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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -------------------------------------------------------------------------------------



For the year ended December 31, 2003



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------



For the transition period from  to



Commission file number: 0-16645



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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                    
|-------------------------------------------------------------- |  | -----------------------------------
|California                                                     |  | 33-0157561                         
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              



|                                         |  |           
|---------------------------------------- |  | ----------
|400 South El Camino Real, Suite 1100     |  |           
|San Mateo, California                    |  | 94402-1708
|(Address of principal executive offices) |  | (Zip Code)



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)



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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: None.



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##### Table of Contents

INDEX

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



|         |  |                                                                                       |  |         
|-------- |  | ------------------------------------------------------------------------------------- |  | --------
|         |  |                                                                                       |  | Page No.
|         |  | PART I                                                                                |  |         
|         |  |                                                                                      
|Item 1   |  | Business                                                                              |  | 3       
|Item 2   |  | Properties                                                                            |  | 3       
|Item 3   |  | Legal Proceedings                                                                     |  | 5       
|Item 4   |  | Submission of Matters to a Vote of Security Holders                                   |  | 5       
|         |  |                                                                                      
|         |  | PART II                                                                               |  |         
|         |  |                                                                                      
|Item 5   |  | Market for Partnerships Common Stock and Related Stockholder Matters                 |  | 6       
|Item 6   |  | Selected Financial Data                                                               |  | 7       
|Item 7   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 7       
|Item 7A. |  | Qualitative and Quantitative Information About Market Risk                            |  | 10      
|Item 8   |  | Financial Statements and Supplementary Data                                           |  | 10      
|Item 9   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 10      
|Item 9A. |  | Controls and Procedures                                                               |  | 10      
|         |  |                                                                                      
|         |  | PART III                                                                              |  |         
|         |  |                                                                                      
|Item 10  |  | Directors and Executive Officers of the Partnership                                   |  | 11      
|Item 11  |  | Executive Compensation                                                                |  | 11      
|Item 12  |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 11      
|Item 13  |  | Certain Relationships and Related Transactions                                        |  | 11      
|Item 14  |  | Principal Accountant Fees and Services                                                |  | 11      
|         |  |                                                                                      
|         |  | PART IV                                                                               |  |         
|         |  |                                                                                      
|Item 15  |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  | 12      
|         |  |                                                                                      
|         |  | SIGNATURES                                                                            |  | 13      



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##### Table of Contents

Part I



Item 1. Business



Rancon Income Fund I, 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, operating and disposing of existing income producing
commercial, industrial and residential real estate properties. The General Partner of the Partnership is Rancon Income Partners I (General Partner). The Partnership was organized in 1986 and completed its public offering of partnership
units (Units) in April 1989. As of December 31, 2003 and 2002, there were 12,966 and 13,279 Units outstanding, respectively. The Partnership has no employees.



At December 31, 2003, the Partnership owned two properties, which are more fully described in Item 2.



Competition Within the 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 additional tenant improvements commensurate with local market conditions. Such competition may lead to rent concessions that could adversely affect the Partnerships cash flow. 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 at acquisition, or may need to sell earlier than anticipated, 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.



Item 2. Properties



The Partnership currently owns
the properties listed below:



|                            |  |                       |  |                  |  |                |  |                                 
|--------------------------- |  | --------------------- |  | ---------------- |  | -------------- |  | --------------------------------
|Name                        |  | Location              |  | Type             |  | Size           |  | Encumbrances atDecember 31, 2003
|Wakefield Industrial Center |  | Temecula, California  |  | Light Industrial |  | 44,200 sq. ft. |  | None                            
|Bristol Medical Center      |  | Santa Ana, California |  | Office           |  | 52,311 sq. ft. |  | None                            



Wakefield Industrial Center



In April 1987, the Partnership acquired the Wakefield facility, at a
cost of approximately $1,899,000 plus acquisition fees of $87,000. Wakefield property consists of three parcels totaling approximately 3.99 acres of land. Two buildings are constructed on two of the parcels with the remaining parcel served as a
parking lot between the buildings. The property is located in Temecula, California, on the west side of Jefferson Avenue, approximately 500 feet west of the Interstate 15 highway in an area that is zoned for medium manufacturing.



Both buildings are composed of concrete tilt-up construction and have central
heating and air conditioning systems in the office areas. One building contains approximately 25,000 square feet of leasable space, of which approximately 5,900 square feet is office space, with the balance used for manufacturing and related
purposes. The other building contains approximately 19,200 square feet of leasable space of which approximately 4,800 square feet is office space, with the balance used for warehousing and related purposes. The Wakefield facility provides uncovered
parking for approximately 54 cars and includes partially improved land which is used for car parking and truck access.



According to research conducted by the Partnerships leasing director, the market has approximately 12 million square feet of existing industrial space, with an
overall vacancy rate of 7.5%. The area offers a wide range of high quality, attractive industrial projects ranging from multi-tenant incubator space to large, single-user distribution facilities located in master-planned business parks. There is
approximately 600,000 square feet of multi-tenant and free standing industrial space that competes directly with



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Wakefield Industrial Center. Wakefield is one of the original industrial buildings in the area. The asking rent for
industrial space in this area ranges between $4.56 and $6.24 per square foot triple net (tenant pays all operating expenses, including taxes, insurance, and capital) with newer properties at the high end.



The neighborhood surrounding Wakefield has grown over the years and now has added many retail
properties which benefit from the high traffic count on Jefferson Avenue. A new retail shopping center is now located directly adjacent to Wakefield. This high-visibility location creates an opportunity for future conversion of the property to a
retail/showroom use.



The occupancy level for each of the five years ended
December 31, 2003, expressed as a percentage of the total net rentable square feet, and the average annual effective rent per square foot, were as follows:



|     |  |                           |   |  |                                              |     
|---- |  | ------------------------- | - |  | -------------------------------------------- | ----
|     |  | Occupancy LevelPercentage |   |  | Average Annual EffectiveRent Per Square Foot
|2003 |  | 100                       | % |  | $                                            | 4.85
|2002 |  | 100                       | % |  | $                                            | 4.77
|2001 |  | 100                       | % |  | $                                            | 4.61
|2000 |  | 100                       | % |  | $                                            | 4.49
|1999 |  | 100                       | % |  | $                                            | 4.40



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.



One tenant occupies 100% of the net rentable square footage of the two buildings. The principal terms of the lease and the nature of the tenants business are as
follows:



|                       |  |                            
|---------------------- |  | ---------------------------
|                       |  | Wakefield Engineering, Inc.
|                       | 
|Nature of Business:    |  | Manufacturer               
|Lease Term:            |  | 10 years                   
|Expiration Date:       |  | November 30, 2004          
|Square Feet:           |  | 44,200                     
|(% of rentable total): |  | 100%                       
|Annual Rent:           |  | $214,000                   
|Rent Increase:         |  | Annual - CPI               
|Renewal Options:       |  | Two 5-year options         



The lease term of Wakefield will
expire at end of this year. Management is currently negotiating with the tenant for a new term.



Bristol Medical Center



In
October 1987, the Partnership entered into an agreement with Rancon Financial Corporation (RFC) to acquire Bristol Medical Center for a purchase price of $5,105,000, plus all costs incurred by RFC in ownership and management of the
property from December 1986. The purchase price was paid in installments through May 1988, for a total cost of $5,370,000. Bristol Medical Center is located in Santa Ana, California, on the west side of Bristol Street, approximately 1.5 miles from a
major east-west freeway and approximately 2 miles from a major north-south freeway. The John Wayne Orange County airport is located 2.5 miles northwest of the property.



Bristol Medical Center consists of two 2-story medical office buildings and related parking spaces on approximately 3.42 acres. The two
office buildings contain an aggregate of approximately 52,311 net rentable square feet of office space. Each of the buildings has one elevator and three stairways, and each suite is served by its own roof-mounted heating and air conditioning unit.
The property contains uncovered parking for approximately 299 cars.



