UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[ X ] ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
      ACT OF 1934. For the year ended December 31, 1997

                                                  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

                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)

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

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

       Partnership's telephone number, including area code (650) 343-9300
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:

                      Units of Limited Partnership Interest
                                (Title of class)

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

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

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

                     DOCUMENTS INCORPORATED BY REFERENCE: None.



                                  Page 1 of 30
<PAGE>





                                           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, completed its public
offering  of  partnership  units  ("Units")  in April 1989 and has 14,555  Units
issued and outstanding. The Partnership has no employees.

At December 31, 1997, the  Partnership  owned three  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 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:
<TABLE>
<CAPTION>
                                                                                     Encumbrances at
     Name                        Location          Type           Size              December 31, 1997
     ----                        --------          ----           ----              -----------------
<S>                                                               <C>                      <C>
Wakefield Industrial     Temecula, California     Light           44,200 sq. ft.           None
  Center                                            Industrial

Bristol Medical Center   Santa Ana, California    Office          52,311 sq. ft.           None

Aztec Village
  Shopping Center        San Diego, California    Retail          23,789 sq. ft.           None

</TABLE>

                                  Page 2 of 30
<PAGE>



Wakefield Industrial Center

In April 1987, the  Partnership  acquired the Wakefield  facility,  at a cost of
approximately  $1,899,000 in addition to acquisition fees of $87,000.  Wakefield
consists  of two  buildings  on three  adjacent  parcels of land  comprising  an
aggregate  of  approximately  3.99 acres.  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 of concrete tilt-up construction with central heating and air
conditioning  systems in the office  areas.  The first  building  located on one
parcel,  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 second building,  located on the second
parcel,  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.  Both lots contain  uncovered  parking for a
total of  approximately  54 cars.  The third  parcel is  unimproved  except  for
partial paving. It is used for car parking and truck access.

According  to research  conducted by the  Partnership's  property  manager,  the
market has  approximately  7,120,000 square feet of existing  industrial  space,
with an  overall  vacancy  rate of 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. Of the 7,120,000 square feet,  approximately  96,000 square feet
of multi-tenant  and free standing  industrial  space compete  directly with the
Wakefield  Industrial  Center.  The average annual  effective rents for the area
approximate  $3.60 per foot NNN (tenant pays all operating  expenses,  including
taxes,  insurance,  and  capital)  depending  on age,  location  and size of the
property. Land prices for finished industrial lots range from $2.00 to $4.00 per
square foot depending on zoning, size, location and amenities.

The  occupancy  level at December 31, 1997 and 1996 and November 30, 1995,  1994
and 1993,  expressed as a percentage of the total net rentable  square feet, and
the average annual effective rent per square foot for the last five years were:

                 Occupancy Level                 Average Annual Effective
                  Percentage                      Rent Per Square Foot
       1997            100%                                $  4.14
       1996            100%                                $  4.04
       1995            100%                                $  3.96
       1994            100%                                $  5.48
       1993            100%                                $  4.77

One  tenant  occupies  100%  of the  net  rentable  square  footage  of the  two
buildings.  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:                              $183,000
      Rent Increase:                            Annual - CPI
      Renewal Options:                          None



                                  Page 3 of 30
<PAGE>

In 1996,  due to projected cash flow analyses,  management  determined  that the
carrying  value of Wakefield  Industrial  Center was in excess of the  estimated
fair value.  As a result,  in 1996,  the  Partnership  recorded a provision  for
impairment of its investment in Wakefield Industrial Center of $175,000.

In the opinion of management, the property is adequately covered by insurance.

At December 31, 1997, the Wakefield Industrial Center property is unencumbered.

During 1997, the property was assessed  property taxes of approximately  $23,000
based on a tax rate of 1.27%.

Bristol Medical Center

In October 1987, the Partnership entered into an agreement with Rancon Financial
Corporation  ("RFC") to acquire  Bristol  Medical  Center,  for a total 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, so that the  Partnership  was entitled to receive a percentage
of the net operating income of the property  exclusive of depreciation  expense.
The Partnership completed the purchase of the Bristol Medical Center in May 1988
for a total cost of $5,370,000.

Bristol  Medical Center consists of two two-story  medical office  buildings and
related parking on approximately  3.42 acres. The two office buildings  together
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.

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.

The  medical  office  market  in which  the  property  is  located  consists  of
approximately  189,847  rentable square feet in five projects,  all of which are
older Class "B"  Buildings.  The  sub-market,  consisting of smaller  buildings,
often houses  converted to  dental/medical  offices and retail  sites,  is being
condemned  or purchased by the City of Santa Ana to widen  Bristol  Street.  The
project  includes  new retail  buildings  built on the  reconfigured  lots and a
landscaped median, which should enhance the area considerably.

According  to research  conducted by the  Partnership's  property  manager,  net
absorption in this area has been on a downward  trend since 1992 when changes in
the business environment for the medical industry pushed vacancy rates up. Total
vacancy in this market was 15.67% for 1997, an increase of 1.07% from 1996.  The
annual  rental  rates  for the area  approximates  $15.00  per  square  foot for
modified gross (tenant pays utilities and interior  janitorial costs) and $16.80
per square foot for full service gross (tenant pays interior janitorial costs).

The  occupancy  level at December 31, 1997 and 1996 and November 30, 1995,  1994
and 1993,  expressed as a percentage of the total net rentable  square feet, and
the average  annual  effective rent per square foot for the last five years were
as follows:


                                  Page 4 of 30
<PAGE>


                          Occupancy Level       Average Annual Effective
                            Percentage            Rent Per Square Foot
       1997                     83%                    $  19.00
       1996                     85%                    $  18.89
       1995                     91%                    $  18.76
       1994                     93%                    $  18.91
       1993                     98%                    $  18.82

The current annual rental rates range from $16.68 to $25.29 per square foot.

The current  annual rental rates at Bristol  Medical  Center are higher than the
market  average as the  leases in effect are old and were  signed at a time when
such rates were  market  rates.  However,  the vacancy  rate at Bristol  Medical
Center remained at  approximately  20% during 1997. The main obstacle in leasing
space at Bristol Medical Center is the current state of the medical  industry in
Santa Ana, California.  It appears that independent physicians not participating
in a managed care group are going bankrupt and, as a result, no new doctors have
leased space in the area in the last three years.

