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, 1998

                                       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 29

<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, 1998, 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, 1998
            ----                        --------                   ----           ----              -----------------
<S>                              <C>                            <C>              <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 29
<PAGE>




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 consists of
two buildings on  approximately  3.99 acres of land.  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  property  manager,  the
market has  approximately  7,549,000 square feet of existing  industrial  space,
with an  overall  vacancy  rate of 4%.  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  325,000 square feet of multi-tenant and
free standing industrial space that competes directly with Wakefield  Industrial
Center.  The asking rent for industrial  space in this area ranges between $4.32
industrial  gross to $6.60 per foot NNN  (tenant  pays all  operating  expenses,
including taxes, insurance, and capital).

The  occupancy  level at December 31, 1998,  1997 and 1996 and November 30, 1995
and 1994,  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:
                    Occupancy Level                 Average Annual Effective
                      Percentage                      Rent Per Square Foot
                      ----------                      --------------------
       1998              100%                                $  4.31
       1997              100%                                $  4.14
       1996              100%                                $  4.04
       1995              100%                                $  3.96
       1994              100%                                $  5.48

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:                    $191,000
      Rent Increase:                  Annual - CPI
      Renewal Options:                None

In 1996,  management  determined that the carrying value of Wakefield Industrial
Center was in excess of the estimated fair value.  As a result,  the Partnership
recorded a provision for  impairment of its  investment in Wakefield  Industrial
Center of $175,000. No such provision was recorded in 1997 or 1998.


                                  Page 3 of 29
<PAGE>

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

At December 31, 1998, the Wakefield Industrial Center property is unencumbered.

During 1998, the property was assessed  property taxes of approximately  $22,500
based on a tax rate of 1.15%.

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 two-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  property  manager,  the
direct market area  consists of five medical  buildings  totaling  approximately
189,847  rentable  square feet, all of which are older Class "B" Buildings.  The
sub-market,  consisting  of smaller  dental/medical  offices and retail sites is
being  condemned or purchased by the City of Santa Ana to widen Bristol  Street.
The renovation project underway by the City of Santa Ana will include new retail
buildings and a landscaped  median,  which should enhance the area considerably.
Net absorption in this area has been on a downward trend since 1992 when changes
in the health care industry  began.  Total  vacancy in this market  increased to
approximately 20% in 1998 an increase of approximately 4% from 1997. The annual
rental  rates for the area range  from  $12.00 per square  foot to $16.80 per
square foot modified gross (tenant pays interior janitorial costs).

The  occupancy  level at December 31, 1998,  1997 and 1996 and November 30, 1995
and 1994,  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:

                  Occupancy Level                 Average Annual Effective
                    Percentage                      Rent Per Square Foot
                    ----------                      --------------------
       1998             60%                              $  18.40
       1997             83%                              $  19.00
       1996             85%                              $  18.89
       1995             91%                              $  18.76
       1994             93%                              $  18.91

The current annual rental rates range from $16.20 to $26.31 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.  The occupancy at Bristol Medical Center decreased
from 83% at December 31, 1997 to 60% at December  31, 1998 due to



                                  Page 4 of 29
<PAGE>


the reduction in leased space by St. Jude Heritage Health (St.  Jude).  The
lease with St. Jude  expired on  September  30,  1998,  at which time the tenant
signed a new lease for 11,283  square feet  (compared to the 24,957  square feet
the  tenant  previously  leased).  Leasing  space at Bristol  Medical  Center is
difficult  as changes in the  healthcare  industry  have  reduced  the number of
independent physicians opening second offices.  Additionally,  physicians appear
to be leasing space at retail locations,  which tend to offer more exposure than
the traditional medical buildings.

There is one tenant  that  occupies  more than ten  percent of the net  rentable
square footage of the Bristol Medical  Center.  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:                      5 year
      Expiration Date:                 August 31, 2003
      Square Feet:                     11,283
      (% of rentable total):           22%
      Annual Rent:                     $198,300
      Rent Increase:                   Annual - CPI
      Renewal Options:                 None

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 1998 and 1996, the Partnership recorded a provision for impairment of
its  investment  in  Bristol   Medical   Center  of  $451,000  and   $1,470,000,
respectively.

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

At December 31, 1998, the Bristol Medical Center property is unencumbered.