According
to research conducted by the Partnerships leasing director, the direct market area consists of five medical buildings totaling approximately 190,000 rentable square feet, all of which are older Class B Buildings. Bristol Medical
Center is located on the proposed route for a mass-transit system (Centerline Project) which is expected to run down Bristol Street directly in front of the project. This will greatly improve access to the project from the large
population base in nearby Santa Ana. Currently, total vacancy in this market is approximately 12%. The annual rental rates for the class B medical buildings range from $15.00 per square foot to $17.40 per square foot on a modified gross
basis (tenant pays interior janitorial costs).



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##### Table of Contents

The occupancy level for each of the five years ended December 31, 2003, expressed as a percentage of the total net
rentable square feet, and the average annual effective rent per square foot, were as follows:



|     |  |                           |   |  |                                              |      
|---- |  | ------------------------- | - |  | -------------------------------------------- | -----
|     |  | Occupancy LevelPercentage |   |  | Average Annual EffectiveRent Per Square Foot
|2003 |  | 87                        | % |  | $                                            | 20.55
|2002 |  | 86                        | % |  | $                                            | 19.17
|2001 |  | 81                        | % |  | $                                            | 18.84
|2000 |  | 69                        | % |  | $                                            | 18.46
|1999 |  | 65                        | % |  | $                                            | 18.00



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 current annual rental rates for this property range from $17 to $30 per square foot.



The current annual rental rates at Bristol Medical Center are slightly higher than the market average as the leases in effect are older and
were signed at a time when market rates were higher. Consequently, as tenants leases expire, rental rates may decline slightly but are expected to increase over the next few years as older buildings are replaced by newer buildings in the submarket
combined with an improvement in the economy. Bristol Medical Center benefits from its high-visibility location on heavily traveled Bristol Street, a main thoroughfare which runs from downtown Santa Ana to South Coast Plaza in Costa Mesa. There is
excellent public transportation with a bus stop directly in front of the property and ample parking for medical tenants. A new stop-light has been installed at the intersection directly in front of the property which improves the ingress and egress
to the property.



There are two tenants that occupy more than ten percent of
the net rentable square footage of the Bristol Medical Center. The principal terms of the leases and the nature of the tenants businesses are as follows:



|                       |  |                               
|---------------------- |  | ------------------------------
|                       |  | Bristol Medical Clinic        
|                       | 
|Nature of Business:    |  | Medical clinic                
|Lease Term:            |  | 7 years                       
|Expiration Date:       |  | December 31, 2007             
|Square Feet:           |  | 13,674                        
|(% of rentable total): |  | 27%                           
|Annual Rent:           |  | $257,000                      
|Rent Increase:         |  | 3% annually                   
|Renewal Options:       |  | None                          
|                       | 
|                       |  | The Richli Group, LLC         
|                       | 
|Nature of Business:    |  | Comprehensive Addiction Center
|Lease Term:            |  | 5 years                       
|Expiration Date:       |  | October 31, 2008              
|Square Feet:           |  | 6,854                         
|(% of rentable total): |  | 13%                           
|Annual Rent:           |  | $132,000                      
|Rent Increase:         |  | 3% annually                   
|Renewal Options:       |  | None                          



Item 3. Legal Proceedings



None.



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



None.



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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.



Holders



As of December 31, 2003, a total of 1,052 persons (Limited Partners) held Units.



Distributions



Distributions are paid from either Cash From Operations or Cash From Sales or Financing.



Cash From Operations is defined in the Partnership Agreement as all cash receipts from operations in the ordinary course of business (except for the sale, refinancing,
exchange or other disposition of real property in the ordinary course of business) after deducting payments for operating expenses. Distributions of Cash From Operations are generally allocated as follows: (i) first to the Limited Partners until
they receive a noncumulative 6% return per annum on their unreturned capital contributions and (ii) the remainder, if any in a given year, shall be divided in the ratio of 90% to the Limited Partners and 10% to the General Partner.



Distributions equal to the amounts otherwise allocable to the General Partner but reallocated
to the Limited Partners pursuant to (i) above shall be paid to the General Partner on the next occasion on which Cash From Operations is available for distribution to Limited Partners in an amount in excess of the amount required to provide the
Limited Partners with a 6% per annum return on their unreturned capital contributions, in which case the excess shall be paid to the General Partner in an amount up to the aggregate amount previously re-allocated pursuant to (i) above and not
subsequently repaid in accordance with the provisions of this paragraph.



Cash
From Sales or Financing 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, together with interest on any notes taken back by the Partnership upon the sale of a property. All distributions of Cash From Sales or Financing are allocated generally as follows: (i) first, 2% to the General Partner and 98% to the
Limited Partners until the Limited Partners have received an amount equal to their capital contributions; (ii) second, 2% to the General Partner and 98% to the Limited Partners until the Limited Partners have received a 6% return on their unreturned
capital contributions (less prior distributions of Cash From Operations); (iii) third, to the General Partner the amount of subordinated real estate commissions payable per the Partnership Agreement; (iv) fourth, 2% to the General Partner and 98% to
the Limited Partners until the Limited Partners have received an additional 4% return on their unreturned capital contributions (less prior distributions of Cash From Operations); (v) fifth, 2% to the General Partner and 98% to the Limited Partners
until the Limited Partners who purchased their Units prior to June 1, 1988, receive an additional return (depending on the date on which they purchased the Units) on their unreturned capital of either 8%, 5% or 2% (calculated through the first
anniversary date of the purchase of the Units); (vi) sixth, 98% to the General Partner and 2% to the Limited Partners until the General Partner has received an amount equal to 15% of all prior distributions made to the Limited Partners and the
General Partner pursuant to subparagraphs (iv) and (v) (less prior distributions to the General Partner under subparagraphs (iv) and (v)); and (vii) seventh, 85% to the Limited Partners and 15% to the General Partner. A more detailed statement of
the distribution policies is set forth in the Partnership Agreement.



The
following distributions of Cash From Operations were made by the Partnership during the three most recent fiscal years:



|                    |  |                                       |  |                           |  |                                    
|------------------- |  | ------------------------------------- |  | ------------------------- |  | -----------------------------------
|Date ofDistribution |  | Amount Distributedto Limited Partners |  | AmountDistributedPer Unit |  | AmountDistributed toGeneral Partner
|08/29/03            |  | $ 135,600                             |  | $ 10.33                   |  |                                   
|02/26/03            |  | $ 135,600                             |  | $ 10.22                   |  |                                   
|08/29/02            |  | $ 135,600                             |  | $ 10.10                   |  |                                   
|02/26/02            |  | $ 135,600                             |  | $ 10.00                   |  |                                   
|08/29/01            |  | $ 138,330                             |  | $ 10.00                   |  |                                   
|02/26/01            |  | $ 138,330                             |  | $ 10.00                   |  |                                   



Of the total distributions noted
above, $3.34, $4.76, and $7.18 per unit represented a return of capital for the fiscal years ended December 31, 2003, 2002 and 2001, respectively.