One tenant  occupies more than ten percent of the net rentable square footage of
the building.  The  principal  terms of the lease and the nature of the tenant's
business are as follows:

                                            St. Jude
                                            Heritage Health
                                            ---------------
      Nature of Business:                   Medical clinic
      Lease Term:                           1 year
      Expiration Date:                      September 30, 1998
      Square Feet:                          24,957
      (% of rentable total):                48%
      Annual Rent:                          $470,500
      Rent Increase:                        Annual - CPI
      Renewal Options:                      None

St.  Jude  Heritage  Health  has a one year  contract  to  manage a  neighboring
hospital.  Since  the  renewal  of the  St.  Jude  Heritage  Health  lease  upon
expiration  is dependent  upon their  ability to renew their  contract  with the
hospital,  they do not commit to lease renewals with the Partnership in advance.
In September 1997, management  successfully executed a one year lease renew with
St. Jude Heritage Health.  Management  believes,  however,  that the tenant will
renew for another year in September 1998 as relations with the hospital and St.
Jude Heritage Health appear positive.

In 1996,  due to an increase in vacancy,  the difficulty in leasing vacant space
and projected cash flow analyses,  management determined that the carrying value
of the Bristol  Medical Center was in excess of the estimated  fair value.  As a
result,  in 1996,  the  Partnership  recorded a provision for  impairment of its
investment in Bristol Medical Center of $1,470,000.

In the opinion of management, the property is adequately covered by insurance.

At December 31, 1997, the Bristol Medical Center property is unencumbered.

During 1997, the property was assessed  property taxes of approximately  $59,000
based on a tax rate of 1.08%.



                                  Page 5 of 30
<PAGE>



Aztec Village Shopping Center

In May 1988, the  Partnership  entered into an agreement with RFC to acquire the
Aztec Village  Shopping Center located in San Diego,  California for $3,350,000,
plus all costs  incurred by RFC in ownership and management of the property from
May 1988. The purchase price was paid in installments  through February 1989, so
that the  Partnership  was entitled to receive a percentage of the net operating
income of the  property  exclusive  of  depreciation  expense.  The  Partnership
completed the purchase of the Aztec Village Shopping Center in February 1989 for
a  total  cost  of  $3,357,000.  Management  does  not  expect  much  growth  or
appreciation  for the  shopping  center and as such is currently  marketing  the
property for sale.  This rental property is classified as property held for sale
on the Partnership's 1997 and 1996 balance sheets.

Aztec  Village  Shopping  Center  contains  approximately  23,789 square feet of
leasable  space on  approximately  1.52 acres.  The shopping  center is a single
story  structure  constructed  with a wood frame and  concrete  block walls with
metal stud interior  portioning and stucco and wood siding on the exterior.  The
shopping center parking lot contains parking for approximately 105 cars.

Aztec  Village   Shopping   Center  is  located  in  east  San  Diego   situated
approximately five miles east of downtown, and is situated at the convergence of
Route 8 Inland Freeway and  Interstate  15. All freeways are readily  accessible
within ten  minutes of  driving.  The  property is on the south side of El Cajon
Boulevard, which is a primary business street.

The trade area  surrounding the Aztec Village Shopping Center is considered East
San Diego and the western portions of La Mesa.  According to research  conducted
by the Partnership's  property manager,  there are approximately  446,000 square
feet of retail space along El Cajon Boulevard from College Avenue to 70th Street
within the neighborhood area, with a combined vacancy rate of 11%, a decrease of
2% over 1996.  The  commercial  sector  consists of nine strip  retail  shopping
centers and two  supermarket  anchored  centers.  Annual rental rates range from
$9.00 to  $13.20  per  square  foot NNN  (tenant  pays all  operating  expenses,
including taxes, insurance,  and capital) for the strip retail centers and $9.00
to $16.80 per square  foot NNN for the  anchored  centers  depending  upon size,
location, condition, and amenities of the property.

The immediate area surrounding San Diego State University, commencing at College
Avenue and Montezuma, is slated for major redevelopment.  The redevelopment will
consist  of adding  150,000  square  feet of  commercial  space  and over  1,000
residential units. This project will offer considerable competition to the Aztec
Village  Shopping  Center and, due to its proximity to the campus,  will command
higher rents and strong national tenant  interest.  As of December 31, 1997, the
construction has been delayed.

The  occupancy  level at December 31, 1997 and 1996 and November 30, 1995,  1994
and 1993,  expressed as a percentage of the total net rentable  square feet, and
the average annual effective rent per square foot for the last five years were:

                    Occupancy Level        Average Annual Effective
                      Percentage             Rent Per Square Foot
       1997               46%                   $     10.56
       1996               38%                   $     10.46
       1995               69%                   $     10.62
       1994               70%                   $      7.80
       1993               68%                   $     13.83

At the end of 1995,  two tenants  occupying a total of 6,530 square feet vacated
the premises due to their  financial  instability.  Management  has continued to
market the space but has been unsuccessful due to the

                                  Page 6 of 30
<PAGE>

poor  economic  area in which  the  property  is  located.  Management  believes
potential business is attracted to the competitors'  products which offer either
anchor tenants and/or closer proximity to San Diego State University.

The current  annual  rental rates range from $9.00 to $15.49 per square foot. In
addition,  one tenant rents  storage space at an annual rental rate of $3.69 per
square foot.

One tenant  occupies more than ten percent of the net rentable square footage of
the building.  The  principal  terms of the lease and the nature of the tenant's
business are as follows:

                                              Music Trader, Inc.
                                              ------------------
      Nature of Business:                     Music retailer
      Lease Term:                             5 years
      Expiration Date:                        May 31, 2001
      Square Feet:                            2,649
      (% of rentable total):                  11%
      Annual Rent:                            $23,900
      Rent Increase:                          Annual Fixed
      Renewal Options:                        None

In 1997 due to an increase in vacancy,  the  difficulty in leasing  vacant space
and projected cash flow analyses,  management determined that the carrying value
of the Aztec Village  Shopping Center was in excess of the estimated fair value.
As a result, in 1997, the Partnership recorded a provision for impairment of its
investment in Aztec Village Shopping Center of $438,000.

