is included on the Partnership's 1996 statement of operations.
Operating expenses decreased $49,000, or 16%, for the year ended December 31, 1996 compared to 1995 primarily due to a $16,000 reduction in real estate taxes and a $7,000 refund of prior years real estate taxes combined with a reduction in parking repairs and maintenance at Mountain View Plaza. In addition, the management fee at Mountain View Plaza, which is based on collections, decreased $5,000 due to the reduction in rental revenue, as previously discussed. The increase of 5% for the year ended December 31, 1995 compared to 1994 occurred when the Partnership incurred expenses related to the vacant Bowling Center that had been paid by the tenant in the prior year.
Depreciation and amortization expense remained consistent from 1995 to 1996. The 8% decrease for the year ended December 31, 1995 compared to 1994 was due to certain assets becoming fully depreciated.
During 1996, management concluded that the carrying value of the Partnership's investment in Mountain View Plaza Shopping Center and adjacent lots were in excess of their estimated fair value and a provision for impairment of the investment in the amount of $513,000 was recorded.
General and administrative expense increased $31,000, or 14%, for the year ended December 31, 1996 compared to 1995 primarily due to a one-time payment of $7,000 for fees rendered in connection with valuations of the limited partnership interests and an increase in data processing charges of $7,000. In addition, there was a $14,000 increase in general legal fees associated with administering the Partnership's and properties' day-to-day affairs. The 25% decrease for the year ended December 31,
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1995 compared to 1994 is a result of the one-time payment of severance and legal fees that occurred in 1994, offset by the payment and expense of 1994 audit and tax return fees in 1995. Since January 1, 1995, audit and tax fees have been accrued in the year to which they relate.
In December, 1994, RFC entered into an agreement with Glenborough Inland Realty Corporation (Glenborough) whereby RFC sold to Glenborough, for approximately $4,466,000 and the assumption of $1,715,000 of RFC's debt, the contract to perform the rights and responsibilities under RFC's agreement with the Partnership, eight other related partnerships and third parties (collectively, the Rancon Partnerships) to perform or contract on the Partnership's behalf financial, accounting, data processing, marketing, legal, investor relations, asset and development management and consulting services for the Partnership. As part of this agreement, Glenborough will perform certain responsibilities for the General Partner(s) of the Rancon Partnerships and RFC agreed to cooperate with Glenborough, should Glenborough attempt to obtain a majority vote of the limited partners to substitute itself as the Sponsor for the Rancon Partnerships. Glenborough is not an affiliate of RFC. This agreement was effective January 1, 1995.
RFC entered into the transaction with Glenborough described above, when it determined to sell that portion of its business relating to investor services, property management services and asset management services, and those services are now rendered to the Rancon Partnerships by Glenborough. The Partnership required those services to be rendered to it until such time as all of its properties were sold, whether performed by the General Partner or Glenborough. RFC, as General Partner for the Partnership, has the responsibility and obligation to manage the Partnership business, including the sale of its properties, notwithstanding that certain property management and other administrative activities regarding the Partnership are now performed by Glenborough.
As a result of the agreement between RFC and Glenborough, RFC terminated certain employees who were previously responsible for performing the administrative, legal and development services to the Partnership. Upon termination, certain employee costs including severance benefits were allocated to the various Rancon Partnerships. Such costs allocated to the Partnership aggregated $51,000 and were included in administrative expenses for the year ended December 31, 1994.
Item 8.

Item 8. Financial Statements and Supplementary Data
For information with respect to Item 8, see Financial Statements and Schedules as listed in Item 14.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On June 6, 1995, Price Waterhouse LLP was dismissed as the principal independent accountant for the Partnership. The decision to dismiss Price Waterhouse LLP was made by the Partnership's General Partners.
The reports of Price Waterhouse LLP on the Partnership's financial statements for the period ending December 31, 1994, do not contain an adverse opinion or a disclaimer of an opinion, nor were such opinions modified as to uncertainty, audit scope, or accounting principles.
During the fiscal year ended December 31, 1994 and the subsequent interim period from January 1, 1995 to June 6, 1995, there were no disagreements between the Partnership and Price Waterhouse LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Price Waterhouse LLP, would have caused it to make a reference to the subject matter of the disagreement in connection with its reports. For this purpose the term disagreement does not include initial differences of opinion based on incomplete facts or preliminary information that were later resolved to the satisfaction of Price Waterhouse LLP by obtaining additional relevant facts or information.
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During the fiscal year ended December 31, 1994 and the subsequent interim period from January 1, 1995 to June 6, 1995, there were no "reportable events" of the type described in Rule 304(a)(1)(v)(A) through (D) of Regulation S-K.