During 1998, the property was assessed  property taxes of approximately  $51,000
based on a tax rate of 1.01%.

Aztec Village Shopping Center
-----------------------------
In May 1988, the Partnership  entered into  anagreement 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, for a total cost of $3,357,000.  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.
Management does not expect much appreciation in the value of the shopping center
and as such has been  marketing  the property for sale.  In February  1999,  the
Partnership  entered into an agreement to sell Aztec Village  Shopping Center to
an  unaffiliated  entity  for  $1,000,000  which  would  result  in  a  gain  of
approximately  $260,000. The sale is expected to close during the second quarter
of 1999;  however,  the sale is subject to a number of  contingencies  including
satisfactory completion of due diligence and customary closing conditions.  As a
result, there can be no assurance that this sale will be completed.  This rental
property is classified as property held for sale on the  Partnership's  1998 and
1997 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



                                  Page 5 of 29
<PAGE>


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.

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 is 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 20%, an increase
of 9% over  1997.  There  are nine  strip  retail  shopping  centers  and  three
supermarket  anchored  centers  competing  directly with Aztec Village  Shopping
Center.  Annual  asking  rental rates range from $6.00 to $12.00 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 centers that have  supermarket  anchor tenants.  The asking rent depends
upon size, location, condition, and amenities of the property.

The immediate area surrounding San Diego State University, commencing at College
Avenue and  Montezuma  has been  slated  for major  redevelopment.  The  planned
redevelopment consists of 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, 1998, the
construction was not anticipated to commence for six to twelve months.

The  occupancy  level at December 31, 1998,  1997 and 1996 and November 30, 1995
and 1994,  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:
              Occupancy Level                Average Annual Effective
                Percentage                     Rent Per Square Foot
                ----------                     --------------------
     1998           70%                             $      11.11
     1997           46%                             $      10.56
     1996           38%                             $      10.46
     1995           69%                             $      10.62
     1994           70%                             $       7.80

The current  annual  rental rates range from $6.52 to $15.95 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 this 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:                      $30,000
      Rent Increase:                    Annual Fixed
      Renewal Options:                  None

     In 1997 due to a high vacancy rate,  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.  No such provision was
recorded in 1998.

                                  Page 6 of 29
<PAGE>



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

At  December  31,  1998,  the  Aztec  Village   Shopping   Center   property  is
unencumbered.

During 1998, the property was assessed  property taxes of approximately  $13,000
based on a tax rate of 1.11%.

Item 3.           Legal Proceedings

                  None.

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

                  None.






















                                  Page 7 of 29
<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, 1998, a total of 1,390 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  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;  (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:  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. A more explicit  statement of the distribution  policies is set
forth in the Partnership Agreement.

                                  Page 8 of 29
<PAGE>


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
     ------------       -------------------     --------     ---------------
       09/03/98          $      27,656         $   1.90            --
       02/26/98          $      27,656         $   1.90            --
       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            --

Of the  total  distributions  noted  above,  $3.80,  $2.88  and  $7.00  per unit
represented  a return of capital for the fiscal  years ended  December 31, 1998,
1997 and 1996, respectively.

Estimated  distributions  for 1999 are consistent  with the 1998 level but there
can be no assurance that the distribution level will not be adjusted.

Item 6.                    Selected Financial Data

The following is selected  financial data for the five years ended December
31, 1998, 1997 and 1996 and November 30, 1995 and 1994 (in thousands, except per
Unit data).
<TABLE>
<CAPTION>
<S>                            <C>              <C>                 <C>               <C>              <C> 
                                   1998              1997             1996              1995              1994
                                 ------            --------         --------          --------          ------
Rental income                  $   1,022        $    1,142          $   1,125         $   1,397        $   1,417

Provision for impairment
 of investments in
  real estate                  $     451        $      438          $   1,645         $      --        $     380

Net income (loss)              $    (279)       $     (165)         $  (1,394)        $     300        $     (69)

Net income (loss)
  allocable to limited
  partners                     $    (276)       $     (163)         $  (1,380)        $     297        $     (62)

Net income (loss)
  per limited
  partnership unit             $  (18.96)       $  (11.20)          $  (94.81)        $   20.40        $   (4.26)

Total assets                   $   6,012        $    6,323          $   6,531         $   8,159        $   8,483