In the opinion of management, the property is adequately covered by insurance.

At  December  31,  1997,  the  Aztec  Village   Shopping   Center   property  is
unencumbered.

During 1997, the property was assessed  property taxes of approximately  $13,000
based on a tax rate of 0.96%.

Item 3.           Legal Proceedings

                  None.

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

                  None.


                      Page 7 of 30
<PAGE>



                                     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, 1997, a total of 1,409 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  disbursed 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  distributions  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 (a more explicit statement
of these distribution policies is set forth in the Partnership Agreement):

     (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


                      Page 8 of 30
<PAGE>




          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 subparagraph (iv) and (v)
          (less prior  distributions  to the General Partner under  subparagraph
          (iv) and (v)); and (vii) Seventh,  85% to the Limited Partners and 15%
          to the General Partner.

The following distributions of Cash From Operations were made by the Partnership
during the three most recent fiscal years.  There were no  distributions of Cash
From Sales or  Financing  made by the  Partnership  during the three most recent
fiscal years.

                                                 Amount           Amount
      Date of         Amount Distributed       Distributed    Distributed to
   Distribution       to Limited Partners       Per Unit      General Partner
     08/29/97          $      28,000           $   1.92             --
     02/28/97          $      14,000           $   0.96             --
    11/29/96           $      14,000           $   0.96             --
    08/30/96           $      14,000           $   0.96             --
    05/31/96           $      14,000           $   0.96             --
    03/01/96           $      60,000           $   4.12             --
    12/31/95           $      60,000           $   4.12             --
    08/31/95           $      61,000           $   4.19             --
    06/02/95           $      61,000           $   4.19             --
    03/02/95           $     182,000           $  12.50             --
    12/02/94           $     182,000           $  12.50             --

Of the  total  distributions  noted  above,  $2.88,  $7.00 and  $12.99  per unit
represented a return of capital for the fiscal years ended December 31, 1997 and
1996 and November 30, 1995, respectively.

Estimated  distributions for 1998 will remain consistent with the 1997 level but
there can be no assurance that the distribution level will not be adjusted.



                      Page 9 of 30
<PAGE>



Item 6.  Selected Financial Data

The following is selected  financial  data for the five years ended December 31,
1997 and 1996 and  November 30, 1995,  1994 and 1993 (in  thousands,  except per
Unit data).

                             1997         1996         1995       1994     1993
                           --------     -------     --------   --------  -------
Rental income            $  1,142   $    1,125   $   1,397  $   1,417  $ 1,304

Provision for
 impairment of
 investment in
 real estate             $    438   $    1,645   $      --  $     380  $    --

Net income (loss)        $   (165)  $   (1,394)  $     300  $     (69) $   403

Net income (loss)
  allocable to limited
  partners               $   (163)  $   (1,380)  $     297  $     (62) $   399

Net income (loss)
  per limited
  partnership unit       $ (11.20)  $   (94.81)  $   20.40  $   (4.26) $ 27.42

Total assets             $  6,323   $    6,531   $   8,159  $   8,483  $ 8,905

Cash distributions
  per  limited
  partnership unit       $   2.88   $     7.00   $   33.39  $   37.50  $ 50.00

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

LIQUIDITY AND CAPITAL RESOURCES

As of April 21, 1989,  Rancon Income Fund I ("the  Partnership") was funded from
the sale of limited partnership units ("Units") in the amount of $14,555,000. As
of December 31, 1997, the Partnership had cash of $749,000. The remainder of the
Partnership's assets consists primarily of its investments in properties,  which
totaled approximately $5,478,000 at December 31, 1997.

The  Partnership's  primary source of funds has consisted of the proceeds of its
public  offering of Units.  As the  Partnership was organized for the purpose of
acquiring income producing properties,  the cash generated from such properties,
net of costs incurred in operating the properties,  is also a significant source
of funds for the  Partnership.  Another  source of funds is the interest  income
earned on cash  balances.  Such 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  quarterly  distributions  to  the  limited
partners.

All of the  Partnership's  assets are located in the Southern  California region
and  have  been  directly  affected  by the  economic  weakness  of the  region.
Management  continues to evaluate the real estate market in Southern  California
in an effort to determine  the optimal time to dispose of the assets and realize
their maximum value.


                      Page 10 of 30
<PAGE>

Management believes that the Partnership's available cash together with the cash
generated by the operations of the  Partnership's  properties will be sufficient
to finance the Partnership's  continued operations.  Estimated distributions for
1998 will remain  consistent  with the 1997 level but there can be no  assurance
that the distribution  level will not be adjusted.  The Partnership is currently
soliciting  offers for the sale of Aztec Village  Shopping  Center.  This rental
property is classified as property held for sale on the  Partnership's  1997 and
1996 balance sheets.

RESULTS OF OPERATIONS

Effective  with the year ended December 31, 1995,  the  Partnership's  reporting
year changed from November 30 to December 31. Since the Partnership's operations
are not  seasonal,  the analysis of  operations  compares the fiscal years ended
December 31, 1996 and November 30, 1995.

Rental  income  increased  slightly,  2%, for the year ended  December  31, 1997
compared to the year ended December 31, 1996. The 19%, or $272,000, decrease for
the year ended December 31, 1996 compared to the year ended November 30, 1995 is
a result of decreased  occupancy at Aztec  Village  Shopping  Center and Bristol
Medical  Center   combined  with  the  decrease  in  billings  for  common  area
maintenance (CAM) and prior year recoveries due to the higher  vacancies.  Aztec
Village  Shopping  Center  lost  two  major  tenants  at the end of 1995  due to
financial  instability  and has been  unsuccessful  in  leasing  the  space.  In
addition,  there were unexpected vacancies in 1996 at Bristol Medical Center due
to the depressed market.

Interest and other income decreased  $107,000,  or 88%, in 1997 compared to 1996
and  increased  $115,000 in 1996  compared to 1995  primarily  due to a one-time
legal  settlement  of $111,000 in 1996 from a former  tenant at Bristol  Medical
Center. Additionally, interest income has increased in 1997 compared to the same
periods in 1996 and 1995 due to higher average invested cash balances.