On June 6, 1995, the Partnership engaged Arthur Andersen LLP as its new principal independent accountant. During the fiscal year ended December 31, 1994 and the subsequent interim period from January 1, 1995 through June 6, 1995, the Partnership did not consult with Arthur Andersen LLP as to the application of accounting principles to a specified transaction or the type of audit opinion that might be rendered on the Partnership's financial statements.
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Part III
Item 10.

Item 10. Directors and Executive Officers of the Partnership
Daniel Lee Stephenson and RFC are the General Partners of the Partnership. The executive officer and director of Rancon is:
Daniel L. Stephenson Director, President, Chief Executive Officer and Chief Financial Officer
There is no fixed term of office for Mr. Stephenson.
Mr. Stephenson, age 53, founded RFC (formerly known as Rancon Corporation) in 1971 for the purpose of establishing itself as a commercial, industrial and residential property syndication, development and brokerage concern. Mr. Stephenson has, from inception, held the position of Director. In addition, Mr. Stephenson was President and Chief Executive Officer of RFC from 1971 to 1986, from August 1991 to September 1992 and from March 31, 1995 to present. Mr. Stephenson is Chairman of the Board of PacWest Group, Inc., a real estate firm which has acquired a portfolio of assets from the Resolution Trust Corporation.
Effective January 1, 1994, RFC acquired all the outstanding shares of Partnership Asset Management Company, a California corporation, which previously performed or contracted on the Partnership's behalf for financial, accounting, data processing, marketing, legal, investor relations, asset and development management and consulting services for the Partnership. These services were provided to the Partnership by RFC subject to the provisions of the Partnership Agreement during calendar 1994.
Rancon Development Fund VII (RDFVII), a partnership sponsored by the General Partners, filed for protection under Chapter 11 of Federal Bankruptcy Law on May 6, 1994 in order to put an automatic stay on RDFVII's property and to forestall the pending foreclosure. In March, 1994, the General Partners were approached by a non-affiliated party interested in acquiring the interests of RDFVII's general partners and attempting to restructure the partnership and its secured debt. Although the necessary majority-in-interest of RDFVII's limited partners was received, an agreement regarding the terms of the transfer and the plan of reorganization could not be reached. The holder of the note secured by RDFVII's property filed for and was granted a relief from the stay thereby allowing the foreclosure sale to proceed. Such sale took place on September 15, 1994 and the bankruptcy was subsequently dismissed, as the property was RDFVII's only asset.
Six Stoneridge L.P. (SSRLP), a partnership formed by Rancon Development Fund VI (RDFVI), a partnership sponsored by the General Partners filed for protection under Chapter 11 of Federal Bankruptcy Law in December, 1992. Efforts to negotiate a modification of the purchase agreement of StoneRidge I, to obtain loans, joint venture partners or other vehicles to meet or modify the cash payment requirements were unsuccessful. In February, 1993, an adversary complaint was filed against SSRLP in the bankruptcy court to determine the nature and extent of SSRLP's interest in StoneRidge I and the debt associated with the property. A tentative agreement has been reached and the bankruptcy was dismissed effective November 8, 1995. As of December 31, 1996, SSRLP and RDFVI have been dissolved.
Item 11.

Item 11. Executive Compensation
The Partnership has no executive officers. For information relating to fees, compensation, reimbursements and distributions paid to related parties, reference is made to Item 13 below.
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Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
No person is known by the Partnership to be the beneficial owner of more than 5% of the Units.
Security Ownership of Management
Amount and Nature of Title Beneficial Percent of Class Name of Beneficial Owner Ownership of Class
Units Rancon Financial Corporation 95 Units (direct) *
* Less than 1 percent
Changes in Control
The Limited Partners have no right, power or authority to act for or bind the Partnership. However, the Limited Partners have the power to vote upon the following matters affecting the basic structure of the Partnership, each of which shall require the approval of Limited Partners holding a majority of the outstanding Units: (i) amendment of the Partnership Agreement; (ii) termination and dissolution of the Partnership; (iii) sale, exchange or pledge of all or substantially all of the assets of the Partnership; (iv) removal of the General Partners or any successor General Partner; and (v) election of a new General Partner or General Partners upon the removal, retirement, death, insanity, insolvency, bankruptcy or dissolution of the General Partners or any successor General Partner.
Item 13.

Item 13. Certain Relationships and Related Transactions
For the year ended December 31, 1996, the Partnership did not incur any costs reimbursable to RFC.
