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, 1996

                                       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 (415) 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:

Annual  report on Form 10-K for the fiscal  year ended  November  30,  1991,  is
incorporated by reference in Part IV hereof.

                                  Page 1 of 33
<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, 1996, 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's
properties are competitive with comparable properties as to those factors within
the  Partnership's  control,  over-building  and other  external  factors  could
adversely  affect the ability of the  Partnership to attract and retain tenants.
The  marketability of the properties may also be affected (either  positively or
negatively)  by these factors as well as by changes in general or local economic
conditions,  including  prevailing  interest  rates.  Depending  on  market  and
economic conditions,  the Partnership may be required to retain ownership of its
properties for periods longer than  anticipated at  acquisition,  or may need to
sell earlier than anticipated,  at a time or under terms and conditions that are
less  advantageous  than  would be the case if  unfavorable  economic  or market
conditions did not exist.

Working Capital

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



                                  Page 2 of 33
<PAGE>

<TABLE>
<CAPTION>

Item 2.           Properties

The Partnership currently owns the properties listed below:

                                                                                                     Encumbrances at
            Name                        Location                   Type           Size              December 31, 1996
            ----                        --------                   ----           ----              -----------------
<S>                              <C>                            <C>              <C>                      <C>
Wakefield Industrial             Temecula, California           Light            44,200 sq. ft.           None
  Center (formerly Aham Tor)      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>

Wakefield Industrial Center (formerly Aham Tor)

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  7,043,550 square feet of existing  industrial  space,
with an  overall  vacancy  rate of 6.4%.  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.  The average annual  effective  rents for the area  approximate
$3.48  per foot  NNN  (tenant  pays all  operating  expenses,  including  taxes,
insurance,  and non-structural capital improvements)  depending on age, location
and size of the property.  Land prices for finished  industrial  lots range from
$2.00 to  $3.75  per  square  foot  depending  on  zoning,  size,  location  and
amenities.

The occupancy  level at December 31, 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 four years were:

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




                                  Page 3 of 33
<PAGE>


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:                            $178,500
      Rent Increase:                          Annual - CPI
      Renewal Options:                        None

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

At December 31, 1996, the Wakefield Industrial Center property is unencumbered.

During 1996, the property was assessed  property taxes of approximately  $24,000
based on a tax rate of 1.36%.

Bristol Medical Center

The  Partnership   purchased   Bristol  Medical  Center  from  Rancon  Financial
Corporation ("RFC") 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.

According  to research  conducted by the  Partnership's  property  manager,  net
absorption  in this area has been on a downward  trend  since 1992 as changes in
the business environment for the medical industry continue to push vacancy rates
up. No new medical  buildings are under  construction  for the area. 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 total  vacancy in this market was 14.6% for 1996, an increase of
7.53% from 1995. The sub-market  consists of smaller buildings,  which often are
houses converted to dental/medical offices and retail sites.

The annual  rental  rates for the area  approximate  $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).
However,  as management  is not aware of any new doctors  having leased space in
the area in the last two years, the rates for competing  buildings have not been
tested.



                                  Page 4 of 33
<PAGE>


The occupancy  level at December 31, 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 four years were:

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

The current annual rental rates range from $8.10 to $25.29 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:

                                             St. Jude
                                             Heritage Health
      Nature of Business:                    Medical clinic
      Lease Term:                            1 year
      Expiration Date:                       September 30, 1997
      Square Feet:                           24,957
      (% of rentable total):                 48%
      Annual Rent:                           $470,500
      Rent Increase:                         Annual - CPI
      Renewal Options:                       None

The tenant is uncertain at this time whether or not they will renew in September
1997 due to changes  occurring  at the  neighboring  hospital  of which they are
affiliated.

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

At December 31, 1996, the Bristol Medical Center property is unencumbered.

During 1996, the property was assessed  property taxes of approximately  $65,000
based on a tax rate of 1.07%.