Operating expenses  decreased  $52,000,  or 11%, for the year ended December 31,
1997 compared to the same period in 1996  primarily due to $42,000 of legal fees
incurred in 1996 in connection with the settlement of a former tenant at Bristol
Medical Center.  The remaining  decrease  relates to $9,000 of costs incurred in
1996 when the  Partnership  obtained  appraisals of the rental  properties.  The
$84,000,  or 15%,  decrease for the year ended December 31, 1996 compared to the
year ended November 30, 1995 was partially due to the vacancies at Aztec Village
Shopping Center and Bristol Medical Center. As a result miscellaneous  operating
expenses,  electric expense and base management fees decreased $30,000,  $20,000
and $8,000, respectively. In addition, there was a decrease in real estate taxes
of $25,000 pertaining to all the Partnership's properties.

The $46,000,  or 20%, decrease in depreciation and amortization  expense for the
year ended  December 31, 1997 compared to the same period in 1996 is a result of
the  decrease  in  depreciation  of the Aztec  Village  Shopping  Center as such
property was  classified as held for sale at December 31, 1996 and  accordingly,
depreciation  of the asset ceased.  The $68,000,  or 23%,  decrease for the year
ended  December  31,  1996  compared  to the year  ended  November  30,  1995 is
primarily the result of certain lease  commissions  becoming fully  amortized at
Bristol Medical Center and Aztec Village Shopping Center at the end of 1995.

In 1997 and 1996,  due to an  increase  in vacancy,  the  difficulty  in leasing
vacant space and projected cash flow analyses,  management  determined  that the
carrying value of the  Partnership's  rental  properties were in excess of their
estimated  fair  values.  As a  result,  in 1997,  the  Partnership  recorded  a
provision for impairment of its investment in Aztec Village  Shopping  Center of
$438,000 and, in 1996,  provisions for impairment of the  investments in Bristol
Medical Center and Wakefield  Industrial  Center were recorded in the amounts of
$1,470,000 and $175,000, respectively.



                      Page 11 of 30
<PAGE>

General and administrative expenses decreased $14,000, or 5%, for the year ended
December 31, 1997 compared to the year ended  December 31, 1996 primarily due to
additional  one-time tax preparation  fees of $13,000 incurred in 1996 resulting
from the  preparation  of  additional  prior and current year tax  returns.  The
$44,000,  or 18%,  increase in the year ended  December 31, 1996 compared to the
year ended  November  30,  1995 is  partially  due to a the  aforementioned  tax
preparation fees,  $10,000 increase in quarterly  overhead  expense,  a one-time
payment of $5,000 for  professional  services  rendered in  connection  with the
valuation of the limited  partner  interests and an increase in data  processing
fees  of  $7,000.   In  addition,   the  Partnership   incurred  legal  fees  of
approximately  $9,000  associated with the management of the  Partnership's  and
properties day-to-day affairs.

Year 2000 Compliance

The Partnership  utilizes a number of computer  software  programs and operating
systems across its entire organization, including applications used in financial
business systems and various  administrative  functions.  To the extent that the
Partnership's  software  applications  contain  a source  code that is unable to
appropriately interpret the upcoming calendar year "2000" and beyond, some level
of  modification,  or replacement of such  applications  will be necessary.  The
Partnership has completed its  identification  of applications  that are not yet
"Year 2000"  compliant and has commenced  modification  or  replacement  of such
applications,  as  necessary.  Given  information  known at this time  about the
Partnership's  systems that are  non-compliant,  coupled with the  Partnership's
ongoing,  normal  course-of-business  efforts to  upgrade  or  replace  critical
systems,  as necessary,  management does not expect "Year 2000" compliance costs
to have any material  adverse impact on the  Partnership's  liquidity or ongoing
results of  operations.  No  assurance  can be given,  however,  that all of the
Partnership's  systems will be "Year 2000" compliant or that compliance costs or
the  impact of the  Partnership's  failure to achieve  substantial  "Year  2000"
compliance will not have a material adverse effect on the  Partnership's  future
liquidity or results of operations.

Item 8.  Financial Statements and Supplementary Data

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

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

None


                      Page 12 of 30
<PAGE>


                                    Part III

Item 10. Directors and Executive Officers of the Partnership

Rancon Income Partners I is the General Partner of the  Partnership.  Daniel Lee
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           Director, President, Chief Executive Officer and
                               Chief Financial Officer

There is no fixed term of office for Mr. Stephenson.

Mr.  Stephenson,  age 54, founded RFC (formerly known as Rancon  Corporation) in
1971 for the purpose of  establishing  itself as a  commercial,  industrial  and
residential  property  syndication,   development  and  brokerage  concern.  Mr.
Stephenson has, from inception,  held the position of Director. In addition, Mr.
Stephenson was President and Chief  Executive  Officer of RFC from 1971 to 1986,
from August  1991 to  September  1992 and from March 31,  1995 to  present.  Mr.
Stephenson is Chairman of the Board of PacWest  Group,  Inc., a real estate firm
which has acquired a portfolio of assets from the Resolution Trust Corporation.

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

                                         Amount and Nature of
Title of Class  Name of Beneficial Owner Beneficial Ownership  Percent 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's  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.


                      Page 13 of 30
<PAGE>




Item 13. Certain Relationships and Related Transactions

For the year ended  December 31, 1997, the  Partnership  did not incur any costs
reimbursable to RFC.


                      Page 14 of 30
<PAGE>



                                     Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

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

      (1) Financial Statements:

          Report of Independent Public Accountants

          Balance Sheets as of December 31, 1997 and 1996

          Statements of Operationsfor the Years Ended December 31,1997 and 1996,
          the Month Ended December 31, 1995 and the Year Ended November 30,1995

          Statements of Partners'Equity (Deficit)for the Years Ended December31,
          1997 and 1996,  the Month Ended  December 31, 1995 and the Year Ended
          November 30, 1995

          Statements ofCash Flows for the Years Ended December 31,1997 and 1996,
          the Month Ended December 31, 1995 and the Year Ended November 30,
          1995

          Notes to Financial Statements

      (2) Financial Statement Schedule:

          Schedule III -- Real Estate and  Accumulated  Depreciation as of
          December 31, 1997 and Note thereto

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

      (3)  Exhibits:
                   (27)Financial Data Schedule

 (b)  Reports on Form 8-K

      None.