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Part IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of the report
(1) Financial Statements:
Reports of Independent Public Accountants
Balance Sheets as of December 31, 1996 and 1995
Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994
Statements of Partners' Equity (Deficit) for the Years Ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
(2) Financial Statement Schedule:
Schedule III -- Real Estate and Accumulated Depreciation as of December 31, 1996 and Note thereto
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(3) Exhibits:
(3.1) Certificate and Agreement of Limited Partnership of the Partnership, included as Exhibit A to the Prospectus dated November 10, 1982, filed pursuant to Rule 424(b), File Number 2-68265, is incorporated as an Exhibit herein by reference. *
(27) Financial data schedule
* Included as an Exhibit in the Partnership's annual report on Form 10-K for fiscal year ended December 31, 1992.
(b) Reports on Form 8-K None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: March 27,1997 RANCON REALTY FUND I, a California Limited Partnership (Registrant)
Date: March 27, 1997 By:/s/ DANIEL L. STEPHENSON ------------------------ Daniel L. Stephenson, General Partner and Director, President, Chief Executive Officer and Chief Financial Officer of Rancon Financial Corporation, General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Partnership and in the capacities and on the dates indicated.
Date: March 27, 1997 By:/s/ DANIEL L. STEPHENSON ------------------------- Daniel L. Stephenson, General Partner and Director, President, Chief Executive Officer and Chief Financial Officer of Rancon Financial Corporation, General Partner
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AND FINANCIAL STATEMENT SCHEDULE
Page
Reports of Independent Public Accountants 18, 19
Financial Statements:
Balance Sheets as of December 31, 1996 and 1995 20
Statements of Operations for the years ended December 31, 1996, 1995 and 1994 21
Statements of Partners' Equity (Deficit) for the years ended December 31, 1996, 1995 and 1994 22
Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 23
Notes to Financial Statements 24
Schedule:
III -Real Estate and Accumulated Depreciation as of December 31, 1996 and Note thereto 31
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP:
We have audited the accompanying balance sheets of RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and the related statement of operations, partners' equity (deficit) and cash flows for the years then ended. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in all material respects, the financial position of RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP, as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying schedule listed in the index to financial statements and schedule is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
San Francisco, California February 12, 1997
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REPORT OF INDEPENDENT ACCOUNTANTS
To the General and Limited Partners of Rancon Realty Fund I
In our opinion, the accompanying statements of operations, of partners' equity and of cash flows present fairly, in all material respects, the results of operations and cash flows of Rancon Realty Fund I for the year ended December 31, 1994, in conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. We have not audited the financial statements of Rancon Realty Fund I for any period subsequent to December 31, 1994.
Our audit for the year ended December 31, 1994 was made for the purpose for forming an opinion on the basic financial statements taken as a whole. Our audit also included an audit of the Financial Statement Schedule listed in Item 14 (a) of this Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements.
PRICE WATERHOUSE LLP
San Diego, California February 3, 1995
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity(Deficit) For the years ended December 31, 1996, 1995 and 1994 (in thousands)
General Limited Partners Partners Total
Balance at December 31, 1993 $ 12 $ 4,541 $ 4,553
Net loss (8) (387) (395) ------------ ------------ ----------
Balance at December 31, 1994 4 4,154 4,158
Net loss (7) (358) (365) ------------ ------------ ----------
Balance at December 31, 1995 (3) 3,796 3,793
Net loss (16) (787) (803) ------------- ------------- -----------
Balance at December 31, 1996 $ (19) $ 3,009 $ 2,990 ============= ============ ==========
The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Rancon Realty Fund I, a California Limited Partnership (the Partnership), was organized in accordance with the provisions of the California Uniform Limited Partnership Act for the purpose of acquiring, developing, operating and ultimately selling real property. The General Partners of the Partnership are Daniel L. Stephenson and Rancon Financial Corporation (RFC), herein referred to as the Sponsor. RFC is wholly-owned by Daniel L. Stephenson. The Partnership reached final funding in July, 1983. In 1996, four limited partnership units (Units) were abandoned and the equity (deficit) balance of the abandoned Units were allocated to the remaining outstanding Units. At December 31, 1996 and 1995, 18,346 and 18,350 Units were issued and outstanding, respectively.
Allocation of profits, losses, cash distributions from operations and cash distributions from sale or financing are made pursuant to the terms of the Partnership Agreement which generally allocates such items 98% to the limited partners and 2% to the General Partners.
Plan of Orderly Liquidation
On February 12, 1997, the General Partners adopted a plan of orderly liquidation of the Partnership's assets. Accordingly, all investments in real estate are currently being marketed for sale. These investments are classified as property and land held for sale on the Partnership's 1996 balance sheet and are recorded at the estimated fair value of the respective asset. The carrying value of the investments in real estate at December 31, 1996 does not purport to represent the ultimate sales price the Partnership will realize from the disposition of these assets nor are the amounts reflected in the accompanying financial statements intended to represent the ultimate amount to be distributed to partners.
