Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the year ended December 31, 2003

OR

For the transition period from              to             

Commission file number: 0-16467

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

Partnership’s telephone number, including area code (650) 343-9300

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership Interest

(Title of class)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

No market for the Limited Partnership units exists and therefore a market value for such units cannot be determined.

DOCUMENTS INCORPORATED BY REFERENCE:

Exhibits: The index of exhibits is contained herein on page number 36.

Table of Contents

INDEX

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

2

Table of Contents

Part I

Item 1. Business

Rancon Realty Fund V, a California Limited Partnership, (“the Partnership”) was organized in accordance with the provisions of the California Revised Limited Partnership Act for the purpose of acquiring, developing, operating and ultimately selling real property. The Partnership was organized in 1985 and completed its public offering of limited partnership units (“Units”) in February 1989. The General Partner of the Partnership are Daniel L. Stephenson (“DLS”) and Rancon Financial Corporation (“RFC”), collectively, the “General Partner.” RFC is wholly owned by DLS. The Partnership has no employees.

The Partnership’s initial acquisition of property in June 1985 consisted of approximately 76.21 acres of partially developed and unimproved land located in San Bernardino, California. The property is part of a master-planned development of 153 acres known as Tri-City Corporate Centre (“Tri-City”) and is zoned for mixed commercial, office, hotel, transportation-related, and light industrial uses. The balance of Tri-City is owned by Rancon Realty Fund IV (“Fund IV”), a partnership sponsored by the General Partner of the Partnership. Since the acquisition of the land, the Partnership has constructed ten projects at Tri-City consisting of five office projects, one industrial property, a 25,000 square foot health club, two restaurants, and a retail space. The Partnership’s properties are more fully described in Item 2.

As of December 31, 2003, the Partnership owned ten rental properties (“Tri-City Properties”) and approximately 11.5 acres of land (“Tri-City land”). Construction has commenced on a one-acre land parcel. Another one-acre land parcel is at a pre-design stage. The remaining 9.5 acres are currently undeveloped.

In May 1996, the Partnership formed Rancon Realty Fund V Tri-City Limited Partnership, a Delaware limited partnership (“RRF V Tri-City”). The limited partner of RRF V Tri-City is the Partnership and the General Partner is Rancon Realty Fund V, Inc. (“RRF V, Inc.”), a corporation wholly owned by the Partnership. Since the Partnership owns 100% of RRF V, Inc. and indirectly owns 100% of RRF V Tri-City, the Partnership considers all assets owned by RRF V, Inc. and RRF V Tri-City to be owned by the Partnership.

In 2002, a total of 2,944 Units were redeemed at an average price of $357. In 2003, a total of 1,998 Units were redeemed at an average price of $375. As of December 31, 2003, there were 88,919 Units outstanding.

Competition Within the Market

The Partnership competes in the leasing of its properties primarily with other available properties in the local real estate market. Management is not aware of any specific competitors of the Partnership’s properties doing business on a significant scale in the local market. Management believes that characteristics influencing the competitiveness of a real estate project are the geographic location of the property, the professionalism of the property manager and the maintenance and appearance of the property, in addition to external factors such as general economic circumstances, trends, and the existence of new, competing properties in the vicinity. Additional competitive factors with respect to commercial and industrial properties, are the ease of access to the property, the adequacy of related facilities, such as parking, and the ability to provide rent concessions and tenant improvements commensurate with local market conditions. Although management believes the Partnership’s properties are competitive with comparable properties as to those factors within the Partnership’s control, over-building and other external factors could adversely affect the ability of the Partnership to attract and retain tenants. The marketability of the properties may also be affected (either positively or negatively) by these factors as well as by changes in general or local economic conditions, including prevailing interest rates. Depending on market and economic conditions, the Partnership may be required to retain ownership of its properties for periods longer than anticipated, or may need to sell earlier than anticipated or refinance a property at a time or under terms and conditions that are less advantageous than would be the case if unfavorable economic or market conditions did not exist.

Working Capital

The Partnership’s practice is to maintain cash reserves for normal repairs, replacements, working capital and other contingencies. The Partnership knows of no statistical information which allows comparison of its cash reserves to those of its competitors.