                      Page 15 of 30
<PAGE>

                                   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 27, 1998       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 27, 1998       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.




                      Page 16 of 30
<PAGE>




                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          INDEX TO FINANCIAL STATEMENTS
                                  AND SCHEDULE


                                                                          Page
                                                                          ----
Report of Independent Public Accountants                                    18

Financial Statements:

  Balance Sheets as of December 31, 1997 and 1996                           19

  Statements  of  Operations  for the years ended  December  31, 1997 and
    1996, the month ended December 31, 1995 and the year ended
    November 30, 1995                                                       20

  Statements of Partners'  Equity  (Deficit) for the years ended December
    31, 1997 and 1996, the month ended December 31, 1995
    and the year ended November 30, 1995                                    21

  Statements  of Cash Flows for the years  ended  December  31,  1997 and
    1996, the month ended December 31, 1995 and the year ended
    November 30, 1995                                                       22

  Notes to Financial Statements  23

Schedule:

         III -  Real Estate and Accumulated Depreciation
                as of December 31, 1997 and Note thereto                    29



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



                      Page 17 of 30
<PAGE>





                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of
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,  1997 and 1996,  and the
related statements of operations,  partners' equity (deficit) and cash flows for
the years ended  December 31, 1997 and 1996,  the month ended  December 31, 1995
and the year  ended  November  30,  1995.  These  financial  statements  and the
schedule  referred  to  below  are  the   responsibility  of  the  Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of RANCON  INCOME  FUND I, A
CALIFORNIA  LIMITED  PARTNERSHIP,  as of  December  31,  1997 and 1996,  and the
results of its  operations  and its cash flows for the years ended  December 31,
1997 and 1996, the month ended December 31, 1995 and the year ended November 30,
1995, in conformity with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements taken as a whole. The accompanying  schedule listed in the
index to  financial  statements  and  schedule  is  presented  for  purposes  of
complying  with the  Securities  and  Exchange  Commission's  rules and is not a
required  part of the basic  financial  statements.  This  information  has been
subjected  to the  auditing  procedures  applied  in  our  audits  of the  basic
financial  statements  and, in our  opinion,  is fairly  stated in all  material
respects in relation to the basic financial statements taken as a whole.





San Francisco, California             /s/ Arthur Andersen LLP
  February 11, 1998


                      Page 18 of 30
<PAGE>




                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                                 Balance Sheets
                           December 31, 1997 and 1996
                    (in thousands, except units outstanding)
<TABLE>
<CAPTION>
                                                                   1997                  1996
                                                               -------------         ------------
<S>                                                            <C>                   <C>
Assets
Real estate investments:
   Rental property, net of accumulated depreciation of
     $1,463 and $1,423 at December 1997 and 1996,
     respectively                                              $      4,803          $      4,954
   Rental property held for sale, at estimated fair value               675                 1,104
                                                               ------------          ------------

     Net real estate investments                                      5,478                 6,058
                                                               ------------          ------------

Cash and cash equivalents                                               749                   426
Accounts receivable                                                      70                    17
Deferred costs, net of accumulated amortization of
   $30 and $196 at December 31, 1997 and 1996, respectively              15                    19
Other assets                                                             11                    11
                                                               ------------          ------------

     Total assets                                              $      6,323          $      6,531
                                                               ============          ============

Liabilities and Partners' Equity (Deficit)
Liabilities:
   Accounts payable and accrued expenses                       $         24          $         23
   Other liabilities                                                     61                    63
                                                               ------------          ------------

     Total liabilities                                                   85                    86
                                                               ------------          ------------

Partners' equity (deficit):
   General Partner                                                     (180)                 (178)
   Limited Partners (14,555 limited partnership
     units outstanding in 1997 and 1996)                              6,418                 6,623
                                                               -------------          ------------

     Total partners' equity                                           6,238                 6,445
                                                               ------------           ------------

     Total liabilities and partners' equity                    $      6,323          $      6,531
                                                               ============           ============
</TABLE>




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


                      Page 19 of 30
<PAGE>




                                       RANCON INCOME FUND I,
                                  A CALIFORNIA LIMITED PARTNERSHIP

                                      Statements of Operations
               For the years ended  December 31, 1997 and 1996, the month ended
               December31, 1995 and for the year ended November 30, 1995
                              (in thousands, except per unit amounts)
<TABLE>
<CAPTION>

                                                           For the            For the          For the           For the
                                                         year ended         year ended       month ended       year ended
                                                        December 31,       December 31,     December 31,      November 30,
                                                            1997               1996             1995              1995
<S>                                                    <C>                <C>                <C>               <C>
Revenue:
 Rental income                                         $      1,142       $      1,125       $        57       $    1,397
 Interest and other income                                       15                122                 1                7
                                                       ------------       ------------       -----------       ----------

       Total revenue                                          1,157              1,247                58            1,404
                                                        ------------       ------------       -----------       ----------

Expenses:
 Operating, including $6 paid to Sponsor
    during the year ended November 30, 1995                     424                476                47              560
 Depreciation and amortization                                  181                227                19              295
 Provision for impairment of investments
    in real estate                                              438              1,645                --               --
 General and administrative, including
    $7 paid to Sponsor during the year
    ended November 30, 1995                                     279                293                20              249
                                                       ------------       ------------       -----------       ----------

       Total expenses                                         1,322              2,641                86            1,104
                                                       ------------       ------------       -----------       ----------

Net income (loss)                                      $       (165)      $     (1,394)      $       (28)      $      300
                                                        ============       ===========        ==========        =========

Net income (loss) per limited partnership unit         $     (11.20)      $     (94.81)      $    (1.92)       $    20.40
                                                        ============       ===========        ==========        =========

Distributions per limited partnership unit:
 Representing return of capital                        $       2.88       $       7.00       $     4.12        $    12.99
 From net income                                                 --                 --                --            20.40
                                                        -----------        -----------        ----------        ---------
       Total distributions per limited
          partnership unit                             $       2.88       $       7.00       $     4.12        $    33.39
                                                        ===========        ===========        =========         =========

Weighted average number of limited  partnership  units  outstanding  during each
    period used to compute net income (loss) and distributions
    per limited partnership unit                             14,555             14,555            14,555          14,555
                                                        ===========        ===========        ==========        =========
</TABLE>