Management believes that the Partnership's available cash together with cash generated from operations prior to sale of the real estate assets and net proceeds upon sales will be sufficient to finance the cash requirements of the Partnership until an orderly liquidation is completed.
General Partners and Management Matters
Effective January 1, 1994, RFC performed or contracted on the Partnership's behalf financial, accounting, data processing, marketing, legal, investor relations, asset and development management and consulting services. These services were provided by RFC subject to the provisions of the Partnership Agreement. Prior to January 1, 1994, the Partnership had contracted with Partnership Asset Management Company (PAMCO), a California corporation, to perform the same services. Effective January 1, 1994, RFC entered into an agreement with the owner of PAMCO to purchase all of its outstanding shares of stock. PAMCO was not an affiliate of the Partnership or RFC at the time of purchase.
In December 1994, RFC entered into an agreement with Glenborough Inland Realty Corporation (Glenborough) whereby RFC sold to Glenborough the contract to perform the rights and responsibilities under RFC's agreement with the Partnership and other related Partnerships (collectively, the Rancon Partnerships) to perform or contract on the Partnership's behalf financial, accounting, data processing, marketing, legal, investor relations, asset and development management and consulting services for the
Page 24 of 33
RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Partnership for a period of ten years or to the liquidation of the Partnership, whichever comes first. According to the contract, the Partnership will pay Glenborough for its services as follows: (i) a specified asset administration fee of $159,000 per year, which is fixed for five years subject to reduction in the year following the sale of assets; (ii) sales fees of 2% for improved properties and 4% for land; (iii) a refinancing fee of 1% and (iv) a management fee of 5% of gross rental receipts. As part of this agreement, Glenborough will perform certain responsibilities for the General Partners of the Rancon Partnerships. RFC has agreed to cooperate with Glenborough, should Glenborough attempt to obtain a majority vote of the limited partners to substitute itself as the Sponsor for the Rancon Partnerships. This agreement was effective January 1, 1995. Glenborough is not an affiliate of RFC or the Partnership.
As a result of this agreement, RFC terminated several of its employees between December 31, 1994 and February 28, 1995. Also as a result of this agreement, certain of the officers of RFC resigned from their positions effective February 28, 1995, March 31, 1995 and July 1, 1995.
Significant Accounting Policies
Basis of Accounting - The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles under the presumption that the Partnership will continue as a going concern. As discussed above, on February 12, 1997, the General Partners adopted a plan of orderly liquidation of the Partnership's assets. However, the liquidation proceeds and the timing thereof are not currently estimable. Once such liquidation proceeds and the cost and timing of the liquidation become determinable, the Partnership will commence reporting on the liquidation basis of accounting whereby remaining assets will be presented at the estimated realizable value and remaining liabilities, including a provision for the estimated costs of the plan, will be presented at the estimated settlement value. Accordingly, the accompanying financial statements do not provide for any adjustments relating to the aforementioned plan of orderly liquidation.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting period. Actual results could differ from those estimates.
Risks and Uncertainties - The Partnership's ability to (i) achieve positive cash flow from operations, (ii) meet its debt obligations, (iii) provide distributions either from operations or the ultimate disposition of the Partnership's properties or (iv) continue as a going concern, may be impacted by changes in interest rates, property values, geographic economic conditions, or the entry of other competitors into the market. The accompanying financial statements do not provide for adjustments with regard to these uncertainties.
Investments in Real Estate - In March, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." The Partnership adopted SFAS 121 in the fourth quarter of 1995. SFAS 121 requires that long-lived assets be carried at the lower of carrying amount or fair value and that an evaluation of an individual property for possible impairment must be performed whenever events or changes in circumstances indicate that an impairment may have occurred. On February 12, 1997 the Partnership elected to list all properties for sale and as such has classified them as
Page 25 of 33
RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
held for sale in the accompanying financial statements. Commencing with the first quarter of 1997, the Partnership will cease depreciating these assets. The specific accounting policies for assets to be held and used and those to be developed are described in more detail below.
Rental Property Held for Sale - Rental property held for sale is stated at the lower of cost or estimated fair value. Estimated fair value is computed using estimated sales price or appraised value of the property less selling costs and does not purport, for a specific property, to represent the sales price that the Partnership could obtain from third parties for such property. Once the property is classified as held for sale, the Partnership will cease depreciation of the asset.
Land Held for Sale - Land held for sale is stated at the lower of cost or estimated fair value. Estimated fair value is computed using estimated sales price or appraised value of the land and does not purport, for a specific property, to represent the current sales price that the Partnership could obtain from third parties for such property.