Cash distributions
  per  limited
  partnership unit             $    3.80        $    2.88           $    7.00         $   33.39        $   37.50
</TABLE>


                                  Page 9 of 29
<PAGE>


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

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The  following  discussions  should be read in  conjunction  with the  financial
statements and notes thereto in Item 14 of Part IV:

As of April 21, 1989,  Rancon Income Fund I ("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 and 14,555 Units remain outstanding
at December 31,  1998.  As of December 31,  1998,  the  Partnership  had cash of
$872,000.  The remainder of the Partnership's  assets consists  primarily of its
real estate investments,  which totaled approximately $4,975,000 at December 31,
1998.

Operationally,  the  Partnership's  primary  source  of  funds  consist  of cash
generated from operating the three 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.

In February  1999,  the  Partnership  entered  into an  agreement  to sell Aztec
Village  Shopping Center to an unaffiliated  entity for $1,000,000.  The sale is
expected  to close  during the  second  quarter  of 1999;  however,  the sale is
subject to a number of contingencies  including  satisfactory  completion of due
diligence  and  customary  closing  conditions.  As a  result,  there  can be no
assurance that this sale will be completed.  This rental  property is classified
as property held for sale on the Partnership's 1998 and 1997 balance sheets.

Management  believes that the Partnership's cash balance as of December 31, 1998
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.  Estimated  distributions  for 1999 will remain consistent with
the 1998 level but there can be no assurance  that the  distribution  level will
not be adjusted.

RESULTS OF OPERATIONS
---------------------
1998 versus 1997

Rental income decreased  $120,000,  or 11%, for the year ended December 31, 1998
compared to the year ended  December 31, 1997. The decrease was primarily due to
one of the  tenants  - St.  Jude  Hospital  downsizing  leased  office  space in
September 1998 at Bristol Medical Center.

Interest and other income  increased  $15,000,  or 100%, in 1998  compared to
1997 due to the interest  earned on a higher invested cash balance in 1998.

Operating, depreciation and amortization and general and administrative expenses
incurred in 1998 were consistent with the expenses incurred in 1997.

In 1998 and 1997, due to high vacancy levels, difficulty in leasing vacant space
and projected cash flow analyses,  management determined that the carrying value
of two of the Partnership's  rental properties were in excess of their estimated
fair values.  As a result,  in 1998,  the  Partnership  recorded a provision for
impairment  of its  investment  in  Bristol  Medical  Center  in the  amount  of
$451,000. In 1997, a provision for impairment of the investment in Aztec Village
Shopping Center was recorded in the amount of $438,000.




                                 Page 10 of 29
<PAGE>

1997 versus 1996
----------------
Rental income  increased 2% during the year ended  December 31, 1997 compared to
the year ended December 31, 1996.

Interest and other income decreased  $107,000,  or 88%, in 1997 compared to 1996
due to a one-time  legal  settlement of $111,000 in 1996 from a former tenant at
Bristol Medical Center. Additionally, interest income increased in 1997 compared
to the same period in 1996 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 $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 was discontinued.

In 1996,  due to an increase in vacancy,  difficulty in leasing vacant space and
projected cash flow analyses,  management determined that the carrying values of
the  investments  in two of the  rental  properties  were  in  excess  of  their
estimated  fair  value  and  accordingly,   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.

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.

Year 2000 Compliance
--------------------
State of  Readiness.  The  Partnership  utilizes a number of  computer  software
programs and operating  systems.  These programs and systems primarily  comprise
(i) information  technology systems ("IT Systems") (i.e.,  software programs and
computer  operating  systems)  that serve the  management  operations,  and (ii)
embedded  systems  such as  devices  used to  control,  monitor  or  assist  the
operation  of equipment  and  machinery  systems  (e.g.,  HVAC,  fire safety and
security) at its properties  ("Property  Systems").  To the extent that 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 these applications will be necessary.

IT  Systems.  Employing  a team made up of internal  personnel  and  third-party
consultants,  Glenborough Corporation (Glenborough), the Partnership's asset and
property  manager,  has  completed an  identification  of IT Systems,  including
hardware  components  that  are not yet  Year  2000  compliant.  To the  best of
Glenborough's knowledge based on available information and a reasonable level of
inquiry and investigation,  such upgrading as appears to be called for under the
circumstances  has  been  completed  in  accordance  with  prevailing   industry
practice.  Glenborough  has commenced a testing  program which will be completed
during 1999. In addition, the Partnership is currently  communicating with third
parties with whom it does significant business,  such as financial institutions,
tenants and vendors, to determine their readiness for Year 2000 compliance.