3

Table of Contents

Item 2. Properties

Tri-City Corporate Centre

On June 3, 1985, the Partnership acquired 76.21 acres of partially developed land in Tri-City for a total acquisition price of $14,118,000. In 1984 and 1985, a total of 76.56 acres within Tri-City were acquired by Fund IV.

Tri-City Corporate Centre is located at the northeastern quadrant of the intersection of Interstate 10 (San Bernardino Freeway) and Waterman Avenue in the southernmost part of the City of San Bernardino, and is in the heart of the Inland Empire, the most densely populated area of San Bernardino and Riverside counties.

Tri-City Properties

The Partnership’s improved properties in the Tri-City Corporate Centre are as follows:

These ten properties total approximately 542,000 rentable square feet and offer a wide range of commercial, R & D, office and retail product to the market.

The Inland Empire is generally broken down into two major markets, Inland Empire East and Inland Empire West. Tri-City Corporate Centre is located within the Inland Empire East market, which consists of approximately 12.4 million square feet of office space and an overall vacancy rate of approximately 12% as of December 31, 2003, according to research conducted by an independent broker.

Within the Tri-City Corporate Centre at December 31, 2003, the Partnership has 441,000 square feet of office space with a vacancy rate of 7%, 51,000 square feet of R & D space with a vacancy rate of 18% and 50,000 square feet of retail space with no vacancy.

Occupancy levels for the Partnership’s Tri-City buildings for each of the five years ended December 31, 2003 expressed as a percentage of the total net rentable square feet, were as follows:

In 2003, management renewed 11 leases, totaling 54,365 square feet and executed 15 new leases totaling 59,987 square feet of space. In 2004, 23 leases, totaling 167,800 square feet, are due to expire. Of these, management has renewed seven leases totaling 72,300 square feet, while five tenants occupying 32,600 square feet have indicated that they will vacate upon expiration of their leases. The remaining tenants occupying a total of 62,900 square feet of space have not yet indicated whether they plan to renew their leases or vacate the premises. Management, along with independent leasing brokers, is aggressively marketing the space.

4

Table of Contents

The annual effective rents per square foot for each of the five years ended December 31, 2003 were as follows:

Annual effective rent is calculated by dividing the aggregate of annualized current monthly rental income for each tenant by the total square feet occupied at the property.

The Partnership’s Tri-City properties had the following tenants that occupied a significant portion of the net rentable square footage as of December 31, 2003:

Chicago Title has renewed its current lease to three separate leases for the terms of 5 years, 3 years and month-to-month with a total annual rent of $678,000 and a 3% annual increase.

New York Life Insurance will extend its lease at One Parkside to the end of 2004 at which time they plan to relocate to Vanderbilt Plaza - a new building developed by Fund IV, a partnership sponsored by the General Partner of the Partnership.

Paychex has extended its lease for another year with an annual rent of $386,000.

Arrowhead Central Credit Union indicates that they plan to expand and may need to relocate to other building within Tri-City. Lease terms and conditions are currently being negotiated.

5

Table of Contents

The Partnership’s Tri-City rental properties are owned by the Partnership, in fee, subject to the following note and line of credit:

Tri-City Land

As of December 31, 2003 the Partnership owned approximately 11.5 acres of land. Construction has commenced on a one-acre land parcel (discussed below). Another one-acre land parcel is at a pre-design stage (discussed below). The remaining 9.5 acres is currently undeveloped. The Partnership anticipates developing and /or selling the parcels of this land by the end of next year.

The projects under construction are two East Lake pads. The estimated construction cost is approximately $710,000. One of the sites will be used as restaurant by a new tenant who is paying for the cost of the building core, shell and other improvements of the property. Construction started in November 2003. Rent for the ground lease of 15 years is expected to commence on March 18, 2004.

A two-story office building of 76,000 square feet, known as Three Carnegie, is currently at a pre-design stage. The Partnership has entered into a construction contract, and the construction cost is approximately $5,000,000, which is estimated to be completed in March 2005. The Partnership is currently negotiating with the lender to increase the availability of the Partnership’s line of credit to cover the construction costs.

Item 3. Legal Proceedings

None

Item 4. Submission of Matters to a Vote of Security Holders

None

6

Table of Contents

Part II

Item 5. Market for Partnership’s Common Equity and Related Stockholder Matters

Market Information

There is no established trading market for the Units issued by the Partnership.