Rental Property - Rental properties are stated at cost, and include the related land, unless events or circumstances indicate that cost cannot be recovered in which case carrying value is reduced to estimated fair value. Estimated fair value for financial reporting purposes: (i) is based upon the Partnership's plans for the continued operation of each property; (ii) is computed using estimated sales price, as determined by prevailing market values for comparable properties and/or the use of capitalization rates multiplied by annualized rental income based upon the age, construction and use of the building, and (iii) does not purport, for a specific property, to represent the current sales price that the Partnership could obtain from third parties for such property. The fulfillment of the Partnership's plans related to each of its properties is dependent upon, among other things, the presence of economic conditions which will enable the Partnership to continue to hold and operate the properties prior to their eventual sale. Due to uncertainties inherent in the valuation process and in the economy, it is reasonably possible that the actual results of operating and disposing of the Partnership's properties could be materially different than current expectations.
Depreciation is provided using the straight line method over the useful lives of the respective assets.
Land Held for Development - Land held for development is stated at cost unless events or circumstances indicate that cost cannot be recovered in which case carrying value is reduced to estimated fair value. Estimated fair value for financial reporting purposes: (i) is based on the Partnership's plans for the development and/or sale of each property; (ii) is computed using estimated sales price, based upon market values for comparable properties, less estimated costs to complete and/or sell the property; and (iii) does not purport, for a specific property, to represent the current sales price that the Partnership could obtain from third parties for such property. The fulfillment of the Partnership's plans related to each of its properties is dependent upon, among other things, the presence of economic conditions which will enable the Partnership to either hold the properties for eventual sale or obtain financing to further develop the properties prior to their sale.
Common costs are allocated among the various projects based upon the relative sales value. Interest and property taxes related to property constructed by the Partnership are capitalized during periods of construction. There were no interest or property taxes capitalized during the years ended December 31, 1996, 1995 or 1994.
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RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Deferred Costs - Deferred loan fees are being amortized over the life of the related loans on a straight-line basis. Amortization expense, which is included in interest expense, was $4,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Deferred lease commissions are amortized over the initial fixed term of the related lease agreement. Amortization expense was $6,000, $11,000 and $23,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Rental Income - Rental income is recognized as earned over the life of the respective leases.
Net Loss Per Limited Partnership Unit - Net loss per limited partnership unit is calculated using the weighted average number of limited partnership units outstanding during the period and the Limited Partners' share of the net loss.
Gain on Sale of Property - Revenue from the sale of property is recognized at the close of escrow, when title has passed, minimum down payment requirements are met, the terms of any notes received by the Partnership satisfy continuing payment requirements and the Partnership is relieved of any requirements for continued involvement with the property.
Income Taxes - No provision for income taxes is included in the accompanying financial statements, as the Partnership's results of operations are passed through to the partners for inclusion in their respective income tax returns. Net income (loss) and Partners' equity (deficit) for financial reporting purposes differs from the Partnership's income tax return because of different accounting methods used for certain items, principally depreciation expense and the provision for impairment of investments in real estate.
Reclassification - Certain 1995 and 1994 balances have been reclassified to conform with the current year presentation.
Note 2. RELATED PARTY TRANSACTIONS
Reimbursable Expenses and Management Fee to Sponsor
In 1994, the Partnership had an agreement with RFC for property management services. The agreement provided for a management fee equal to 5% of gross rents collected in addition to reimbursement of certain administrative expenses incurred while managing properties. Fees and costs incurred under this agreement totaled $27,000 for the year ended December 31, 1994.
The Partnership Agreement also provided for the reimbursement of actual costs incurred by RFC in providing certain administrative, legal and development services necessary for the prudent operation of the Partnership. Reimbursable costs incurred by the Partnership totaled $263,000 for the year ended December 31, 1994. Effective January 1, 1995, these services are provided by Glenborough as described in Note 1.
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RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 3. INVESTMENTS IN REAL ESTATE
Rental property held for sale as of December 31, 1996 and held for investment at December 31, 1995 is as follows:
1996 1995 -------- ------ Land $ 351,000 $ 421,000 Buildings 4,048,000 5,389,000 Leasehold and other improvements 116,000 164,000 -------------- -------------- 4,515,000 5,974,000 Accumulated depreciation (1,952,000) (2,270,000) -------------- -------------- Total $ 2,563,000 $ 3,704,000 ============== ===============
As of December 31, 1996, one of the Partnership's properties held for sale, Mountain View Plaza, has been pledged as security for a trust deed note payable (see Note 4).
Land held for sale as of December 31, 1996 and held for development at December 31, 1995 is as follows:
1996 1995 8.9 acres in Mojave, California $ 411,000 $ 471,000 13.9 acres in Temecula, California 1,383,000 1,364,000 -------------- -------------- Total $ 1,794,000 $ 1,835,000 ============== ===============
The above unimproved land remains unencumbered at December 31, 1996.