                                 Page 11 of 29
<PAGE>




Property Systems.  An identification  of Property  Systems,  including  hardware
components,  that are not yet Year  2000  compliant,  has also  been  completed.
Upgrading  of such  systems as appears to be called for under the  circumstances
based  on  available   information  and  a  reasonable   level  of  inquiry  and
investigation,   and  in  accordance  with  prevailing   industry  practice  has
commenced.  Upon  completion  of  such  upgrading,  a  testing  program  will be
initiated and completed during 1999. To the best of Glenborough's knowledge, the
Partnership has no Property Systems,  the failure of which would have a material
effect on its operations.

Costs of Addressing Year 2000 issues.  Given the information  known at this time
about systems that are  non-compliant,  coupled with ongoing,  normal  course-of
business  efforts to upgrade or replace  critical  systems,  as  necessary,  the
Partnership  does not  expect  Year  2000  compliance  costs to have a  material
adverse impact on its liquidity or ongoing  results of operations.  The costs of
such assessment and remediation will be paid as an operating expense.

Risks of Year 2000 issues.  In light of the assessment and upgrading  efforts to
date, and assuming completion of the planned, normal course-of-business upgrades
and subsequent  testing,  the  Partnership  believes that any residual Year 2000
risk will be limited to non-critical business applications and support hardware,
and to short-term  interruptions affecting Property Systems which, if they occur
at all, will not be material to overall  operations.  The  Partnership  believes
that all  systems  will be Year  2000  compliant  and that  compliance  will not
materially adversely affect its future liquidity or results of operations or its
ability to service debt.
However, the Partnership cannot give absolute assurance that this is the case.

Contingency  Plans.  The Partnership is currently  developing a contingency plan
for all  operations  which will  address the most  reasonably  likely worst case
scenario regarding Year 2000 compliance.  Such a plan,  however,  will recognize
material  limitations  on the ability to respond to major regional or industrial
failures such as power outages or communications breakdowns.  Management expects
such a contingency plan to be completed during 1999.

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 29
<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 55, founded RFC 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 29
<PAGE>





Item 13.          Certain Relationships and Related Transactions

For the year ended  December 31, 1998, the  Partnership  did not incur any costs
reimbursable to RFC or any affiliate of the Partnership.



























                                 Page 14 of 29
<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, 1998 and 1997

                   Statements of Operations for the Years Ended December 31,
                   1998, 1997 and 1996

                   Statements of Partners' Equity (Deficit) for the Years Ended
                   December 31, 1998, 1997 and 1996

                   Statements of Cash Flows for the Years Ended December 31, 
                   1998, 1997 and 1996

                   Notes to Financial Statements

              (2)  Financial Statement Schedule:

                   Schedule III -- Real Estate and  Accumulated  Depreciation as
                   of December 31, 1998 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 29
<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 30, 1999        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 Partner 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, 1999         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 Partner I, L.P.





                                 Page 16 of 29
<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, 1998 and 1997                     19

  Statements of Operations for the years ended December 31, 1998,
  1997 and 1996                                                       20

  Statements of Partners' Equity (Deficit) for the years ended
  December 31, 1998, 1997 and 1996                                    21

  Statements of Cash Flows for the years ended December 31, 1998,
  1997 and 1996                                                       22

  Notes to Financial Statements                                       23

Schedule:

  III -  Real Estate and Accumulated Depreciation
         as of December 31, 1998 and Note thereto                     28



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 29
<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,  1998 and 1997,  and the
related statements of operations,  partners' equity (deficit) and cash flows for
the years ended December 31, 1998, 1997 and 1996. 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,  1998 and 1997,  and the
results of its  operations  and its cash flows for the years ended  December 31,
1998, 1997 and 1996 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
  February 12, 1999








                                 Page 18 of 29
<PAGE>


                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                                 Balance Sheets
                           December 31, 1998 and 1997
                    (in thousands, except units outstanding)