Holders

As of December 31, 2003, there were 9,609 holders of Partnership Units.

Distributions

Distributions are paid from either Cash From Operations or Cash From Sales or Refinancing (as such terms are defined in the Partnership Agreement).

Cash From Operations includes all cash receipts from operations in the ordinary course of business (except for the sale, exchange or other disposition of real property in the ordinary course of business) after deducting payments for operating expenses. All distributions of Cash From Operations are paid in the ratio of 90% to the Limited Partners and 10% to the General Partner.

Cash From Sales or Refinancing is 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, together with interest on any notes taken back by the Partnership upon the sale of a property. All distributions of Cash From Sales or Refinancing are generally allocated as follows: (i) first, 1 percent to the General Partner and 99 percent to the Limited Partners until the Limited Partners have received an amount equal to their capital contributions; (ii) second, 1 percent to the General Partner and 99 percent to the Limited Partners until the Limited Partners have received a 12 percent return on their unreturned capital contributions including prior distributions of Cash From Operations; plus their Limited Incremental Preferred Return for the twelve month period following the purchase date of each Unit and following admission as a Limited Partner, (iii) third, 99 percent to the General Partner and 1 percent to the Limited Partners until the General Partner has received an amount equal to 20 percent of all distributions of Cash From Sales or Refinancing previously made under clauses (ii) and (iii) above, reduced by the amount of prior distributions made to the General Partner under clauses (ii) and (iii); and (iv) fourth, the balance 20 percent to the General Partner and 80 percent to the Limited Partners. A more explicit statement of the distribution policies is set forth in the Partnership Agreement.

In 2003, the Partnership distributed $1,353,000 and $151,000 to the Limited Partners and General Partner, respectively.

In 2002, the Partnership distributed $1,228,000 and $136,000 to the Limited Partners and General Partner, respectively.

7

Table of Contents

Item 6. Selected Financial Data

The following is selected financial data for each of the five years ended December 31, 2003 (in thousands, except per Unit data):

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the financial statements and the notes thereto as listed in Item 15 of Part IV.

Results of Operations

Comparison of the year ended December 31, 2003 to the year ended December 31, 2002

Revenue

Rental income increased $1,103,000, or 15%, for the year ended December 31, 2003, compared to the year ended December 31, 2002, primarily due to the increases in occupancy at One Carnegie Plaza, Two Carnegie Plaza, Lakeside Tower, Chuck E. Cheese and Two Parkside, as well as an increase in rental rates, offset by the decrease in occupancy at Carnegie Business Center II.

Occupancy rates at the Partnership’s Tri-City properties for each of the five years ended December 31, 2003 were as follows:

As of December 31, 2003, tenants at Tri-City Corporate Centre occupying substantial portions of leased rental space included: (i) Chicago Title with a lease through February 2004; (ii) New York Life Insurance with a lease through May 2004; (iii) Paychex with a lease through July 2004; (iv) Computer Associates with a lease through November 2005; (v) Holiday Spa Health Club with a lease through December 2010; (vi) Lewis, D’Amato & Brisbois et al with a lease through December 2012; and (vii) Arrowhead Central Credit Union with two leases through September 2004 and 2010. These seven tenants, in the aggregate, occupy approximately 199,000 square feet of the 542,000 total rentable square feet at Tri-City and account for approximately 42% of the rental income generated at Tri-City for the Partnership as of December 31, 2003.

The 5% increase in occupancy from December 31, 2002 to December 31, 2003 at One Carnegie Plaza was due to leasing 1,100 square feet to a new tenant, and expansion of two existing tenants into approximately 4,100 square feet of space.

8

Table of Contents

The 4% increase in occupancy from December 31, 2002 to December 31, 2003 at Two Carnegie Plaza was due to expansion of two existing tenants into approximately 2,600 square feet of space.

The 9% decrease in occupancy from December 31, 2002 to December 31, 2003 at Carnegie Business Center II was due to a tenant of 4,300 square feet moving out upon its lease expiration.

The 5% increase in occupancy from December 31, 2002 to December 31, 2003 at Lakeside Tower was due to leasing 5,800 square feet to a new tenant.

Land improvement at Harriman Plaza was completed, and costs were transferred from construction in progress to land and land improvements in June 2003. A new tenant, Chuck E. Cheese, occupies the whole site as a restaurant and started paying ground lease rent in June 2003.