At December 31, 1996, management concluded that the carrying value of the Partnership's investment in Mountain View Plaza Shopping Center and adjacent lots were in excess of its estimated fair value and a provision for impairment of the investment in the amount of $513,000 was recorded.
On December 11, 1996, the Partnership sold the Bowling Center to an unaffiliated third party for $700,000. The sale resulted in a gain of $138,000 and cash proceeds of $636,000. The Partnership used the proceeds to payoff an unsecured note payable of $144,000 and replenish cash reserves. The sale was an all cash sale and the Partnership has no continuing obligations or involvement with the property. Accordingly, the Partnership recognized the sale of the Bowling Center property under the full accrual method of accounting.
On February 3, 1997, the Partnership entered into a letter of intent with an unaffiliated third party for the sale of the Mountain View Plaza Shopping Center and adjacent land. The sale is expected to be completed by April 15, 1997 for a purchase price of approximately $2,150,000. The Partnership's management can provide no guarantee that this sale will close under the terms specified or under any other terms.
Note 4. NOTE PAYABLE
The note payable with a balance of $1,821,000 and $1,846,000 at December 31, 1996 and 1995, respectively, collateralized by a first deed of trust on the Mountain View Plaza property, bears interest at
Page 28 of 33
RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
the weighted average cost of savings, borrowings and advances for eleventh district members of the Federal Home Loan Bank System (9.5% per annum at December 31, 1996 and 1995). Principal and interest payments are due in monthly installments of approximately $17,000 and the remaining principal balance is due on June 1, 2002.
During 1996, the Partnership entered into an unsecured note payable with Glenborough in the amount of $144,000 to finance operating costs in excess of revenues. The loan accrued interest at 10% and was due and payable September, 1998. In December, 1996, the Partnership paid off the loan with the proceeds from the sale of the Bowling Center.
The aggregate annual maturities of the remaining note payable for the years subsequent to December 31, 1996 are as follows:
1997 $ 30,000 1998 33,000 1999 36,000 2000 39,000 2001 44,000 Thereafter 1,639,000 -------------- Total $ 1,821,000 ==============
Note 5. LEASES
The Partnership's rental properties are leased under operating leases that expire at various dates through October 2007. In addition to basic monthly rentals, some of the leases provide for additional rents based upon a percentage of sales levels attained by the retail tenants. Minimum future rental income on non-cancelable operating leases as of December 31, 1996 is as follows:
1997 $ 483,000 1998 405,000 1999 322,000 2000 247,000 2001 196,000 Thereafter 1,263,000 -------------- Total $ 2,916,000 ==============
Included in the future rental income stated above is $929,000 of rents from K-Mart who although vacated its space in 1993, continues to meet its monthly rental obligations pursuant to its lease.
Note 6. TAXABLE INCOME
The Partnership's tax returns, the qualification of the Partnership as a partnership for federal income tax purposes, and the amount of income or loss are subject to examination by federal and state taxing authorities. If such examinations result in changes to the Partnership's taxable income or loss, the tax liability of the partners could change accordingly.
Page 29 of 33
RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
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RANCON REALTY FUND I, A California Limited Partnership
INDEX TO EXHIBITS
Exhibit Number Exhibit
27 Financial Data Schedule
Page 33 of 33


Item 2. PROPERTIES
RGA Reinsurance houses its employees and the majority of RGA's officers in 71,994 square feet of office space at 660 Mason Ridge Center Drive, St. Louis County, Missouri. These premises are leased from General American for an initial term ending August 31, 1998, at an annual rent of $1,538,872, plus a pro-rated share of increases in taxes and operating expenses for the building beyond the levels of 1995. A portion of this office space is subleased to subsidiaries and affiliates: Great Rivers Reinsurance Management, Re Partners, and RGA/Swiss Financial Group.
RGA Reinsurance conducts business from approximately 1,800 square feet of office space located in Hong Kong and approximately 1,200 square feet of office space located in Tokyo, Japan. The rental expenses paid by RGA Reinsurance under the leases during 1996 were approximately $162,100 and $42,800 for Hong Kong and Tokyo, respectively. RGA Australia conducts business from approximately 1,800 square feet of office space located in Sydney, Australia and paid $41,600 during 1996 for lease expense. The Hong Kong and Tokyo leases expire in 1998 and the Sydney lease expires in December 1997.
Manantial conducts business from approximately 8,400 square feet of office space in Buenos Aires, Argentina, pursuant to several leases. Rental expense paid for the office was approximately $138,700 during 1996. BHIF America and RGA Chile conduct business from approximately 3,400 square feet of office space in Santiago, Chile. The lease expense paid during 1996 was approximately $35,500. Two of the Buenos Aires leases expire in October and November 1997 with the remaining leases expiring in 1999. The Santiago lease expires in April 1997.