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Item 6. Selected Financial Data



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



|                                                |  |      |       |      |   |       |  |      |       |      |   |       |  |   |      
|----------------------------------------------- |  | ---- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                                                |  | 2003 |       | 2002 |   | 2001  |  | 2000 |       | 1999
|Rental income                                   |  | $    | 1,278 |      | $ | 1,136 |  | $    | 968   |      | $ | 859   |  | $ | 868  
|Net income                                      |  | $    | 228   |      | $ | 208   |  | $    | 178   |      | $ | 173   |  | $ | 391  
|Net income allocable to limited partners        |  | $    | 226   |      | $ | 206   |  | $    | 176   |      | $ | 171   |  | $ | 387  
|Net income per limited partnership unit         |  | $    | 17.21 |      | $ | 15.34 |  | $    | 12.82 |      | $ | 11.94 |  | $ | 26.59
|Total assets                                    |  | $    | 4,721 |      | $ | 4,871 |  | $    | 4,998 |      | $ | 5,149 |  | $ | 5,488
|Cash distributions per limited partnership unit |  | $    | 20.55 |      | $ | 20.10 |  | $    | 20.00 |      | $ | 20.00 |  | $ | 61.90



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



The following discussion should be read in conjunction with the Partnerships financial statements and notes thereto in Item 15 of Part IV:



Results of Operations



2003 versus 2002



Rental income increased $142,000, or 13%, for the year ended December 31, 2003, compared to the year ended December 31, 2002, primarily as a result of overall increases
in occupancy at Bristol Medical Center. Occupancy stood at 92% in March 2003, and increased to 100% in June 2003. Occupancy then decreased to 78% when the lease of a tenant, St. Jude Heritage Health, expired on August 31, 2003. Occupancy rates
returned to 92% in October and November 2003.



Occupancy rates at the
Partnerships rental properties for the years ended December 31, 2003 and 2002 were as follows:



|                                 |  |      |   |  |      |  
|-------------------------------- |  | ---- | - |  | ---- | -
|                                 |  | 2003 |   |  | 2002 |  
|Bristol Medical Center           |  | 87   | % |  | 86   | %
|Wakefield Building               |  | 100  | % |  | 100  | %
|Total weighted average occupancy |  | 94   | % |  | 93   | %



Operating expenses increased $61,000,
or 13%, for the year ended December 31, 2003, compared to the year ended December 31, 2002, primarily due to increases in special assessment property taxes, utility and janitorial costs and reserves for bad debt, offset by a property tax refund from
a tax appeal for Bristol Medical Center.



Depreciation and amortization expense
increased $47,000, or 17%, for the year ended December 31, 2003, compared to December 31, 2002, primarily due to additions to rental properties.



General and administrative expenses increased $10,000, or 5%, during the year ended December 31, 2003, compared to the year ended December 31, 2002, primarily due to an
increase in postage costs associated with investor relation service expenses.



2002 versus 2001



Rental income increased $168,000, or
17%, for the year ended December 31, 2002, compared to the year ended December 31, 2001, primarily due to an approximately 20% increase in occupancy at Bristol Medical Center in May 2001.



Occupancy rates at the Partnerships rental properties for the years ended December 31, 2002 and 2001 were as follows:



|                                 |  |      |   |  |      |  
|-------------------------------- |  | ---- | - |  | ---- | -
|                                 |  | 2002 |   |  | 2001 |  
|Bristol Medical Center           |  | 86   | % |  | 81   | %
|Wakefield Building               |  | 100  | % |  | 100  | %
|Total weighted average occupancy |  | 93   | % |  | 88   | %



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The 5% increase in occupancy from December 31, 2001 to December 31, 2002 at Bristol Medical Center was primarily due to
the leasing of 1,000 square feet of previously vacant space to a new tenant, as well as a 3,300 square foot expansion for an existing tenant, slightly offset by a decrease of 1,700 square feet due to an existing tenant moving out upon the expiration
of their lease.



Interest and other income decreased $15,000 for the year ended
December 31, 2002, compared to the year ended December 31, 2001, primarily due to lower interest rates.



Operating expenses increased $85,000, or 22%, for the year ended December 31, 2002, compared to the year ended December 31, 2001, primarily due to an increase in occupancy at Bristol Medical Center and increase in
utility cost.



Depreciation and amortization expense increased $53,000, or 24%,
for the year ended December 31, 2002, compared to December 31, 2001, primarily due to additions to rental properties.



General and administrative expenses decreased $15,000, or 7%, during the year ended December 31, 2002, compared to the year ended December 31, 2001, primarily due to a
decrease in legal costs.



Liquidity and Capital Resources



On April 21, 1989, the Partnership was funded from the sale of 14,559
limited partnership units (Units) in the amount of $14,559,000. Four Units were retired in 1990. As of December 31, 2003, a total of 1,589 Units have been repurchased and 12,966 Units remain outstanding.



As of December 31, 2003, the Partnership had cash of $348,000. The remainder of the
Partnerships assets consists primarily of its real estate investments, which totaled approximately $4,177,000 at December 31, 2003.



The Partnership is contingently liable for a subordinated real estate commission payable to the General Partner in the amount of $30,000 at December 31, 2003 for the May
1999 sale of Aztec Village Shopping Center. Upon the sale of a Partnership property, the Partnership Agreement entitles the General Partner to a subordinated real estate commission, provided that, in no event shall the subordinated real estate
commission payable to the General Partner exceed 3% of the gross sales price of the property which is sold. The subordinated real estate commission is payable only after the limited partners have received distributions equal to their original
invested capital plus a cumulative non-compounded return of 6% per annum on their adjusted invested capital. Since the circumstances under which this commission would be payable are limited, the liability has not been recognized in the
Partnerships financial statements; however, the amount will be recorded if and when it becomes payable.



Operationally, the Partnerships primary source of funds consists of cash generated from operating the rental properties. Cash flows from operating activities have been sufficient to provide funds to reinvest in
the properties by way of improvements, as well as to fund distributions to the limited partners. Another source of funds has been the interest earned on invested cash balances.



Management believes that the Partnerships cash balance as of December 31, 2003, together with the cash from operations, will be
sufficient to finance the Partnerships and the properties continued operations on both a short-term and long-term basis. 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.



Operating Activities



During the year ended December 31, 2003, the Partnerships cash
provided by operating activities totaled $379,000.



The $69,000 increase in
deferred costs at December 31, 2003, compared to December 31, 2002, was due to $118,000 of lease commissions paid for new and renewal leases, offset by $49,000 of amortization expense.



The $40,000 increase in prepaid expenses and other assets at December 31, 2003, compared to December 31, 2002, was primarily due to an
increase in tenant rents receivable recognized on a straight line basis.



The
$13,000 decrease in accounts payable and other liabilities at December 31, 2003, compared to December 31, 2002, was primarily due to payments of audit fees and redemptions.



Investing Activities



During the year ended December 31, 2003, the Partnerships cash used for investing activities totaled $378,000 for improvement of the rental properties.



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##### Table of Contents

Financing Activities



During the year ended December 31, 2003, the Partnerships cash used for financing activities totaled $365,000 which consisted of $271,000 of distributions to the
Limited Partners, and $94,000 paid to redeem 313 limited partnership units (Units).



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.



Carrying value of rental properties



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.



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 financial position or results of operations, although they may in
future periods. 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.



9



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##### Table of Contents

Item 7A. Qualitative and Quantitative Information About Market Risk



As of December 31, 2003, the Partnership had cash equivalents of $200,000 invested in interest-bearing certificates of deposit. These investments are subject to interest rate risk due to changes in interest rates upon
maturity. The Partnership does not own any derivative instruments. Declines in interest rates over time would reduce Partnership interest income.



Item 8. Financial Statements and Supplementary Data



For information with respect to Item 8, 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 Rancon Income Fund I, 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 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 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 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 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.



10



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##### Table of Contents

Part III



Item 10. Directors and Executive Officers of the Partnership



Rancon Income Partners I, L.P. is the General Partner of the Partnership. Daniel L. Stephenson and Rancon Financial Corporation (RFC) are the General Partners of Rancon Income Partners I, L.P. 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 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 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.



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.



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



|               |  |                          |  |                      |  |                                     
|-------------- |  | ------------------------ |  | -------------------- |  | ------------------------------------
|Title of Class |  | Name of Beneficial Owner |  | Beneficial Ownership |  | Amount and Nature ofPercent of Class
|Units          |  | Daniel L. Stephenson     |  | 3 Units (trust)      |  | 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 Partner or
any successor General Partner; (v) election of a new General Partner; (vi) the approval or disapproval of the terms of purchase of the General Partners interest; and (vii) the modification of the terms of any agreement between the Partnership
and the General Partner or an affiliate.