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

                      Page 20 of 30
<PAGE>




                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                    Statements of Partners' Equity (Deficit) For the years ended
         December 31, 1997 and 1996, the month ended
             December 31, 1995 and the year ended November 30, 1995
                                 (in thousands)


                                        General          Limited
                                        Partner         Partners      Total
                                       ----------     ----------   ----------
      Balance at November 30, 1994    $     (167)     $   8,382    $   8,215

      Distributions                           --           (486)        (486)

      Net income                                3            297         300
                                        ----------     ---------  -----------

      Balance at November 30, 1995          (164)         8,193        8,029

      Distributions                           --            (60)         (60)

      Net loss                                --            (28)         (28)
                                       ---------       --------    ---------

      Balance at December 31, 1995          (164)         8,105        7,941

      Distributions                           --           (102)        (102)

      Net loss                               (14)        (1,380)      (1,394)
                                       ---------       --------    ---------

      Balance at December 31, 1996          (178)         6,623        6,445

      Distributions                           --            (42)         (42)

      Net loss                                (2)          (163)        (165)
                                       ----------     ----------   ----------

      Balance at December 31, 1997     $    (180)     $   6,418    $   6,238
                                       ==========     ==========   ==========









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


                      Page 21 of 30
<PAGE>



                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                             Statements of Cash Flows
        For the years ended December 31, 1997 and 1996, the month ended December
                    31, 1995 and the year ended November 30, 1995
                                  (in thousands)

<TABLE>
<CAPTION>
                                                           For the             For the         For the            For the
                                                          year ended         year ended       month ended       year ended
                                                         December 31,       December 31,     December 31,      November 30,
                                                            1997               1996             1995              1995
                                                         -----------        -----------      -----------       -----------
<S>                                                       <C>               <C>                <C>            <C>
Cash flows from operating activities:
   Net income (loss)                                      $    (165)        $   (1,394)        $      (28)    $      300
Adjustments to reconcile net income (loss)
   to net cash provided by operating activities:
     Depreciation and amortization                              181                227                 19            295
     Provision for impairment of investments
       in real estate                                           438              1,645                 --             --
Changes in certain assets and liabilities:
     Accounts receivable                                        (53)                (1)                 7             (9)
     Deferred costs                                              (3)                (1)                --             --
     Other assets                                                --                 --                 35              7
     Payable to sponsor                                          --                 --                 --           (158)
     Accounts payable and accrued expenses                        1                (52)                --             32
     Other liabilities                                           (2)                (6)                14            (12)
                                                           --------          ---------          ---------      ---------
       Net cash provided by operating activities                397                418                 47            455
                                                           --------          ---------          ---------      ---------

Cash flows used for investing activities:
     Additions to real estate                                   (32)              (164)                 (1)          (53)
                                                           --------          ---------          ----------     ---------

Cash flows used for financing activities:
     Cash distributions to limited partners                     (42)              (102)                (60)         (486)
                                                           --------          ---------          ----------     ---------

Net increase (decrease) in cash and cash
     equivalents                                                323                152                 (14)          (84)

Cash and cash equivalents at beginning
     of period                                                  426                274                 288           372
                                                           --------          ---------          ----------     ---------

Cash and cash equivalents at end of period                $     749         $      426         $       274    $      288
                                                           ========          =========          ==========     =========
</TABLE>





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



                      Page 22 of 30
<PAGE>





                               RANCON INCOME FUND I,
                       A CALIFORNIA LIMITED PARTNERSHIP

                         Notes to Financial Statements

                   December 31, 1997, 1996 and November 30, 1995

Note 1.  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

Rancon Income Fund I ("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, 1997 and 1996,  14,555
units were issued and outstanding.

Effective  with the year ended December 31, 1995,  the  Partnership's  reporting
year changed from November 30 to December 31.

Allocation  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 limited  partners in  proportion  to the
amounts of cash from  operations  distributed  to the  partners  for each fiscal
year. 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 income or
net loss for any period.  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.

All of the  Partnership's  assets are located in the Southern  California region
and  have  been  directly  affected  by the  economic  weakness  of the  region.
Management  continues to evaluate the real estate market in Southern  California
in an effort to determine  the optimal time to dispose of the assets and realize
their maximum value.

Management believes that the Partnership's available cash together with the cash
generated by the operations of the  Partnership's  properties will be sufficient
to finance the Partnership's  continued operations.  Estimated distributions for
1998 will remain  consistent  with the 1997 level but there can be no  assurance
that the distribution  level will not be adjusted.  The Partnership is currently
soliciting  offers for the sale of Aztec Village  Shopping  Center.  This rental
property is classified as property held for sale on the  Partnership's  1997 and
1996 balance sheets.


                      Page 23 of 30
<PAGE>




General Partner and Management Matters

In December 1994, Rancon Financial Corporation ("RFC") entered into an agreement
with Glenborough Corporation (successor by merger with Glenborough Inland Realty
Corporation)  ("Glenborough")  whereby RFC sold to  Glenborough  the contract to
perform  the  rights  and  responsibilities   under  RFC's  agreement  with  the
Partnership   and  other  related   Partnerships   (collectively,   "the  Rancon
Partnerships")  to perform or contract on the  Partnership's  behalf  financial,
accounting,  data processing,  marketing,  legal, investor relations,  asset and
development  management and consulting services for the Partnership for a period
of ten years or to the  liquidation of the  Partnership,  whichever comes first.
According to the contract, the Partnership will pay Glenborough for its services
as follows: (i) a specified asset administration fee of $208,000 per year, which
is fixed for five years  subject to reduction in the year  following the sale of
assets;  (ii) sales fees of 2% for improved  properties and 4% for land; (iii) a
refinancing fee of 1% and (iv) a management fee of 5% of gross rental  receipts.
As part of this agreement, Glenborough will perform certain responsibilities for
the General Partner of the Rancon Partnerships. RFC has agreed to cooperate with
Glenborough, should Glenborough attempt to obtain a majority vote of the limited
partners to substitute itself as the Sponsor for the Rancon  Partnerships.  This
agreement was effective January 1, 1995.  Glenborough is not an affiliate of RFC
or the Partnership.