RGA Canada's operations are conducted from approximately 9,800 square feet of office space located in Montreal, Canada. The lease with respect to such space expires in 2010. Rental expenses paid by RGA Canada under the lease during 1996 were approximately $175,600. RGA Canada also leases approximately 5,900 square feet of space in Toronto, Canada. This lease expires in 1998. The rental expenses paid by RGA Canada under the Toronto lease during 1996 were approximately $126,500.
Item 3.

Item 3. LEGAL PROCEEDINGS
From time to time, subsidiaries of RGA are subject to reinsurance-related litigation and arbitration in the normal course of business. Management does not believe that any such pending litigation or arbitration would have a material adverse effect on RGA's future operations.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters that were submitted to a vote of security holders during the fourth quarter of 1996.
Part II
Item 5.

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information on this subject is incorporated by reference to the Annual Report for 1996 under the caption "Quarterly Data (Unaudited)" at page 49.
Dividend Policy - ---------------
RGA began paying a dividend of $0.06 per share each quarter, starting in August 1993. In August 1995, the dividend was raised to $0.07 per share and to $0.08 per share in August 1996. It is expected that payments at this level will continue. However, all future payments of dividends are at the discretion of the Company's Board of
Directors and will depend on the Company's earnings, capital requirements, insurance regulatory conditions, operating conditions, and such other factors as the Board of Directors may deem relevant. The amount of dividends that the Company can pay will depend in part on the operations of its reinsurance subsidiaries. The transfer of funds from the insurance subsidiaries to RGA is subject to applicable insurance laws and regulations.
Reinsurance companies are subject to statutory regulations which restrict the payment of dividends. In the case of RGA Reinsurance, Missouri regulations impose a limit of the greater of 10% of statutory capital and surplus or statutory operating income, both as of the end of the preceding year. Any dividend proposed by RGA Reinsurance in excess of these measures would, under Missouri law, be "extraordinary" and subject to review by the Missouri Director of Insurance. See "Business -- Corporate Structure -- Regulation."
Item 6.

Item 6. SELECTED FINANCIAL DATA
These data are found at page 48 in the Annual Report for 1996 under the caption "Selected Consolidated Financial and Operating Data" which section is incorporated herein by reference.
Item 7.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis is incorporated by reference to the Annual Report for 1996 under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" at pages 13 to 22.
Item 8.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is incorporated by reference to the Annual Report for 1996 under the following captions:
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 Directors of the Company is incorporated by reference to the Proxy Statement under the captions "Nominees and Continuing Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance." The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company's fiscal year.
The following is certain additional information concerning each executive officer of the Company who is not also a director. With the exception of Mr. McCauley and Mr. St-Amour, each individual holds the same position at RGA and RGA Reinsurance.
David B. Atkinson is Executive Vice President and Chief Operating Officer. Prior to the formation of RGA, Mr. Atkinson served as Reinsurance Operations Vice President of General American. Mr. Atkinson joined General American in 1987 as Second Vice President and was promoted to Vice President later the same year. Prior to joining General American, he served as Vice President and Actuary of Atlas Life Insurance Company from 1981 to 1987, as Chief Actuarial Consultant at Cybertek Computer Products from 1979 to 1981, and in a variety of actuarial positions with Occidental Life Insurance Company of California from 1975 to 1979. Mr. Atkinson also serves as a director and officer of certain RGA subsidiaries.
Bruce E. Counce is Executive Vice President and Chief Corporate Operating Officer. Prior to the formation of RGA, Mr. Counce served as Reinsurance Sales and Marketing Vice President for General American. After joining General American in 1967, Mr. Counce joined the Reinsurance Division in 1980 in a sales capacity and held a series of increasingly responsible positions leading to his current position. Mr. Counce also serves as a director and officer of certain of RGA's subsidiaries.
Jack B. Lay is Executive Vice President and Chief Financial Officer. Prior to joining the Company in 1994, Mr. Lay served as Second Vice President and Associate Controller at General American. In that position, he was responsible for all accounting and external financial reporting as well as merger and acquisition support. Before joining General American in 1991, Mr. Lay was a partner in the financial services practice with the St. Louis office of KPMG Peat Marwick LLP. Mr. Lay also serves as a director and officer of certain RGA subsidiaries.
Graham S. Watson is Executive Vice President and Chief Marketing Officer. Upon joining RGA in 1996, Mr. Watson was President and CEO of RGA Australia. Prior to joining RGA in 1996, Mr. Watson was the President and CEO of Intercedent Limited in Canada and has held various positions of increasing responsibility for other life insurance companies. Mr. Watson also serves as a director and officer of certain RGA subsidiaries.