Item 13. Certain Relationships and Related Transactions



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



Item 14. Principal Accountant Fees and Services



The Partnership was billed for each of the last two calendar years for professional services rendered by the principal accountant in connection with the audit of the annual financial statements on Form 10-K and the quarterly financial
statements on Form 10-Q in the amount of $21,000 and $19,400 in 2003 and 2002, respectively.



11



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##### Table of Contents

Part IV



Item 15. Exhibits, Financial Statements, Schedule and Reports on Form 8-K



| | (a) | The following documents are filed as part of this report:
| | --- | ---------------------------------------------------------



| | (1) | Financial Statements:
| | --- | ---------------------



|                                                                                   
|-----------------------------------------------------------------------------------
|Independent Auditors Report                                                       
|                                                                                   
|Report of Former Independent Public Accountants                                    
|                                                                                   
|Balance Sheets as of December 31, 2003 and 2002                                    
|                                                                                   
|Statements of Operations for the Years Ended December 31, 2003, 2002 and 2001      
|                                                                                   
|Statements of Partners Equity for the Years Ended December 31, 2003, 2002 and 2001
|                                                                                   
|Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001      
|                                                                                   
|Notes to Financial Statements                                                      



| | (2) | Financial Statement Schedule:
| | --- | -----------------------------



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.



| | (3) | Exhibits:
| | --- | ---------



| | 10.3 | Agreement for Acquisition of Management Interests, dated December 20, 1994 (filed as Exhibit 10.3 to the Partnerships quarterly report on Form 10-Q for the quarter ended
September 30, 2003 is incorporated herein by reference).
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 31.1 | Section 302 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------



| | 32.1 | Section 906 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------



| | (b) | Reports on Form 8-K
| | --- | -------------------



None.



12



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##### 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.



|                     |  |                                  |  |                                                 
|-------------------- |  | -------------------------------- |  | ------------------------------------------------
|                     |  | RANCON INCOME FUND I,           
|                     |  | a California Limited Partnership
|                     |  | (Partnership)                   
|                     |  |                                 
|                     |  | By:                              |  | RANCON INCOME PARTNERS I, L.P.                  
|                     |  |                                  |  | General Partner                                 
|                     |  |                                 
|Date: March 30, 2004 |  | By:                              |  | /s/ Daniel L. Stephenson                        
|                     |  |                                  |  | Daniel L. Stephenson,                           
|                     |  |                                  |  | Director, President, Chief Executive Officer and
|                     |  |                                  |  | Chief Financial Officer of                      
|                     |  |                                  |  | Rancon Financial Corporation,                   
|                     |  |                                  |  | General Partner of                              
|                     |  |                                  |  | Rancon Income Partners I, L.P.                  



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.



|                     |  |     |  |                                                 
|-------------------- |  | --- |  | ------------------------------------------------
|                     |  | By: |  | RANCON INCOME PARTNERS I, L.P.                  
|                     |  |     |  | General Partner                                 
|                     |  |    
|Date: March 30, 2004 |  | By: |  | /s/ Daniel L. Stephenson                        
|                     |  |     |  | Daniel L. Stephenson,                           
|                     |  |     |  | Director, President, Chief Executive Officer and
|                     |  |     |  | Chief Financial Officer of                      
|                     |  |     |  | Rancon Financial Corporation,                   
|                     |  |     |  | General Partner of                              
|                     |  |     |  | Rancon Income Partners I, L.P.                  



13



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##### Table of Contents

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



INDEX TO FINANCIAL STATEMENTS

AND SCHEDULE



|                                                                                                  |  |         
|------------------------------------------------------------------------------------------------- |  | --------
|                                                                                                  |  | Page No.
|Independent Auditors Report                                                                      |  | 15      
|                                                                                                  | 
|Report of Former Independent Public Accountants                                                   |  | 16      
|                                                                                                  | 
|Balance Sheets as of December 31, 2003 and 2002                                                   |  | 17      
|                                                                                                  | 
|Statements of Operations for the years ended December 31, 2003, 2002 and 2001                     |  | 18      
|                                                                                                  | 
|Statements of Partners Equity for the years ended December 31, 2003, 2002 and 2001               |  | 19      
|                                                                                                  | 
|Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001                     |  | 20      
|                                                                                                  | 
|Notes to Financial Statements                                                                     |  | 21-26   
|                                                                                                  | 
|Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2003 and Notes thereto |  | 27-28   



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



14



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##### Table of Contents

Independent Auditors Report



The General
Partner

RANCON INCOME FUND I, A California Limited Partnership:



We have audited the accompanying balance sheets of RANCON INCOME FUND I, a California Limited Partnership, as of December 31, 2003 and 2002, and the related 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 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 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 financial statements and financial statement schedule based on our audits. The 2001 financial statements and financial statement schedule of RANCON INCOME FUND I, a California Limited
Partnership, as listed in the accompanying index, were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those 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 financial statements referred to above present fairly, in all material respects, the financial position of RANCON INCOME FUND I, a California Limited Partnership, as of December 31,
2003, and 2002, and the results of its operations and its cash flows for each of the years in the 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 financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.



| |  |             
| |  | ------------
| |  | /s/ KPMG LLP
| |  | KPMG LLP    



San Francisco, California

February 4, 2004



15



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##### Table of Contents

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the
Partners of

RANCON INCOME FUND I:



We have audited the accompanying balance sheets of RANCON INCOME FUND I, A CALIFORNIA LIMITED PARTNERSHIP, as of December 31, 2001 and 2000, and the related 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 audit provides 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 INCOME FUND I as of December 31,
2001 and 2000, and the results of its operations and its 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.



|                                          |                     |                        
|----------------------------------------- | ------------------- | -----------------------
|San Francisco, CaliforniaFebruary 1, 2002 |                     | /s/ Arthur Andersen LLP
|                                          | Arthur Andersen LLP



This is a copy of the audit report
previously issued by Arthur Andersen LLP in connection with RANCON INCOME FUND I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.



16



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##### Table of Contents

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Balance Sheets

December 31, 2003 and 2002

(in thousands, except units outstanding)



|                                                                                                                       |  |                   |        |   |                   |   |        |  
|---------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------ | -
|                                                                                                                       |  | December 31, 2003 |        |   | December 31, 2002 |  
|                                                                                                                       | 
|Assets                                                                                                                 |  |                   |        |   |                   |   |        |  
|                                                                                                                       |  |                  
|Real estate investments:                                                                                               |  |                   |        |   |                   |   |        |  
|Rental properties                                                                                                      |  | $                 | 6,900  |   |                   | $ | 6,522  |  
|Accumulated depreciation                                                                                               |  |                   | (2,723 | ) |                   |   | (2,450 | )
|                                                                                                                       |  |                   |        |   |                   |   |        |  
|Rental properties, net                                                                                                 |  |                   | 4,177  |   |                   |   | 4,072  |  
|                                                                                                                       |  |                  
|Cash and cash equivalents                                                                                              |  |                   | 348    |   |                   |   | 712    |  
|Deferred costs, net of accumulated amortization of $148 and $99 at December 31, 2003 and 2002, respectively            |  |                   | 123    |   |                   |   | 54     |  
|Prepaid expenses and other assets                                                                                      |  |                   | 73     |   |                   |   | 33     |  
|                                                                                                                       |  |                   |        |   |                   |   |        |  
|Total assets                                                                                                           |  | $                 | 4,721  |   |                   | $ | 4,871  |  
|                                                                                                                       |  |                   |        |   |                   |   |        |  
|Liabilities and Partners Equity                                                                                       |  |                   |        |   |                   |   |        |  
|                                                                                                                       |  |                  
|Liabilities:                                                                                                           |  |                   |        |   |                   |   |        |  
|Accounts payable and other liabilities                                                                                 |  | $                 | 34     |   |                   | $ | 48     |  
|Security deposits                                                                                                      |  |                   | 84     |   |                   |   | 83     |  
|                                                                                                                       |  |                   |        |   |                   |   |        |  
|Total liabilities                                                                                                      |  |                   | 118    |   |                   |   | 131    |  
|                                                                                                                       |  |                   |        |   |                   |   |        |  
|Commitments and contingent liabilities (Note 5)                                                                        |  |                   |        |   |                   |   |        |  
|                                                                                                                       |  |                  
|Partners Equity:                                                                                                      |  |                   |        |   |                   |   |        |  
|General partner                                                                                                        |  |                   | (185   | ) |                   |   | (187   | )
|Limited partners, 12,966 and 13,279 limited partnership units outstanding at December 31, 2003, and 2002, respectively |  |                   | 4,788  |   |                   |   | 4,927  |  
|                                                                                                                       |  |                   |        |   |                   |   |        |  
|Total partners equity                                                                                                 |  |                   | 4,603  |   |                   |   | 4,740  |  
|                                                                                                                       |  |                   |        |   |                   |   |        |  
|Total liabilities and partners equity                                                                                 |  | $                 | 4,721  |   |                   | $ | 4,871  |  
|                                                                                                                       |  |                   |        |   |                   |   |        |  