Significant Accounting Policies

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that effect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported results of operations during the reporting period.
Actual results could differ from those estimates.

New Accounting Pronouncements

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting  Standards No. 131 (SFAS 131),  "Disclosures about Segments
of an  Enterprise  and Related  Information."  SFAS 131 is effective  for fiscal
years beginning  after December 15, 1997.  Management has not yet determined the
level of  additional  disclosure,  if any,  that may be  required  by SFAS  131.
Additional  disclosures that may be required will be provided beginning with the
financial statements of the Partnership for the year ending December 31, 1998.

Rental Property to be Held and Used - Rental  properties are stated at cost, and
include the related  land,  unless  events or  circumstances  indicate that cost
cannot be recovered in which case  carrying  value is reduced to estimated  fair
value.  Estimated fair value: (i) is based upon the Partnership's  plans for the
continued  operation of each property;  (ii) is computed using  estimated  sales
price,  as  determined by prevailing  market  values for  comparable  properties
and/or the use of  capitalization  rates multiplied by annualized  rental income
based upon the age,  construction  and use of the  building,  and (iii) does not
purport, for a specific property,  to represent the current sales price that the
Partnership  could obtain from third parties for such property.  The fulfillment
of the Partnership's  plans related to each of its properties is dependent upon,
among other things,  the presence of economic  conditions  which will enable the



                      Page 24 of 30
<PAGE>

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.

Rental  Property Held for Sale - Rental  property held for sale is stated at its
estimated fair value.  Estimated fair value is computed  using  estimated  sales
price or  appraised  value  of the  property  less  selling  costs  and does not
purport,  for a  specific  property,  to  represent  the  sales  price  that the
Partnership could obtain from third parties for such property.

Cash and cash equivalents - The Partnership  considers all certificates of
deposit and money marketfunds with  original  maturities  of less than  ninety
days to be cash

Deferred Costs - Deferred lease commissions are amortized over the initial fixed
term of the related  lease  agreement  on a  straight-line  basis.  Amortization
expense was $7,000 and $24,000 for the years ended  December  31, 1997 and 1996,
respectively, and $58,000 for the year ended November 30, 1995.

Rental  Income - Rental  income is  recognized  as  earned  over the life of the
respective leases.

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' 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.

Note 2.           RELATED PARTY TRANSACTIONS

Reimbursable Expenses and Management Fee to Sponsor

In 1994,  the  Partnership  had an agreement  with RFC for  property  management
services.  The  agreement  provided  for a  management  fee equal to 5% of gross
rentals  collected  in  addition  to  reimbursement  of  certain  administrative
expenses incurred while managing properties.  Fees and costs incurred under this
agreement totaled $6,000 for the year ended November 30, 1995.

The Partnership  Agreement also provided for the  reimbursement  of actual costs
incurred  by RFC in  providing  certain  administrative,  legal and  development
services  necessary for the prudent  operation of the Partnership.  Reimbursable
costs  incurred by the  Partnership  and paid to RFC totaled $7,000 for the year
ended November 30, 1995.  Effective January 1, 1995, these services are provided
by Glenborough as described in Note 1.


                      Page 25 of 30
<PAGE>




Note 3.  RENTAL PROPERTY, NET

Rental property as of  December 31, 1997 and 1996 is as follows:
---------------------------------------------------------------
<TABLE>
<CAPTION>

                                                       1997                    1996
                                                        ----                    ----
<S>                                               <C>                   <C>
Land                                              $    2,072,000        $     2,072,000
Buildings and improvements                             3,788,000              3,851,000
Tenant improvements                                      406,000                454,000
                                                   -------------         --------------
                                                       6,266,000              6,377,000
Less: accumulated depreciation                        (1,463,000)            (1,423,000)
                                                   -------------         --------------
         Total                                    $    4,803,000        $     4,954,000
                                                   =============         ==============

Rental property held for sale at December 31, 1997 and 1996 is as follows:
-------------------------------------------------------------------------
                                                      1997                    1996
                                                      ----                    ----
Land                                              $      312,000        $       461,000
Buildings and improvements                               632,000                920,000
Tenant improvements                                       70,000                 86,000
                                                   --------------        ---------------
                                                       1,014,000              1,467,000
Less: accumulated depreciation                          (339,000)              (363,000)
                                                   --------------        ---------------
         Total                                     $      675,000        $    1,104,000

                                                   ==============        ===============
</TABLE>

At December 31, 1997 and 1996,  the Aztec Village  Shopping  Center  property is
classified as held for sale.

None of the Partnership's properties are encumbered as of December 31, 1997.

In 1997 and 1996,  due to an  increase  in vacancy,  the  difficulty  in leasing
vacant space and projected cash flow analyses,  management  determined  that the
carrying value of the  Partnership's  rental  properties were in excess of their
estimated  fair  values.  As a  result,  in 1997,  the  Partnership  recorded  a
provision for impairment of its investment in Aztec Village  Shopping  Center of
$438,000 and, in 1996,  provisions for impairment of the  investments in Bristol
Medical Center and Wakefield  Industrial  Center were recorded in the amounts of
$1,470,000 and $175,000, respectively.

Note 4.           LEASES

The  Partnership's  rental  properties  are leased under  operating  leases that
expire on various dates through  November 2004.  Minimum future rental income on
non-cancelable operating leases as of December 31, 1997 is as follows:
                1998                           $     950,000
                1999                                 546,000
                2000                                 459,000
                2001                                 414,000
                2002                                 401,000
                Thereafter                         1,913,000
                                                 -----------
                  Total                        $   4,683,000
                                                 ===========

                      Page 26 of 30
<PAGE>

Note 5.           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  Partnership's  tax returns are filed on a calendar year basis. As such, the
following is a reconciliation of the net income for financial reporting purposes
to the estimated taxable income,  for the years ended December 31, 1997 and 1996
and November 30, 1995,  determined in accordance with accounting  practices used
in preparation of federal income tax returns (in thousands).