Brendan J. Galligan is Senior Vice President, Asia Pacific Division. Prior to joining RGA, Mr. Galligan was Senior Vice President of RGA Canada, and its predecessor, National Re, for five years. His insurance and reinsurance career commenced in Canada in 1977.
Joel S. Iskiwitch is Senior Vice President, Accident and Health Division. In 1995, Mr. Iskiwitch joined Great Rivers Reinsurance, a subsidiary of RGA, as a participant in General American's Management Rotation Program. Prior to joining Great Rivers and RGA, Mr. Iskiwitch held the position of Vice President of Business Markets and Advanced Underwriting for GenMark/Individual Line at General American. Since joining General American in 1988, Mr. Iskiwitch has held a series of responsible positions leading to his current position at RGA.
Paul Nitsou is Senior Vice President, Market Development Division. Prior to joining RGA in 1996, Mr. Nitsou was Vice President, Reinsurance for Manulife Financial. Mr. Nitsou joined RGA in 1996 as Vice President, Market Development and was later promoted within his first year of employment to Senior Vice President, Market Development Division.
Paul A. Schuster is Senior Vice President, U.S. Division. Prior to the formation of RGA, Mr. Schuster served as Second Vice President and Reinsurance Actuary of General American. Prior to joining General American in 1991, he served as Vice President and Assistant Director of Reinsurance Operations of the ITT Lyndon Insurance Group from 1988 to 1991, and in a variety of actuarial positions with General Reassurance Corporation from 1976 to 1988.
Kenneth D. Sloan is Senior Vice President, U.S. Facultative Division. Prior to the formation of RGA, Mr. Sloan served as Second Vice President of Reinsurance Underwriting for General American. Mr. Sloan joined General American in 1968 in an underwriting capacity and held a series of increasingly responsible positions leading to his current position.
Todd C. Larson is Vice President & Controller. Mr. Larson previously was Assistant Controller at Northwestern Mutual Life Insurance Company from 1994 through 1995 and prior to this position he was a Senior Manager for KPMG Peat Marwick LLP through 1993.
Matthew P. McCauley is General Counsel and Secretary of the Company. Mr. McCauley has served as Associate General Counsel of General American since 1985 and is a director and officer of General American Capital Company and an officer of The Walnut Street Funds, Inc., both of which are registered investment companies affiliated with General American. He serves as a director or officer of a number of General American subsidiaries, including Conning Asset Management Company, formerly known as General American Investment Management Company, a registered investment advisor, and Walnut Street Securities, Inc., a registered broker/dealer.
Andre St-Amour is President and Chief Executive Officer of RGA Canada and Chief Agent for the General American Life Insurance Company Canadian Branch. Prior to January 1995, he was President and Chief Operating Officer. Mr. St-Amour joined RGA Canada in 1992 when the company acquired the reinsurance business of National Re. Mr. St-Amour served as Executive Vice President, Life Division, of National Re from 1989 to 1991, and in various actuarial positions.
Item 11.

Item 11. EXECUTIVE COMPENSATION
Information on this subject is included by reference to the Proxy Statement under the captions "Executive Compensation" and "Nominees and Continuing Directors." The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company's fiscal year.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information on this subject is incorporated by reference to the Proxy Statement under the caption "Common Stock Ownership of Management and Certain Beneficial Owners." The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company's fiscal year.
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on this subject is incorporated by reference to the Proxy Statement under the caption "Certain Relationships and Related Transactions." The Proxy Statement will be filed pursuant to Regulation 14A within 120 days of the end of the Company's fiscal year.
Part IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated statements are incorporated by reference to the Annual Report for 1996 under the following captions:
2. Schedules, Reinsurance Group of America, Incorporated and Subsidiaries
All other schedules specified in Regulation S-X are omitted for the reason that they are not required, are not applicable, or that equivalent information has been included in the consolidated financial statements, and notes thereto, incorporated by reference to the Annual Report for 1996.
3. Exhibits
See the Index to Exhibits on page 30.
(b) No reports on Form 8-K were filed during the fourth quarter of 1996.
Independent Auditors' Report ----------------------------
The Board of Directors and Stockholders Reinsurance Group of America, Incorporated:
Under date of February 7, 1997, we reported on the consolidated balance sheets of Reinsurance Group of America, Incorporated and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996, as contained in the 1996 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1996. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri February 7, 1997
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE IV - - Reinsurance (in Millions)
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1996 (in millions)
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.
Reinsurance Group of America, Incorporated.
By: /s/ A. Greig Woodring March 24, 1997 ------------------------------------------- A. Greig Woodring President
Date: March 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on March 24, 1997.