<TABLE>
<CAPTION>
<S>                                                               <C>                   <C> 
                                                                      1998                  1997
                                                                  -------------         ------------
Assets
------
Real estate investments:
   Rental property, net of accumulated depreciation of
     $1,626 and $1,463 at December 1998 and 1997,
     respectively                                                 $       4,290         $      4,803
   Rental property held for sale, net                                       685                  675
                                                                  -------------         ------------

     Total real estate investments                                        4,975                5,478
                                                                  -------------         ------------

Cash and cash equivalents                                                   872                  749
Deferred costs, net of accumulated amortization of
   $42 and $30 at December 31, 1998 and 1997, respectively                   55                   15
Prepaid expenses and other assets                                           110                   81
                                                                  -------------         ------------

     Total assets                                                 $       6,012         $      6,323
                                                                  =============         ============

Liabilities and Partners' Equity (Deficit)
Liabilities:
   Accounts payable and accrued expenses                          $          36         $         24
   Security deposits                                                         72                   61
                                                                  -------------         ------------

     Total liabilities                                                      108                   85
                                                                  -------------         ------------

Partners' equity (deficit):
   General Partner                                                         (183)                (180)
   Limited Partners (14,555 limited partnership
     units outstanding)                                                   6,087                6,418
                                                                  -------------         ------------

     Total partners' equity                                               5,904                6,238
                                                                  -------------         ------------

     Total liabilities and partners' equity                       $       6,012         $      6,323
                                                                  =============         ============
</TABLE>






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




                                 Page 19 of 29
<PAGE>




                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                            Statements of Operations
              For the years ended December 31, 1998, 1997 and 1996
                     (in thousands, except per unit amounts)


<TABLE>
<CAPTION>
<S>                                             <C>                  <C>                    <C> 
                                                  1998                  1997                  1996
                                                ---------            -----------            ------
Revenue:
 Rental income                                  $   1,022            $     1,142            $   1,125
 Interest and other income                             30                     15                  122
                                                ---------            -----------            ---------

       Total revenue                                1,052                  1,157                1,247
                                                ---------            -----------            ---------

Expenses:
 Operating                                            429                    424                  476
 Depreciation and amortization                        175                    181                  227
 Provision for impairment of investments
    in real estate                                    451                    438                1,645
 General and administrative                           276                    279                  293
                                                ---------            -----------            ---------

       Total expenses                               1,331                  1,322                2,641
                                                ---------            -----------            ---------

Net loss                                        $   (279)            $     (165)            $  (1,394)
                                                =========            ===========            ==========
Net loss per limited partnership unit           $ (18.96)            $   (11.20)            $  (94.81)
                                                =========            ===========            ==========

Distributions per limited partnership unit:
 Representing return of capital                 $   3.80             $     2.88             $   7.00
 From net income                                      --                    --                    --
                                                --------             -----------            ---------
       Total distributions per limited 
       partnership unit                         $   3.80             $     2.88             $   7.00
                                                ========             ===========            =========

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



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










                                 Page 20 of 29
<PAGE>




                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                         Statements of Partners' Equity
                     (Deficit) For the years ended December
                             31, 1998, 1997 and 1996
                                 (in thousands)


                                       General         Limited
                                       Partner         Partners         Total
                                       -------         --------         -----
      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

      Distributions                          --            (55)             (55)

      Net loss                               (3)          (276)            (279)
                                      ----------     ----------       ----------

      Balance at December 31, 1998    $    (183)     $   6,087        $   5,904
                                      ==========     ==========       ==========
















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



                                 Page 21 of 29
<PAGE>


                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                            Statements of Cash Flows
              For the years ended December 31, 1998, 1997 and 1996
                                 (in thousands)
<TABLE>
<CAPTION>

                                                         1998               1997                1996
                                                     ------------        -----------         ------------
<S>                                                  <C>                 <C>                 <C>    
Cash flows from operating activities:
   Net loss                                          $      (279)        $      (165)        $    (1,394)
Adjustments to reconcile net loss
   to net cash provided by operating activities:
     Depreciation and amortization                           175                 181                 227
     Provision for impairment of investments  
       in real estate                                        451                 438               1,645
Changes in certain assets and liabilities:
     Deferred costs                                          (52)                 (3)                 (1)
     Prepaid expenses and other assets                       (29)                (53)                 (1)
     Accounts payable and accrued expenses                    12                   1                 (52)
     Security deposits                                        11                  (2)                 (6)
                                                     -----------         -----------         -----------
       Net cash provided by operating activities             289                 397                 418
                                                     -----------         -----------         -----------