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



17



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##### Table of Contents

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Statements of Operations

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

(in thousands, except per unit and unit amounts)



|                                                                                    |  |      |        |      |   |        |  |   |       
|----------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                                                                    |  | 2003 |        | 2002 |   | 2001  
|Revenue                                                                             |  |      |        |      |   |        |  |   |       
|                                                                                    |  |      |       
|Rental income                                                                       |  | $    | 1,278  |      | $ | 1,136  |  | $ | 968   
|Interest and other income                                                           |  |      | 7      |      |   | 11     |  |   | 26    
|                                                                                    |  |      |        |      |   |        |  |   |       
|Total revenue                                                                       |  |      | 1,285  |      |   | 1,147  |  |   | 994   
|                                                                                    |  |      |        |      |   |        |  |   |       
|Expenses                                                                            |  |      |        |      |   |        |  |   |       
|                                                                                    |  |      |       
|Operating                                                                           |  |      | 532    |      |   | 471    |  |   | 386   
|Depreciation and amortization                                                       |  |      | 322    |      |   | 275    |  |   | 222   
|General and administrative                                                          |  |      | 203    |      |   | 193    |  |   | 208   
|                                                                                    |  |      |        |      |   |        |  |   |       
|Total expenses                                                                      |  |      | 1,057  |      |   | 939    |  |   | 816   
|                                                                                    |  |      |        |      |   |        |  |   |       
|Net income                                                                          |  | $    | 228    |      | $ | 208    |  | $ | 178   
|                                                                                    |  |      |        |      |   |        |  |   |       
|Basic and diluted net income per limited partnership unit                           |  | $    | 17.21  |      | $ | 15.34  |  | $ | 12.82 
|                                                                                    |  |      |        |      |   |        |  |   |       
|Weighted average number of limited partnership units outstanding during each period |  |      | 13,131 |      |   | 13,429 |  |   | 13,732
|                                                                                    |  |      |        |      |   |        |  |   |       



The accompanying notes
are an integral part of these financial statements



18



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##### Table of Contents

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Statements of Partners Equity

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

(in thousands)



|                                                    |  |                |      |   |                 |   |       |       |  |   |       |  
|--------------------------------------------------- |  | -------------- | ---- | - | --------------- | - | ----- | ----- |  | - | ----- | -
|                                                    |  | GeneralPartner |      |   | LimitedPartners |   |       | Total | 
|Balance at December 31, 2000                        |  | $              | (191 | ) |                 | $ | 5,237 |       |  | $ | 5,046 |  
|                                                    |  |                |     
|Retirement of limited partnership units             |  |                |     |   |                 |   | (70   | )     |  |   | (70   | )
|                                                    |  |                |     
|Distributions ($20.00 per limited partnership unit) |  |                |     |   |                 |   | (277  | )     |  |   | (277  | )
|                                                    |  |                |     
|Net income                                          |  |                | 2    |   |                 |   | 176   |       |  |   | 178   |  
|                                                    |  |                |      |   |                 |   |       |       |  |   |       |  
|Balance at December 31, 2001                        |  |                | (189 | ) |                 |   | 5,066 |       |  |   | 4,877 |  
|                                                    |  |                |     
|Retirement of limited partnership units             |  |                |     |   |                 |   | (74   | )     |  |   | (74   | )
|                                                    |  |                |     
|Distributions ($20.10 per limited partnership unit) |  |                |     |   |                 |   | (271  | )     |  |   | (271  | )
|                                                    |  |                |     
|Net income                                          |  |                | 2    |   |                 |   | 206   |       |  |   | 208   |  
|                                                    |  |                |      |   |                 |   |       |       |  |   |       |  
|Balance at December 31, 2002                        |  |                | (187 | ) |                 |   | 4,927 |       |  |   | 4,740 |  
|                                                    |  |                |     
|Retirement of limited partnership units             |  |                |     |   |                 |   | (94   | )     |  |   | (94   | )
|                                                    |  |                |     
|Distributions ($20.55 per limited partnership unit) |  |                |     |   |                 |   | (271  | )     |  |   | (271  | )
|                                                    |  |                |     
|Net income                                          |  |                | 2    |   |                 |   | 226   |       |  |   | 228   |  
|                                                    |  |                |      |   |                 |   |       |       |  |   |       |  
|Balance at December 31, 2003                        |  | $              | (185 | ) |                 | $ | 4,788 |       |  | $ | 4,603 |  
|                                                    |  |                |      |   |                 |   |       |       |  |   |       |  



The accompanying notes
are an integral part of these financial statements



19



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##### Table of Contents

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Statements of Cash Flows

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

(in thousands)



|                                                                                  |  |      |      |   |      |   |      |      |  |   |      |  
|--------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                                                  |  | 2003 |      |   | 2002 |   |      | 2001 | 
|Cash flows from operating activities:                                             |  |      |      |   |      |   |      |      |  |   |      |  
|                                                                                  |  |      |     
|Net income                                                                        |  | $    | 228  |   |      | $ | 208  |      |  | $ | 178  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |      |   |      |   |      |      |  |   |      |  
|Depreciation and amortization                                                     |  |      | 322  |   |      |   | 275  |      |  |   | 222  |  
|Changes in certain assets and liabilities:                                        |  |      |      |   |      |   |      |      |  |   |      |  
|Deferred costs                                                                    |  |      | (118 | ) |      |   | (24  | )    |  |   | (39  | )
|Prepaid expenses and other assets                                                 |  |      | (40  | ) |      |   | (19  | )    |  |   | 4    |  
|Accounts payable and other liabilities                                            |  |      | (12  | ) |      |   | 5    |      |  |   | 3    |  
|Security deposits                                                                 |  |      | (1   | ) |      |   | 5    |      |  |   | 15   |  
|                                                                                  |  |      |      |   |      |   |      |      |  |   |      |  
|Net cash provided by operating activities                                         |  |      | 379  |   |      |   | 450  |      |  |   | 383  |  
|                                                                                  |  |      |      |   |      |   |      |      |  |   |      |  
|Cash flows used for investing activities:                                         |  |      |      |   |      |   |      |      |  |   |      |  
|Additions to real estate investments                                              |  |      | (378 | ) |      |   | (141 | )    |  |   | (219 | )
|                                                                                  |  |      |      |   |      |   |      |      |  |   |      |  
|Cash flows from financing activities:                                             |  |      |      |   |      |   |      |      |  |   |      |  
|                                                                                  |  |      |     
|Distributions to Limited Partners                                                 |  |      | (271 | ) |      |   | (271 | )    |  |   | (277 | )
|Retirement of limited partnership units                                           |  |      | (94  | ) |      |   | (74  | )    |  |   | (70  | )
|                                                                                  |  |      |      |   |      |   |      |      |  |   |      |  
|Net cash used for financing activities                                            |  |      | (365 | ) |      |   | (345 | )    |  |   | (347 | )
|                                                                                  |  |      |      |   |      |   |      |      |  |   |      |  
|Net decrease in cash and cash equivalents                                         |  |      | (364 | ) |      |   | (36  | )    |  |   | (183 | )
|                                                                                  |  |      |     
|Cash and cash equivalents at beginning of year                                    |  |      | 712  |   |      |   | 748  |      |  |   | 931  |  
|                                                                                  |  |      |      |   |      |   |      |      |  |   |      |  
|Cash and cash equivalents at end of year                                          |  | $    | 348  |   |      | $ | 712  |      |  | $ | 748  |  
|                                                                                  |  |      |      |   |      |   |      |      |  |   |      |  