<TABLE>
<CAPTION>

                                                          1997            1996             1995
                                                          ----            ----             ----
<S>                                                 <C>             <C>             <C>
Net income (loss) per financial statements          $       (165)   $    (1,394)    $        300
Provision for impairment of investments in
      real estate                                            438          1,645               --
Financial reporting depreciation in excess
      of tax depreciation                                    (19)            (4)              --
Rental income reported in a different period
      for tax than for financial reporting                   (40)           114              112
Operating revenues and expenses reported in a
      different period for tax than for financial
      reporting, net                                          48           (111)            (190)
                                                    ------------    ------------     ------------
Estimated net income for federal
      income tax purposes                           $        262    $        250     $        222
                                                     ===========     ===========      ===========

</TABLE>


                      Page 27 of 30
<PAGE>



The following is a reconciliation  as of December 31, 1997 and 1996 of partner's
equity for  financial  reporting  purposes  to  estimated  partners'  equity for
federal income tax purposes (in thousands).

                                                      1997            1996
                                                      ----            ----
Partners' equity per financial statements       $      6,238    $      6,445
Cumulative provision for impairment of
      investments in real estate                       4,563           4,125
Financial reporting depreciation in excess
      of tax reporting depreciation                     (285)           (266)
Operating expenses recognized in a different
      period for financial reporting than for
      tax reporting, net                                  49               3
Other, net                                               (44)             (7)
                                                -------------   -------------
Estimated partners' equity for federal
      income tax purposes                       $     10,521    $     10,300
                                                =============   =============




                      Page 28 of 30
<PAGE>



                              RANCON INCOME FUND I,
                        A California Limited Partnership

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1997
                                 (In Thousands)


<TABLE>
<CAPTION>
<S>                               <C>        <C>            <C>           <C>          <C>        <C>         <C>          <C>
COLUMN A                            COLUMN B           COLUMN C                 COLUMN D                        COLUMN E
------------------------------------------------------------------------------------------------------------------------------------
                                                   Initial Cost to            Subsequent to               Gross Amount Carried
                                                     Partnership                Acquisition               at December 31, 1997
                                                  ----------------           ----------------             --------------------
                                                            Buildings                                        Building
                                                               and                     Carrying                 and         (1,2)
   Description                   Encumbrances     Land     Improvements   Improvements   Cost       Land   Improvements     Total
------------------------------------------------------------------------------------------------------------------------------------

Rental Properties:

 Wakefield Facility               $    --    $     740      $    1,159    $    218     $  --      $   740     $  1,377     $  2,117
  Less:  Provisions for impairment
    in real estate  (2)                --         (135)           (116)       (123)       --         (135)        (239)        (374)

  Bristol Medical Center               --        1,937           3,327         729        --        1,937        4,056        5,993
  Less:  Provision for impairment
    in real estate(2)                  --         (470)           (271)       (729)       --         (470)      (1,000)      (1,470)
                                   --------  ----------      ---------    ----------   -------    ----------   --------    ---------

                    Subtotal           --        2,072           4,099          95        --        2,072        4,194        6,266
                                   --------  ----------      ---------    ----------   -------    ---------    --------    ---------

Rental property held for sale:

  Aztec Village Shopping Center        --        1,205           2,152         375        --        1,205        2,527        3,732
  Less:  Provision for impairment
    in real estate  (2)                --         (893)         (1,617)       (208)       --         (893)      (1,825)      (2,718)
                                   --------  ----------      ----------   ----------   -------    ---------    --------    ---------

                    Subtotal           --          312             535         167        --          312          702        1,014
                                   --------  ----------      ----------   ----------   -------    ---------   ---------    ---------

                     Totals       $    --    $   2,384      $    3,564    $    262     $  --      $  2,384    $  4,896     $  7,280
                                  =========  ==========      ==========   ==========   =======    =========   =========    =========

</TABLE>

<TABLE>
<CAPTION>
<S>                               <C>                <C>                        <C>                            <C>
COLUMN A                           COLUMN F            COLUMN G                 COLUMN H                        COLUMN I
------------------------------------------------------------------------------ -----------------------------------------------------



                                                        Date                                                       Life
                                  Accumulated        Construction                 Date                         Depreciated
Description                       Depreciation          Began                   Acquired                           Over
------------------------------------------------------------------------------------------------------------------------------------



Rental Properties:                $    321              N/A                      4/20/87                       5 - 40 years

 Wakefield Facility                     --
  Less:  Provisions for impairment
    in real estate  (2)              1,142              N/A                      5/04/88                       5 - 40 years

  Bristol Medical Center                --
  Less:  Provision for impairment ---------
    in real estate(2)

                    Subtotal         1,463
                                  ---------


Rental property held for sale:


  Aztec Village Shopping Center        339              N/A                      2/20/89                       5- 40 years

  Less:  Provision for impairment       --
    in real estate  (2)           ---------

                    Subtotal           339
                                  ---------

                     Totals       $  1,802
                                  =========
</TABLE>




(1)  The aggregate cost for Federal income tax purposes is $11,478
(2)  See Note 3 to Financial Statements


                      Page 29 of 30
<PAGE>



         NOTE TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                 (In Thousands)


Reconciliation  of gross  amount at which real  estate was carried for the years
ended  December 31, 1997 and 1996 and the month ended  December 31, 1995 and the
year ended November 30, 1995:
<TABLE>
<CAPTION>
                                           Dec. 31,      Dec. 31,       Dec. 31,       Nov. 30,
                                             1997          1996           1995           1995
<S>                                    <C>            <C>             <C>           <C>
INVESTMENT IN REAL ESTATE

  Balance at beginning of period       $     7,844    $     9,325     $     9,324   $     9,362
     Additions during period:
         Improvements, etc.                     32            164               1            53
     Deletions during period:
         Disposals(158)                       (158)            --              --           (91)
         Provision for impairment of
           investments in real estate         (438)        (1,645)             --            --
                                        -----------     ---------      ----------    -----------

  Balance at end of period             $     7,280    $     7,844     $     9,325   $     9,324
                                        ==========     ==========      ==========    ===========

ACCUMULATED DEPRECIATION

  Balance at beginning of period       $     1,786    $     1,583     $     1,566   $     1,420
     Additions charged expenses                174            203              17           237
     Disposals                                (158)            --              --           (91)
                                        ----------    -----------     -----------    ----------
  Balance at end of period             $     1,802    $     1,786     $     1,583   $     1,566
                                        ==========     ==========      ==========    ===========

</TABLE>


                      Page 30 of 30
<PAGE>