Cash flows used for investing activities:
     Additions to real estate                               (111)                (32)               (164)
                                                     ------------        -----------         -----------

Cash flows used for financing activities:
     Cash distributions to limited partners                  (55)                (42)               (102)
                                                     ------------        -----------         -----------

Net increase in cash and cash equivalents                    123                 323                 152

Cash and cash equivalents at beginning of year               749                 426                 274
                                                     -----------         -----------         -----------

Cash and cash equivalents at end of year             $       872         $       749         $       426
                                                      ==========          ==========          ==========
</TABLE>





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




                                 Page 22 of 29
<PAGE>



                              RANCON INCOME FUND I,

                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 1998 and 1997


Note 1.           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, 1998 and 1997,  14,555
units were issued and outstanding.

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. In no event shall the General  Partner be allocated  less than one percent
of such income.  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  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.

Effective  January 1, 1995,  Glenborough  Corporation  (successor by merger with
Glenborough Inland Realty Corporation) ("Glenborough") 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 the Partnership 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  Glenborough's
responsibilities  for providing  investor relations  services.  According to the
contract,  the Partnership will pay Glenborough for its services as follows: (i)
a specified  annual asset  administration  fee ($187,000 in 1998 and $208,000 in
1997 and 1996);  (ii) sales fees of 2% for improved  properties and 4% for land;
(iii) a  refinancing  fee of 1% and (iv)  management  fees of 5% of gross rental
receipts. 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.

Note 2:            SIGNIFICANT ACCOUNTING POLICIES
                   -------------------------------
Basis of Accounting - The accompanying  financial  statements have been prepared
on the  accrual  basis of  accounting  in  accordance  with  generally  accepted
accounting  principles  under the presumption that the Partnership will continue
as a going concern.


                                 Page 23 of 29
<PAGE>
 

                            RANCON INCOME FUND I,

                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 1998 and 1997


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.  As the
Partnership  operates  in  only  one  geographic  location and one industry, and
allocates  resources  solely for the optimization of the  Partnership's  overall
return,   management  has  determined  that  no  additional  disclosure  in  the
Partnership's financial statements is necessary.

Rental Property - 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 the useful lives of
the respective assets.

Rental  Property Held for Sale - Rental  property held for sale is stated at the
lower of cost or estimated  fair value less costs to sell.  Estimated fair value
is based upon 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 to dispose of property is dependent upon, among other things, the presence
of economic  conditions,  which will enable the Partnership to hold the property
for eventual sale. The  Partnership  discontinues  depreciating  rental property
once it is classified as held for sale.

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


Fair  Value  of  Financial  Instruments  -  Statement  of  Financial  Accounting
Standards  No.  107  requires  disclosure  about  fair  value for all  financial
instruments. Cash and cash equivalents consist of demand deposits,  certificates
of deposit and short-term investments with financial institutions.  The carrying
amount of cash and cash equivalents approximates fair value.


                                 Page 24 of 29
<PAGE>
                             RANCON INCOME FUND I,

                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 1998 and 1997


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 $12,000,  $7,000 and $24,000 for the years ended  December 31, 1998,
1997 and 1996, respectively.

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

Net Loss Per Limited Partnership Unit - Net loss per limited partnership unit is
calculated  using the  weighted  average  number of  limited  partnership  units
outstanding  during the period and the limited partners'  allocable share of the
net 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 3.           RENTAL PROPERTY, NET
                  --------------------
Rental property as of  December 31, 1998 and 1997 is as follows:
---------------------------------------------------------------
                                         1998                    1997
                                         ----                    ----
Land                               $    1,928,000        $     2,072,000
Buildings and improvements              3,504,000              3,788,000
Tenant improvements                       484,000                406,000
                                    -------------         --------------
                                        5,916,000              6,266,000
Less: accumulated depreciation         (1,626,000)            (1,463,000)
                                    --------------        --------------
         Total                     $    4,290,000        $     4,803,000
                                    =============         ==============