Construction of the core and shell for Two Parkside, a Class A three-story building was completed in June 2003, and costs were transferred from construction in progress to land, land improvements and building. On September 26, 2003, an anchor tenant moved into two floors totaling 53,003 rentable square feet. Two other tenants have executed leases which will bring this building to 100% occupancy by April 2004. One of these two tenants leased 14,422 square feet for March 2004 occupancy, and the other leased 14,491 square feet for April 2004 occupancy.

Interest and other income for the year ended December 31, 2003 decreased $150,000 from the year ended December 31, 2002, primarily due to a lower invested cash balance resulting from payment of the construction costs at Two Parkside and Harriman Plaza.

Expenses

Operating expenses increased $350,000, or 11%, during the year ended December 31, 2003, compared to the year ended December 31, 2002, primarily due to increases in occupancy at One Carnegie Plaza, Two Carnegie Plaza, Chuck E. Cheese and Two Parkside, as well as an increase in utility and janitorial costs.

Interest expense decreased $349,000, or 41%, during the year ended December 31, 2003, compared to the year ended December 31, 2002, primarily due to interest capitalized during construction at Two Parkside and Harriman Plaza, offset by interest on the new line of credit.

Depreciation and amortization expense increased $510,000, or 28%, during the year ended December 31, 2003, compared to the year ended December 31, 2002, primarily due to depreciation of new building, land improvements and tenant improvements.

Expenses associated with undeveloped land decreased $104,000, or 27%, for year ended December 31, 2003, compared to the year ended December 31, 2002, primarily due to capitalization of property taxes and insurance at Two Parkside and Harriman Plaza during the construction period.

Comparison of the year ended December 31, 2002 to the year ended December 31, 2001

Revenue

Rental income increased slightly for the year ended December 31, 2002, compared to the year ended December 31, 2001, primarily due to the increases in occupancy at One Carnegie Plaza and Two Carnegie Plaza, offset by the sale of the Santa Fe property in 2001.

Occupancy rates at the Partnership’s Tri-City properties for each of the five years ended December 31, 2002 were as follows:

9

Table of Contents

As of December 31, 2002, tenants at Tri-City Corporate Centre occupying substantial portions of leased rental space included: (i) Chicago Title with a lease through February 2004; (ii) New York Life Insurance with a lease through May 2004, (iii) Paychex with a lease through July 2004, (iv) Computer Associates with a lease through November 2005, (v) Holiday Spa Health Club with a lease through December 2010 and (vi) Lewis, D’Amato & Brisbois et al with a lease through December 2012. These six tenants, in aggregate, occupied approximately 140,000 square feet of the 448,000 total rentable square feet at Tri-City and accounted for approximately 33% of the rental income generated at Tri-City for the Partnership.

The 17% increase in occupancy at One Carnegie Plaza from December 31, 2001 to December 31, 2002 was primarily due to the expansion of three existing tenants into approximately 19,000 square feet of vacant space.

The 11% increase in occupancy at Two Carnegie Plaza from December 31, 2001 to December 31, 2002 was primarily due to the leasing of approximately 8,000 square feet of previously vacant space to several new tenants.

In August 2001, the Santa Fe property was purchased by BNSF, the sole tenant at the property, for a price of $4,820,000. The sale generated a gain of approximately $2,663,000 and net proceeds of approximately $4,316,000, of which $1,093,000 distributed to the partners in 2001.

Interest and other income for the year ended December 31, 2002 decreased $251,000 from the year ended December 31, 2001, primarily due to a lower invested cash balance which resulted from the November 2001 payoff of a $4 million note payable secured by One Carnegie Plaza, distributions to the partners in November 2001 and 2002, and decreases in interest rates, offset by an increase in the invested cash balance resulting from the sale of the Santa Fe property in August 2001.

Expenses

Operating expenses increased $111,000, or 3%, during the year ended December 31, 2002, compared to the year ended December 31, 2001, primarily due to increases in occupancy at One Carnegie and Two Carnegie, and an increase in utility costs, partially offset by the sale of the Santa Fe property in 2001.

Interest expense decreased $328,000, or 28%, during the year ended December 31, 2002, compared to the year ended December 31, 2001, primarily due to the payoff of a $4 million loan in November 2001 as discussed above.