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



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##### Table of Contents

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Note to Financial Statements

December 31, 2003 and 2002



Note 1. ORGANIZATION



Rancon Income Fund I, 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,
operating and disposing of existing income producing commercial, industrial and residential real estate properties. The Partnership reached final funding in April 1989. The Partnership was formed with initial capital contributions from Rancon Income
Partners I, L.P. (the General Partner) and Daniel Lee Stephenson, the initial limited partner, who indirectly owns and controls the General Partner. The General Partner and its affiliates are hereinafter referred to as the Sponsor. At December 31,
2003 and 2002, 12,966 and 13,279 units were issued and outstanding, respectively.



Allocation of Net Income and Net Loss



Allocations of
the profits and losses from operations are made pursuant to the terms of the Partnership Agreement.



Generally, net income from operations is allocated to the General Partner and the limited partners in proportion to the amounts of cash from operations distributed to the partners for each fiscal year. In no event
shall the General Partner be allocated less than 1% of the net income from any period. If there are no distributions of cash from operations during such fiscal year, net income shall be allocated 90% to the limited partners and 10% to the General
Partner. Net losses from operations are allocated 90% to the limited partners and 10% to the General Partner until such time as a partners account is reduced to zero. Additional losses will be allocated entirely to those partners with positive
account balances until such balances are reduced to zero. In no event will the General Partner be allocated less than 1% of net loss for any period.



Net income other than net income from operations shall be allocated as follows: (i) first, 1% to the General Partner; (ii) second, to the partners who have a deficit
balance in their capital account in proportion to and to the extent of such deficit balances, provided, that in no event shall the General Partner be allocated more than 10% of the net income other than net income from operations until the earlier
of sale or disposition of substantially all of the assets or the distribution of cash (other than cash from operations) equal to the original invested capital of the General Partner and the limited partner; (iii) the balance, if any, shall be
allocated (a) first, to the General Partner in an amount equal to the lesser of (1) the amount of cash from sale or financing anticipated to be distributed to the General Partner or (2) an amount sufficient to increase the General Partners
account balance to an amount equal to such distribution from sale or financing; (b) the balance, to the limited partners. In no event shall the General Partner be allocated less than 1% of the net income other than net income from operations for any
period.



Distributions



Distributions of cash from operations are generally allocated as follows: (i) first, to the
limited partners until they receive a non-cumulative 6% return per annum on their unreturned capital contributions and (ii) the remainder, if any in a given year, shall be divided in the ratio of 90% to the limited partners and 10% to the General
Partner.



Distributions of cash from sales or financing are generally allocated
as follows: (i) first, 2% to the General Partner and 98% to the limited partners until the limited partners have received an amount equal to their capital contributions; (ii) second, 2% to the General Partner and 98% to the limited partners until
the limited partners have received a cumulative non-compounded return of 6% per annum on their unreturned capital contributions (less prior distributions of cash from operations); (iii) third, to the General Partner for the amount of subordinated
real estate commissions payable per the Partnership Agreement; (iv) fourth, 2% to the General Partner and 98% to the limited partners until the limited partners have received an additional 4% return on their unreturned capital contributions (less
prior distributions of cash from operations); (v) fifth, 2% to the General Partner and 98% to the limited partners until the limited partners who purchased their partnership units (Units) prior to June 1, 1988, receive an additional
return (depending on the date on which they purchased the Units) on their unreturned capital of either 8%, 5% or 2% (calculated through the first anniversary date of the purchase of the Units); (vi) sixth, 98% to the General Partner and 2% to the
limited partners until the General Partner has received an amount equal to 15% of all prior distributions made to the limited partners and the General Partners pursuant to subparagraphs (iv) and (v), reduced by the aggregate of all prior
distributions to the General Partner under subparagraphs (iv) and (v); and (vii) seventh, the balance, 85% to the limited partners and 15% to the General Partner.



The terms of the Partnership agreement call for the General Partner to restore any deficits that may exist in its capital account after
allocation of gains and losses from the sale of the final property owned by the Partnership, but prior to any liquidating distributions being made to the partners.



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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Note to Financial Statements

December 31, 2003 and 2002



Management Agreement



Effective January 1, 1995, Glenborough Corporation (GC) entered into an agreement with the Partnership and other related
Partnerships (collectively, the Rancon Partnerships) to perform or contract on the Partnerships behalf for financial, accounting, data processing, marketing, legal, investor relations, asset and development management and
consulting services for a period of ten years or until the liquidation of the Partnership, whichever comes first. Effective January 1, 1998, the agreement was amended to eliminate GCs responsibility for providing investor relation services and
Preferred Partnership Services, Inc., a California corporation unaffiliated with the Partnership, contracted to assume the investor relations services. In October 2000, GC merged into Glenborough Realty Trust Incorporated (Glenborough).



Effective July 1, 1999, the agreement was further amended to: (i) reduce the
asset administration fee to $100,000 plus CPI annually ($105,000 and $103,000 as of December 31, 2003, and 2002, respectively); (ii) increase the sales fee for improved properties from 2% to 3% and (iii) reduce the management fee applicable to
Wakefield Industrial Center from 5% to 3% of the gross rental receipts. The Partnership will also pay Glenborough: (i) a sales fees of 4% for land; (ii) a refinancing fee of 1% and (iii) a management fee of 5% of gross rental receipts from Bristol
Medical Center. As part of this agreement, Glenborough will perform certain duties for the General Partner of the Rancon Partnerships. 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 the Partnership or RFC.



Risks and Uncertainties



The Partnerships ability to achieve positive cash flow from operations, provide distributions from operations and continue as a going concern may be impacted by
changes in property values, local and regional 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.



Note 2. SIGNIFICANT ACCOUNTING POLICIES



Basis of Accounting



The accompanying financial statements have been prepared on the accrual basis of accounting
in accordance with accounting principles generally accepted in the United States.



Use of Estimates



The preparation of financial
statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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.



Rental Properties



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
is reduced to the estimated fair value. Estimated fair value: (i) is based upon the Partnerships plans for the continued operation 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.



Depreciation is provided using the straight-line method over useful lives ranging from five to forty years for the respective assets.



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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Note to Financial Statements

December 31, 2003 and 2002



Cash and Cash Equivalents



The Partnership considers certificates of deposit and money market funds with original maturities of less than ninety days when purchased to
be cash equivalents.



Fair Value of Financial Instruments



For certain financial instruments, including cash and cash
equivalents, prepaid expenses and other assets, accounts payable and other liabilities and security deposits, recorded amounts approximate fair value due to the relatively short maturity period.



Deferred Costs



Deferred lease commissions are amortized over the initial fixed term of the related lease agreements on a straight-line basis.



Revenue



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, or if other tenants pay rent whom the Partnership previously estimated would not.