Rental property held for sale at December 31, 1998 and 1997 is as follows:
-------------------------------------------------------------------------  
                                         1998                   1997
                                         ----                   ----
Land                               $      312,000        $       312,000
Buildings and improvements                642,000                632,000
Tenant improvements                        70,000                 70,000
                                   --------------        ---------------
                                        1,024,000              1,014,000
Less: accumulated depreciation           (339,000)              (339,000)
                                   --------------        ---------------
         Total                     $      685,000        $       675,000
                                   ==============         ==============

At December 31, 1998 and 1997,  the Aztec Village  Shopping  Center  property is
classified as held for sale. In February 1999, the  Partnership  entered into an
agreement to sell Aztec Village  Shopping Center to an  unaffiliated  entity for
$1,000,000.  The sale is  expected to close  during the second  quarter of 1999;
however, the sale is subject to a number of contingencies including satisfactory
completion of due diligence and customary closing conditions. As a result, there
can be no assurance that this sale will be completed.

None of the Partnership's properties are encumbered as of December 31, 1998.


                                 Page 25 of 29
<PAGE>
                             RANCON INCOME FUND I,

                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 1998 and 1997


In 1998 and 1997, due to high vacancy levels, difficulty in leasing vacant space
and projected cash flow analyses,  management determined that the carrying value
of two of the Partnership's  rental properties were in excess of their estimated
fair values.  As a result,  in 1998,  the  Partnership  recorded a provision for
impairment of its investment in Bristol Medical Center in the amount of $451,000
and in 1997 a  provision  for  impairment  of the  investment  in Aztec  Village
Shopping Center was recorded in the amount of $438,000.

Note 4.           LEASES

The Partnership's  rental properties are leased under  non-cancelable  operating
leases that expire on various dates through November 2004.  Minimum future rents
under non-cancelable operating leases as of December 31, 1998 are as follows:

            1999                               $   726,000
            2000                               $   651,000
            2001                               $   605,000
            2002                               $   587,000
            2003                               $   484,000
            Thereafter                             175,000
                                               ------------
                             Total             $ 3,228,000
                                               ============

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, 1998, 1997 and
1996,  determined in accordance with accounting practices used in preparation of
federal income tax returns (in thousands).

<TABLE>
<CAPTION>




                                 Page 26 of 29
<PAGE>
                             RANCON INCOME FUND I,

                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 1998 and 1997

                                                        1998            1997            1996
                                                        ----           -----            ----
<S>                                                   <C>            <C>              <C>       
Net loss per financial statements                     $   (279)      $    (165)       $  (1,394)
Provision for impairment of investments in
      real estate                                          451             438            1,645
Financial reporting depreciation in excess
      of tax depreciation                                  (29)            (19)              (4)
Rental income reported in a different period
      for tax than for financial reporting                  --             (40)             114
Operating revenues and expenses reported in a
      different period for tax than for financial
      reporting, net                                        21              48             (111)
                                                      --------       ---------        ---------
Estimated net income for federal income tax purposes  $    164       $     262        $     250
                                                       =======        ========         ========
</TABLE>


The following is a reconciliation  as of December 31, 1998 and 1997 of partner's
equity for  financial  reporting  purposes  to  estimated  partners'  equity for
federal income tax purposes (in thousands).

                                                      1998            1997
                                                      ----            ----
Partners' equity per financial statements       $      5,904    $      6,238
Cumulative provision for impairment of
      investments in real estate                       5,014           4,563
Financial reporting depreciation in excess
      of tax reporting depreciation                     (314)           (285)
Operating expenses recognized in a different
      period for financial reporting than for
      tax reporting, net                                  26              49
Other, net                                                --             (44)
                                                ------------    ------------
Estimated partners' equity for federal
      income tax purposes                       $     10,630    $     10,521
                                                ============    ============