Depreciation and amortization expense increased $122,000, or 7%, during the year ended December 31, 2002, compared to the year ended December 31, 2001, primarily due to additions to real estate, partially offset by the sale of the Santa Fe property in 2001.

General and administrative expenses decreased $94,000, or 8%, during the year ended December 31, 2002, compared to the year ended December 31, 2001, primarily due to a decrease in investor relation expenses related to the redemption of partnership units.

Liquidity and Capital Resources

At December 31, 2003, the Partnership had cash of $1,136,000. The remainder of the Partnership’s assets consisted primarily of its net investments in real estate of approximately $38,171,000 which includes $35,853,000 of rental properties, $769,000 of construction in progress and $1,549,000 of land held for development within the Tri-City area.

Rental properties increased primarily due to the transfer of two projects, Two Parkside and Harriman Plaza, from construction in progress to land, land improvements and building. Both projects were completed in June 2003. At Harriman Plaza, a new tenant occupies the whole site as a restaurant and started paying ground lease rent in June 2003. Construction of the core and shell for Two Parkside, a Class A three-story building was completed in June 2003, and costs were transferred from construction in progress to land, land improvements and building. On September 26, 2003, an anchor tenant moved into two floors totaling 53,003 rentable square feet. Two other tenants have executed leases which will bring this building to 100% occupancy by April 2004. One of these two tenants leased 14,422 square feet for March 2004 occupancy, and the other leased 14,491 square feet for April 2004 occupancy.

The Partnership’s liabilities at December 31, 2003, included a note payable and a line of credit totaling approximately $13,828,000 and encumbering properties with an aggregate net book value of approximately $22,220,000. The note requires monthly principal and interest payments of $83,000, bears a fixed interest rate of 9.39%, and has a maturity date of August 1, 2006. The line of credit has a total availability of $6,000,000, requires monthly interest-only payments, bears an interest rate of prime plus 0.75% points, with a floor set at 5.5% (5.5% as of December 31, 2003), and has a maturity date of March 5, 2005.

The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the amount of $102,000 at December 31, 2003, for sales that occurred in previous years. The subordinated real estate commissions are payable only after the Limited Partners have received distributions equal to their original invested capital plus a cumulative non-compounded return of six percent per annum on their adjusted invested capital. Since the circumstances under which these commissions would be payable are limited, the liability has not been recognized in the accompanying consolidated financial statements; however, the amount will be recorded when and if it becomes payable.

10

Table of Contents

Operationally, the Partnership’s primary source of funds consists of cash provided by its rental activities. Other sources of funds may include permanent financing, property sales, interest income on certificates of deposit and other deposits of funds invested temporarily. Cash generated from property sales is generally added to the Partnership’s cash reserves, pending use in development of other properties or distribution to the partners.

Management believes that the Partnership’s cash balance at December 31, 2003, together with cash from operations, sales and financings will be sufficient to finance the Partnership’s and the properties’ continued operations and development plans on a short-term basis and for the reasonably foreseeable future. The Partnership is currently negotiating with the lender to increase the availability of the Partnership’s line of credit to cover the construction costs at Three Carnegie, a two-story office building of 76,000 square feet. There can be no assurance that the Partnership’s results of operations will not fluctuate in the future and at times affect its ability to meet its operating requirements.

The Partnership knows of no demands, commitments, events or uncertainties which might affect its capital resources in any material respect. In addition, the Partnership is not subject to any covenants pursuant to its secured debt that would constrain its ability to obtain additional capital.

Operating Activities

During the year ended December 31, 2003, the Partnership’s cash provided by operating activities totaled $2,792,000.

The $337,000 decrease in accounts receivable at December 31, 2003, compared to December 31, 2002, was primarily due to the collection of tenant improvement receivables, and the reimbursement of tenant improvements from the impound account.

The $578,000 increase in deferred costs at December 31, 2003, compared to December 31, 2002, was due to $819,000 of lease commissions primarily paid for two new leases at Two Parkside and One Carnegie, and a $139,000 loan fee paid for the Partnership’s line of credit, offset by $380,000 of amortization expense.

The $119,000 increase in prepaid expenses and other assets at December 31, 2003, compared to December 31, 2002, was primarily due to increases in mortgage impound accounts and prepaid insurance premiums.