The Partnerships portfolio of leases turns over continuously, with the number and
value of expiring leases varying from year to year. The Partnerships ability to re-lease the space to existing or new tenants at rates equal to or greater than those realized historically is impacted by, among other things, the economic
conditions of the market in which a property is located, the availability of competing space, and the level of improvements which may be required at the property. No assurance can be given that the rental rates that the Partnership will obtain in
the future will be equal to or greater than those obtained under existing contractual commitments.



Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue in the period the applicable expenses are incurred. Differences between estimated and actual amounts
are recognized in the subsequent year.



Net Income (Loss) Per Limited
Partnership Unit



Net income (loss) per limited partnership unit is
calculated using the weighted average number of limited partnership units outstanding during the period and the limited partners allocable share of the net income (loss).



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 for financial reporting purposes will differ from the Partnership 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.



Concentration Risk



Two tenants
represented 44% of rental income for the year ended December 31, 2003. Three tenants represented 65% and 62% of rental income for the years ended December 31, 2002 and 2001, respectively.



New Accounting Pronouncements



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



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##### Table of Contents

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Note to Financial Statements

December 31, 2003 and 2002



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.



Note 3. INVESTMENTS IN REAL ESTATE



Rental properties consist of the following at December 31, 2003 and 2002:



|                               |  |      |            |   |      |   |            |  
|------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                               |  | 2003 |            |   | 2002 |  
|Land                           |  | $    | 1,928,000  |   |      | $ | 1,928,000  |  
|Buildings and improvements     |  |      | 3,872,000  |   |      |   | 3,662,000  |  
|Tenant improvements            |  |      | 1,100,000  |   |      |   | 932,000    |  
|                               |  |      |            |   |      |   |            |  
|                               |  |      | 6,900,000  |   |      |   | 6,522,000  |  
|Less: accumulated depreciation |  |      | (2,723,000 | ) |      |   | (2,450,000 | )
|                               |  |      |            |   |      |   |            |  
|Total                          |  | $    | 4,177,000  |   |      | $ | 4,072,000  |  
|                               |  |      |            |   |      |   |            |  



None of the Partnerships
properties are encumbered by debt as of December 31, 2003 and 2002.



Note 4.
LEASES



The Partnerships rental properties are leased under
non-cancelable operating leases that expire on various dates through 2008 and thereafter. Minimum future rents under non-cancelable operating leases as of December 31, 2003 are as follows:



|           |  |   |          
|---------- |  | - | ---------
|2004       |  | $ | 1,060,000
|2005       |  |   | 851,000  
|2006       |  |   | 778,000  
|2007       |  |   | 753,000  
|2008       |  |   | 354,000  
|Thereafter |  |   | 323,000  
|           |  |   |          
|Total      |  | $ | 4,119,000
|           |  |   |          



In addition to minimum rental
payments, certain tenants pay reimbursements for their pro rata share of specified operating expenses, which amounted to $116,000, $74,000, and $43,000 for the years ended December 31, 2003, 2002, and 2001, respectively. These amounts are included
in the accompanying statements of operations.



Note 5. COMMITMENTS AND
CONTINGENT LIABILITIES



General Uninsured Losses



The Partnership carries property and liability insurance with respect to the properties.
This coverage has policy specification and insured limits customarily carried for similar properties. However, certain types of losses (such as from earthquakes and floods) may be either uninsurable or not economically insurable. Should the
properties sustain damage as a result of an earthquake or flood, the Partnership may incur losses due to insurance deductibles, co-payments on insured losses or uninsured losses.



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##### Table of Contents

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Note to Financial Statements

December 31, 2003 and 2002



Additionally, the Partnership has elected to obtain insurance coverage for certified acts of terrorism as
defined in the Terrorism Risk Insurance Act of 2002; however, the Partnerships policies of insurance may not provide coverage for other acts of terrorism. Any losses from such other acts of terrorism might be uninsured. Should an uninsured
loss occur, the Partnership could lose some or all of its capital investment, cash flow and anticipated profits related to the properties.



Other Matters



The Partnership is contingently liable for a subordinated real estate commission payable to the General Partner in the amount of $30,000 at December 31, 2003 for the May 1999 sale of Aztec Village. Upon the sale of a
Partnership property, the Partnership Agreement entitles the General Partner to a subordinated real estate commission, provided that, in no event shall the subordinated real estate commission payable to the General Partner exceed 3% of the gross
sales price of the property which is sold. The subordinated real estate commission is payable only after the limited partners have received distributions equal to their original invested capital plus a cumulative non-compounded return of 6% per
annum on their adjusted invested capital. Since the circumstances under which this commission would be payable are limited, the liability has not been recognized in the accompanying financial statements; however, the amount will be recorded if and
when it becomes payable.



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.



The following is a reconciliation of the
net income for financial reporting purposes to the estimated taxable income, for the years ended December 31, 2003, 2002 and 2001, determined in accordance with accounting practices used in preparation of federal income tax returns (in thousands):



|                                                                                                      |  |      |     |   |      |   |      |  |   |     |  
|----------------------------------------------------------------------------------------------------- |  | ---- | --- | - | ---- | - | ---- |  | - | --- | -
|                                                                                                      |  | 2003 |     |   | 2002 |   | 2001 | 
|Net income as reported in the accompanying financial statements                                       |  | $    | 228 |   |      | $ | 208  |  | $ | 178 |  
|Financial reporting depreciation in excess of tax depreciation*                                       |  |      | 119 |   |      |   | 96   |  |   | 60  |  
|Operating revenues and expenses reported in a different period for tax than financial reporting, net* |  |      | (7  | ) |      |   | 16   |  |   | (25 | )
|                                                                                                      |  |      |     |   |      |   |      |  |   |     |  
|Net income for federal income tax purposes*                                                           |  | $    | 340 |   |      | $ | 320  |  | $ | 213 |  
|                                                                                                      |  |      |     |   |      |   |      |  |   |     |  



The following is a reconciliation as
of December 31, 2003 and 2002 of partners equity for financial reporting purposes to estimated partners equity for federal income tax purposes (in thousands):



|                                                                                                         |  |      |       |      |   |      
|-------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                                                                         |  | 2003 |       | 2002
|Partners equity as reported in the accompanying financial statements                                    |  | $    | 4,603 |      | $ | 4,740
|Cumulative provision for impairment of investments in real estate                                        |  |      | 2,096 |      |   | 2,096
|Financial reporting depreciation in excessof tax reporting depreciation*                                 |  |      | 625   |      |   | 506  
|Operating expenses recognized in a different period for financial reporting than for tax reporting, net* |  |      | 56    |      |   | 72   
|                                                                                                         |  |      |       |      |   |      
|Partners equity for federal income tax purposes*                                                        |  | $    | 7,380 |      | $ | 7,414
|                                                                                                         |  |      |       |      |   |      

---

|* | Unaudited
|- | ---------



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##### Table of Contents

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP



Note to Financial Statements

December 31, 2003 and 2002



Note 7. UNAUDITED QUARTERLY RESULTS OF OPERATIONS



The following represents an unaudited summary of quarterly results of operations for the
years ended December 31, 2003 and 2002 (in thousands, except for per unit amounts and units outstanding):