                                 Page 27 of 29
<PAGE>


                              RANCON INCOME FUND I,
                        A California Limited Partnership

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1998
                                 (In Thousands)
<TABLE>
<CAPTION>
<S>                            <C>       <C>      <C>        <C>          <C>        <C>       <C>          <C>        <C>
COLUMN A                  COLUMN B           COLUMN C                COLUMN D                       COLUMN E            COLUMN F    
------------------------------------------------------------------------------------------------------------------------------------
                                                                  Cost Capitalized
                                          Initial Cost to           Subsequent to         Gross Amount Carried
                                            Partnership              Acquisition           at December 31, 1998
                                          ----------------         ---------------         --------------------     
                                              Buildings         Buildings                        Building                         
                                                 and              and       Carrying              and        (1 , 2)  Accumulated   
Description               Encumbrances    Land  Improvements   Improvements   Cost       Land  Improvements   Total   Depreciation  
------------------------------------------------------------------------------------------------------------------------------------
Rental Properties:

 Wakefield Facility            $  --     $  740   $  1,159   $    218     $  --      $   740   $  1,377     $  2,117   $   353      
  Less:  Provisions for 
  impairment in real estate(2)    --       (135)      (116)      (123)       --         (135)      (239)        (374)       --

  Bristol Medical Center          --      1,937      3,327        830        --        1,937      4,157        6,094     1,273      
  Less:  Provision for
  impairment in real estate(2)    --       (614)      (271)    (1,036)       --         (614)    (1,307)      (1,921)       --
                              -------  --------- ----------- ------------ ---------  ---------  --------    ---------  --------
       Subtotal                   --      1,928      4,099       (111)       --         1,928     3,988        5,916     1,626
                              -------  --------- ----------- ------------ ---------  ---------  --------    ---------  --------

Rental property held for sale:

  Aztec Village Shopping Center   --      1,205      2,152        385        --         1,205     2,537        3,742       339      
  Less:  Provision for
  impairment in real estate(2)    --       (893)    (1,617)      (208)       --          (893)   (1,825)      (2,718)       --
                              -------  --------- ----------- -----------  ---------  --------- --------     ---------  --------

      Subtotal                    --        312       535         177        --           312       712        1,024       339
                              -------  --------- ----------- -----------  ---------  --------- --------     ---------  --------

      Totals                 $    --   $  2,240  $  4,634     $    66     $  --      $  2,240  $  4,700     $  6,940   $ 1,965
                              =======  ========= =========== ===========  =========  ========= ========     =========  ========
</TABLE>

COLUMN A                      COLUMN G     COLUMN H     COLUMN I    
--------------------------------------------------------------------

                                Date                    Life        
                             Construction    Date     Depreciated   
Description                    Began       Acquired      Over       
--------------------------------------------------------------------
Rental Properties:                                                  
                                                                    
 Wakefield Facility             N/A         4/20/87    5 - 40 years 
  Less:  Provisions for                                             
  impairment in real estate(2)                                       
                                                                    
  Bristol Medical Center        N/A         5/04/88    5 - 40 years 
  Less:  Provision for                                              
  impairment in real estate(2)                                      
                                                                    
       Subtotal                                                     

Rental property held for sale:                                       
                                                                    
  Aztec Village Shopping Cent   N/A         2/20/89    5- 40 years  
  Less:  Provision for       
  impairment in real estate(2)
                                                            
                                                     
(1)  The aggregate cost for Federal income tax purposes is $11,589
(2)  See Note 3 to Financial Statements

                                 Page 28 of 29
<PAGE>



         NOTE TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION



Reconciliation  of gross  amount at which real  estate was carried for the years
ended December 31, 1998, 1997 and 1996 (in thousands):

<TABLE>
<CAPTION>
                                                  1998            1997             1996
                                             ------------     ------------      ---------
<S>                                          <C>              <C>               <C>    
INVESTMENT IN REAL ESTATE

  Balance at beginning of year               $     7,280      $     7,844       $   9,325
     Additions during year:
         Improvements, etc.                          111               32             164
     Deletions during year:
         Disposals                                    --             (158)             --
         Provision for impairment of
           investments in real estate               (451)            (438)         (1,645)
                                             ------------     ------------      ----------

  Balance at end of year                     $     6,940      $     7,280       $    7,844
                                             ============     ============      ==========

ACCUMULATED DEPRECIATION

  Balance at beginning of year               $     1,802      $     1,786       $    1,583
     Additions charged expenses                      163              174              203
     Disposals                                        --             (158)              --
                                             -----------      ------------      -----------

  Balance at end of year                     $     1,965      $     1,802       $    1,786
                                             ===========      ============      ===========











                                 Page 29 of 29
<PAGE>
</TABLE>