The $18,000 increase in accounts payable and other liabilities at December 31, 2003, compared to December 31, 2002, was primarily due to an increase in security deposits for new tenants.

The $518,000 increase in prepaid rents at December 31, 2003, compared to December 31, 2002, was due to receipt of January 2004 rents in December 2003.

Investing Activities

During the year ended December 31, 2003, the Partnership’s cash used for investing activities totaled $8,077,000 which consisted of $170,000 for building improvements, and $2,205,000 for tenant improvements primarily at Two Parkside, Lakeside Tower and One Carnegie Plaza, $244,000 for site improvement at two East Lake Pads, and $5,458,000 for construction costs at Two Parkside and Harriman Plaza lot (see Item 2 for discussion).

Financing Activities

During the year ended December 31, 2003, the Partnership’s cash provided by financing activities totaled $2,833,000, which consisted of a $5,270,000 draw on the line of credit (see Item 2 for discussion), offset by $184,000 in principal payments on the note payable, $1,504,000 of distributions to the Limited Partners and General Partner, and $749,000 paid to redeem 1,998 limited partnership units (“Units”).

Construction for two East Lake pads was completed at end of February 2004. The remaining of the construction costs is approximately $200,000 which will be paid from the Partnership’s line of credit (see note 4 for further discussion).

Construction for Three Carnegie is currently at a pre-design stage, and is estimated to be completed in March 2005. The Partnership has entered into a construction contract, and the construction cost is approximately $5,000,000, which will be paid from the Partnership’s line of credit (see note 4 for further discussion).

Critical Accounting Policies

Revenue recognized on a straight-line basis

The Partnership recognizes rental revenue on a straight-line basis at amounts that it believes it will collect on a tenant by tenant basis. The estimation process may result in higher or lower levels from period to period as the Partnership’s collection experience and the credit quality of the Partnership’s tenants changes. Actual amounts collected could be lower or higher than the amounts recognized on a straight-line basis if specific tenants are unable to pay rent that the Partnership has previously recognized as revenue.

11

Table of Contents

Carrying value of rental properties and land held for development

The Partnership’s rental properties, including the related land, are stated at cost unless events or circumstances indicate that cost cannot be recovered, in which case, the carrying value of the property is reduced to its estimated fair value. Estimated fair value is based upon (i) the Partnership’s plans for the continued operations of each property, and (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. 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.

Land held for development is stated at cost unless events or circumstances indicate that cost cannot be recovered, in which case, the carrying value is reduced to estimated fair value. Estimated fair value: (i) is based on the Partnership’s plans for the development of each property; (ii) is computed using estimated sales price, based upon market values for comparable properties; and (iii) considers the cost to complete and the estimated fair value of the completed project. 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.

The actual value of the Partnership’s portfolio of properties and land held for development could be significantly higher or lower than their carrying amounts.

New Accounting Pronouncements

The Financial Accounting Standards Board (FASB) has approved for issuance a number of new accounting standards. Management does not expect these new accounting standards to have a material impact on the Partnership’s consolidated financial position or results of operations. These new accounting standards are as follows:

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” which addresses consolidation by business enterprises of variable interest entities (“VIEs”) either: (1) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of a controlling financial interest. In December 2003, the FASB completed deliberations of proposed modifications to FIN 46 (FIN 46 Revised) resulting in multiple effective dates based on the nature as well as the creation date of the VIE. VIEs created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on FIN 46 or FIN 46 Revised. However, FIN 46 Revised must be applied no later than the first quarter of fiscal 2004. VIEs created after January 1, 2004 must be accounted for under FIN 46 Revised. Special Purpose Entities (“SPEs”) created prior to February 1, 2003 may be accounted for under FIN 46 or FIN 46 Revised’s provisions no later than the fourth quarter of fiscal 2003. Non-SPEs created prior to February 1, 2003, should be accounted for under FIN 46 Revised’s provisions no later than the first quarter of fiscal 2004. The Partnership has not entered into any arrangements which are considered SPEs. FIN 46 Revised may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. The disclosure requirements of FIN 46 Revised are effective for all financial statements initially issued after December 31, 2003. The adoption of FIN 46 will not have a material impact on the financial statements of the Partnership.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003 and, otherwise, is effective at the beginning of the first interim period beginning after June 15, 2003. Certain provisions have been deferred indefinitely by the FASB under FSP 150-3. This standard did not have a material impact on the Partnership’s financial position or results of operations.