|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|----------------------------------------------------------------------------------- |  | ------------------------- | ------ | ------------ | - | ------------ |  | ----------- | ------ |  | - | ------
|                                                                                    |  | Quarter Ended (unaudited)
|                                                                                    |  | March 31,2003             |        | June 30,2003 |   | Sept 30,2003 |  | Dec 31,2003
|Revenues                                                                            |  |                           |        |              |   |              |  |             |        |  |   |       
|Rental income                                                                       |  | $                         | 287    |              | $ | 361          |  | $           | 307    |  | $ | 323   
|Interest and other income                                                           |  |                           | 3      |              |   | 1            |  |             | 1      |  |   | 2     
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Total revenues                                                                      |  |                           | 290    |              |   | 362          |  |             | 308    |  |   | 325   
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Expenses                                                                            |  |                           |        |              |   |              |  |             |        |  |   |       
|Operating                                                                           |  |                           | 119    |              |   | 136          |  |             | 128    |  |   | 149   
|Depreciation and amortization                                                       |  |                           | 74     |              |   | 74           |  |             | 82     |  |   | 92    
|General and administrative                                                          |  |                           | 48     |              |   | 49           |  |             | 52     |  |   | 54    
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Total expenses                                                                      |  |                           | 241    |              |   | 259          |  |             | 262    |  |   | 295   
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Net income                                                                          |  | $                         | 49     |              | $ | 103          |  | $           | 46     |  | $ | 30    
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Basis and diluted net income per limited partnership unit                           |  | $                         | 3.69   |              | $ | 7.64         |  | $           | 3.54   |  | $ | 2.34  
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Weighted average number of limited partnership units outstanding during each period |  |                           | 13,267 |              |   | 13,212       |  |             | 13,067 |  |   | 12,978
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|                                                                                    | 
|                                                                                    |  | Quarter Ended (unaudited)
|                                                                                    |  | March 31,2002             |        | June 30,2002 |   | Sept 30,2002 |  | Dec 31,2002
|Revenues                                                                            |  |                           |        |              |   |              |  |             |        |  |   |       
|Rental income                                                                       |  | $                         | 278    |              | $ | 302          |  | $           | 268    |  | $ | 288   
|Interest and other income                                                           |  |                           | 3      |              |   | 2            |  |             | 3      |  |   | 3     
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Total revenues                                                                      |  |                           | 281    |              |   | 304          |  |             | 271    |  |   | 291   
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Expenses                                                                            |  |                           |        |              |   |              |  |             |        |  |   |       
|Operating                                                                           |  |                           | 110    |              |   | 99           |  |             | 137    |  |   | 125   
|Depreciation and amortization                                                       |  |                           | 63     |              |   | 69           |  |             | 71     |  |   | 72    
|General and administrative                                                          |  |                           | 47     |              |   | 46           |  |             | 47     |  |   | 53    
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Total expenses                                                                      |  |                           | 220    |              |   | 214          |  |             | 255    |  |   | 250   
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Net income                                                                          |  | $                         | 61     |              | $ | 90           |  | $           | 16     |  | $ | 41    
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Basis and diluted net income per limited partnership unit                           |  | $                         | 4.43   |              | $ | 6.61         |  | $           | 1.21   |  | $ | 3.09  
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       
|Weighted average number of limited partnership units outstanding during each period |  |                           | 13,546 |              |   | 13,435       |  |             | 13,412 |  |   | 13,323
|                                                                                    |  |                           |        |              |   |              |  |             |        |  |   |       



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##### Table of Contents

RANCON INCOME FUND I,

A California Limited Partnership



SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2003

(In Thousands)



|                                               |  |                            |   |                                          |   |                                          |  |               |       |  |              |        |          |  |          |                          |          |   |           |   |  |                          |        |                       |  |               |        |                     |  |   |       |  |     |  |         |  |            
|---------------------------------------------- |  | -------------------------- | - | ---------------------------------------- | - | ---------------------------------------- |  | ------------- | ----- |  | ------------ | ------ | -------- |  | -------- | ------------------------ | -------- | - | --------- | - |  | ------------------------ | ------ | --------------------- |  | ------------- | ------ | ------------------- |  | - | ----- |  | --- |  | ------- |  | -----------
|COLUMN A                                       |  | COLUMN B                   |   | COLUMN C                                 |   | COLUMN D                                 |  | COLUMN E      |       |  | COLUMN F     |        | COLUMN G |  | COLUMN H |                          | COLUMN I
|                                               |  | Initial Cost toPartnership |   | Cost CapitalizedSubsequent toAcquisition |   | Gross Amount Carried atDecember 31, 2003 |  |               |      
|Description                                    |  | Encum-brances              |   | Land                                     |   | BuildingsandImprove-ments                |  | Improve-ments |       |  | CarryingCost |        | Land     |  |          | BuildingandImprove-ments |          |   | (1) Total |   |  | Accumu-latedDepreciation |        | DateConstructionBegan |  | Date Acquired |        | LifeDepreciatedOver
|Rental Properties:                             |  |                            |   |                                          |   |                                          |  |               |       |  |              |        |          |  |          |                          |          |   |           |   |  |                          |        |                       |  |               |        |                     |  |   |       |  |     |  |         |  |            
|Wakefield Facility                             |  | $                          |  |                                          | $ | 666                                      |  | $             | 1,118 |  | $            | 133    |          |  | $        |                         |          | $ | 666       |   |  | $                        | 1,251  |                       |  | $             | 1,917  |                     |  | $ | 510   |  | N/A |  | 4/20/87 |  | 5 -40 years
|Less: Provisions for impairment in real estate |  |                            |  |                                          |   |                                         |  |               |      |  |              | (175   | )        |  |          |                         |          |   | (61       | ) |  |                          | (114   | )                     |  |               | (175   | )                   |  |   |      |  |     |  |         |  |            
|Bristol Medical Center                         |  |                            |  |                                          |   | 1,937                                    |  |               | 3,327 |  |              | 1,815  |          |  |          |                         |          |   | 1,937     |   |  |                          | 5,142  |                       |  |               | 7,079  |                     |  |   | 2,213 |  | N/A |  | 5/04/88 |  | 5 -40 years
|Less: Provision for impairment in real estate  |  |                            |  |                                          |   |                                         |  |               |      |  |              | (1,921 | )        |  |          |                         |          |   | (614      | ) |  |                          | (1,307 | )                     |  |               | (1,921 | )                   |  |   |      |  |     |  |         |  |            
|                                               |  |                            |   |                                          |   |                                          |  |               |       |  |              |        |          |  |          |                          |          |   |           |   |  |                          |        |                       |  |               |        |                     |  |   |       |  |     |  |         |  |            
|Total                                          |  | $                          |  |                                          | $ | 2,603                                    |  | $             | 4,445 |  | $            | (148   | )        |  | $        |                         |          | $ | 1,928     |   |  | $                        | 4,972  |                       |  | $             | 6,900  |                     |  | $ | 2,723 |  |     |  |         |  |            
|                                               |  |                            |   |                                          |   |                                          |  |               |       |  |              |        |          |  |          |                          |          |   |           |   |  |                          |        |                       |  |               |        |                     |  |   |       |  |     |  |         |  |            

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|(1) | The aggregate cost of land and buildings for Federal income tax purposes is $9,058 (unaudited).
|--- | -----------------------------------------------------------------------------------------------

(continued)



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##### Table of Contents

NOTE TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION



Reconciliation of the gross amount at which real estate was carried for the years ended
December 31, 2003, 2002 and 2001 (in thousands):



|                             |  |      |       |      |   |       |  |   |      
|---------------------------- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                             |  | 2003 |       | 2002 |   | 2001 
|Investment in Real Estate    |  |      |       |      |   |       |  |   |      
|Balance at beginning of year |  | $    | 6,522 |      | $ | 6,381 |  | $ | 6,162
|Additions during year:       |  |      |       |      |   |       |  |   |      
|Improvements, etc.           |  |      | 378   |      |   | 141   |  |   | 219  
|                             |  |      |       |      |   |       |  |   |      
|Balance at end of year       |  | $    | 6,900 |      | $ | 6,522 |  | $ | 6,381
|                             |  |      |       |      |   |       |  |   |      
|Accumulated Depreciation     |  |      |       |      |   |       |  |   |      
|Balance at beginning of year |  | $    | 2,450 |      | $ | 2,204 |  | $ | 1,998
|Additions charged to expense |  |      | 273   |      |   | 246   |  |   | 206  
|                             |  |      |       |      |   |       |  |   |      
|Balance at end of year       |  | $    | 2,723 |      | $ | 2,450 |  | $ | 2,204
|                             |  |      |       |      |   |       |  |   |      



See accompanying Independent
Auditors Report.



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