Item 7A. Qualitative and Quantitative Information About Market Risk

Interest Rates

The Partnership’s primary market risk exposure is to changes in interest rates obtainable on its secured borrowings. The Partnership does not believe that changes in market interest rates will have a material impact on the performance or fair value of its portfolio. The Partnership does not own any derivative instruments.

12

Table of Contents

For debt obligations, the table below presents principal cash flows and interest rates by expected maturity dates.

A change of 1/8% in the index rate to which the Partnership’s variable rate debt is tied would not have a material impact on the annual interest incurred by the Partnership, based upon the balances outstanding on variable rate instruments at December 31, 2003.

As of December 31, 2003, the Partnership had no investments in interest-bearing certificates of deposit. The Partnership does not own any derivative instruments.

Item 8. Financial Statements and Supplementary Data

For information with respect to this item, see Financial Statements and Schedule as listed in Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

On July 18, 2002, the General Partner of the Partnership Realty Fund V, a California Limited Partnership (“the Partnership”), engaged KPMG LLP (“KPMG”) to serve as the Partnership’s independent public accountants for the fiscal year ending December 31, 2002, to replace Arthur Andersen LLP (“Arthur Andersen”), the Partnership’s former independent public accountants.

Arthur Andersen’s reports on the Partnership’s consolidated financial statements for each of the fiscal years ended December 31, 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. Arthur Andersen’s report on the Partnership’s consolidated financial statements for the fiscal year ended December 31, 2001 was issued on an unqualified basis in conjunction with the publication of the Partnership’s Annual Report on Form 10-K.

During the fiscal years ended December 31, 2001 and 2000 and through July 18, 2002, there were no disagreements with Arthur Andersen on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to Arthur Andersen’s satisfaction, would have caused them to make reference to the subject matter in connection with their report on the Partnership’s consolidated financial statements for such fiscal years; and there were no reportable events as defined in Item 304(a) (1) (v) of Regulation S-K.

Pursuant to Item 304 (a) (3) of Regulation S-K, the Partnership is required to provide Arthur Andersen with a copy of the foregoing disclosures and to file as an exhibit a letter from Arthur Andersen stating whether it agrees with the statements made in this Item. the Partnership provided Arthur Andersen with a copy of the foregoing disclosures. Arthur Andersen advised the Partnership that it has ceased furnishing such letters. Item 304T (b) (2) of Regulation S-K provides that if an issuer cannot obtain such a letter after reasonable efforts, compliance with Item 304 (a) (3) is not required. After reasonable efforts, the Partnership was not able to obtain such a letter; accordingly, no such letter has been filed herewith.

During the fiscal years ended December 31, 2001 and 2000 and through July 18, 2002, the Partnership did not consult KPMG with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Partnership’s consolidated financial statements, or any other matter that was the subject of a disagreement or a reportable event as set forth in Items 304(a) (2) (i) and (ii) of Regulation S-K.

Item 9A Controls and procedures

(a) Evaluation of disclosure controls and procedures.

The General Partner’s chief executive officer and chief financial officer, after evaluating the effectiveness of the Partnership’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a date (the “Evaluation Date”) within 90 days before the filing date of this annual report, has concluded that as of the Evaluation Date, the Partnership’s disclosure controls and procedures were effective and designed to ensure that material information relating to the Partnership and its consolidated subsidiaries would be made known to him by others within those entities.

(b) Changes in internal controls.

There were no significant changes in the Partnership’s internal controls or in other factors that could significantly affect those controls subsequent to the Evaluation Date.

13

Table of Contents

Part III

Item 10. Directors and Executive Officers of the Partnership

Daniel L. Stephenson and Rancon Financial Corporation (“RFC”) are the general partners of the Partnership. The executive officer and director of RFC is Daniel L. Stephenson who is Director, President, Chief Executive Officer and Chief Financial Officer.

Mr. Stephenson founded RFC (formerly known as Rancon Corporation) in 1971 for the purpose of establishing 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 1995 to present. Mr. Stephenson is Chairman of the Board of PacWest Group, Inc., a real estate firm that has acquired a portfolio of assets from the Resolution Trust Corporation.

Item 11. Executive Compensation

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

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 outstanding.

Security Ownership of Management

Changes in Control

The Limited Partners have no right, power or authority to act for or bind the Partnership. However, the Limited Partners generally have the power to vote upon the following matters affecting the basic structure of the Partnership, passage of each of which requires 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 Partner or any successor General Partner; (v) election of a new General Partner or General Partner upon the removal, retirement, death, insanity, insolvency, bankruptcy or dissolution of the General Partner or any successor General Partner; (vi) modification of the terms of any agreement between the Partnership and the General Partner or an affiliate of the General Partner; and (vii) extension of the term of the Partnership.

Item 13. Certain Relationships and Related Transactions

During the year ended December 31, 2003, the Partnership did not incur any expenses or costs reimbursable to RFC or any other affiliate of the Partnership.

Item 14. Principal Accountant Fees and Services

The Partnership was billed for $67,500 and $62,300 in 2003 and 2002, respectively for professional services rendered by the principal accountant in connection with the audit of the annual financial statements included on Form 10-K and review of the quarterly financial statements included on Form 10-Q.

14

Table of Contents

Part IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following documents are filed as part of the report

Independent Auditors’ Report

Report of Former Independent Public Accountants

Consolidated Balance Sheets as of December 31, 2003 and 2002

Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001

Consolidated Statements of Partners’ Equity for the years ended December 31, 2003, 2002 and 2001

Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001

Notes to Consolidated Financial Statements

Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2003 and Notes thereto

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

15

Table of Contents

(b) Reports on Form 8-K

None.

16

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) 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.

17

Table of Contents

INDEX TO FINANCIAL STATEMENTS

AND SCHEDULE

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

18

Table of Contents

Independent Auditors’ Report

The General Partner

RANCON REALTY FUND V, A California Limited Partnership:

We have audited the accompanying consolidated balance sheets of RANCON REALTY FUND V, a California Limited Partnership, and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, partners’ equity, and cash flows for each of the years in the two-year period ended December 31, 2003. In connection with our audits of the 2003 and 2002 consolidated financial statements, we have also audited the related 2003 and 2002 information in the financial statement schedule listed in the accompanying index to the financial statements and schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these 2003 and 2002 consolidated financial statements and financial statement schedule based on our audits. The 2001 consolidated financial statements and financial statement schedule of RANCON REALTY FUND V, a California Limited Partnership, and subsidiaries, as listed in the accompanying index, were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those consolidated financial statements and financial statement schedule in their report dated February 1, 2002.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 2003 and 2002 consolidated financial statements referred to above present fairly, in all material respects, the financial position of RANCON REALTY FUND V, a California Limited Partnership, and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in two-year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related 2003 and 2002 information in the financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

San Francisco, California

February 4, 2004

19

Table of Contents

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of

RANCON REALTY FUND V:

We have audited the accompanying consolidated balance sheets of RANCON REALTY FUND V, A CALIFORNIA LIMITED PARTNERSHIP, and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, partners’ equity and cash flows for the years ended December 31, 2001, 2000 and 1999. 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 auditing standards generally accepted in the United States. 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 V and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for the years ended December 31, 2001, 2000 and 1999, in conformity with accounting principles generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements and schedule is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not a required part of the basic financial statements. This schedule 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.

This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with RANCON REALTY FUND V’s filing on Form 10-K for the year ended December 31, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection with this filing on Form 10-K.

20

Table of Contents

RANCON REALTY FUND V

A California Limited Partnership, and Subsidiaries

Consolidated Balance Sheets

December 31, 2003 and 2002

(in thousands, except unit amounts)

The accompanying notes are an integral part of these consolidated financial statements.

21

Table of Contents

RANCON REALTY FUND V

A California Limited Partnership, and Subsidiaries

Consolidated Statements of Operations

For the years ended December 31, 2003, 2002 and 2001

(in thousands, except per unit amounts and units outstanding)

The accompanying notes are an integral part of these consolidated financial statements.

22

Table of Contents

RANCON REALTY FUND V

A California Limited Partnership, and Subsidiaries

Consolidated Statements of Partners’ Equity

For the years ended December 31, 2003, 2002 and 2001

(in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

23

Table of Contents

RANCON REALTY FUND V

A California Limited Partnership, and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31, 2003, 2002 and 2001

(in thousands)