Aztec Village Shopping Center

The Partnership  purchased  Aztec Village  Shopping Center from RFC in February,
1989 for a total cost of  $3,357,000.  Management  does not  expect  significant
growth  or  appreciation  for the  shopping  center  and as  such  is  currently
marketing  the property for sale.  This rental  property is classified as rental
property held for sale on the Partnership's 1996 balance sheet.

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
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

                                  Page 5 of 33
<PAGE>

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  Aztec Village is considered  east San Diego and the
western   portions  of  La  Mesa.   According  to  research   conducted  by  the
Partnership's property manager, this area is comprised of over 186,000 residents
within a three  mile  radius of Aztec  Village as well as  approximately  29,000
students enrolled at San Diego State University. There are approximately 400,000
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 13%, an
increase of 2.3% over 1995.  Annual  rental rates range from $6.00 to $16.80 per
square foot NNN (tenant pays all operating expenses, including taxes, insurance,
and  non-structural   capital  improvements)   depending  upon  size,  location,
condition,  and amenities of the property.  There are nine strip retail shopping
centers  competing with Aztec Village for tenants and two  supermarket  anchored
centers.

The immediate area surrounding San Diego State University, commencing at College
Avenue and  Montezuma,  is slated  for major  redevelopment  in late 1997.  This
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 Aztec  Village and due to its  proximity to the campus,  will command  higher
rents and strong national tenant interest.

The occupancy  level at December 31, 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 four years were:

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

In December  1995,  the  property  lost two  tenants  occupying a total of 6,530
square feet due to financial instability. Management continues to market but has
been  unsuccessful in leasing the space.  Subsequent to the  Partnership's  year
end, the occupancy increased to 42%.

The current  annual  rental rates range from $9.00 to $15.04 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 the opinion of management, the property is adequately covered by insurance.

                                  Page 6 of 33
<PAGE>

At  December  31,  1996,  the  Aztec  Village   Shopping   Center   property  is
unencumbered.
During 1996, the property was assessed  property taxes of approximately  $20,000
based on a tax rate of 1.12%.

Item 3.           Legal Proceedings

None.

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

None.



                                  Page 7 of 33
<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, 1996, a total of 1,478 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 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.

                                  Page 8 of 33
<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
 11/29/96        $      14,000           $   0.96                 --
  8/30/96        $      14,000           $   0.96                --
  5/31/96        $      14,000           $   0.96                --
   3/1/96        $      60,000           $   4.12                --
 12/31/95        $      60,000           $   4.12                --
  8/31/95        $      61,000           $   4.19                --
   6/2/95        $      61,000           $   4.19                --
   3/2/95        $     182,000           $  12.50                --
  12/2/94        $     182,000           $  12.50                --
   9/2/94        $     182,000           $  12.50                --
   6/3/94        $     182,000           $  12.50                --
  12/3/93        $     182,000           $  12.50                --

In order to rebuild cash reserves,  management  decided to forego a distribution
from 1994's first quarter earnings, therefore no distribution was made in March,
1994.

Due to the  uncertainty  of the St. Jude Heritage  Health lease renewal in 1997,
representing 48% of the space at Bristol Medical Center, estimated distributions
for 1997 will remain consistent with the 1996 level.

Of the total distributions paid, $7.00, $12.99 and $37.50 per unit represented a
return of capital for the fiscal year ends 1996, 1995, and 1994 respectively.





                                  Page 9 of 33
<PAGE>


Item 6.                    Selected Financial Data
<TABLE>
<CAPTION>

The following is selected  financial  data for the year ended  December 31, 1996
and the years ended November 30, 1995, 1994, 1993 and 1992 (in thousands, except
per Unit data).

                                   1996              1995             1994               1993              1992
                                 --------          --------         --------           -------           ------
<S>                            <C>              <C>                 <C>               <C>              <C>
Rental income                  $   1,125        $    1,397          $   1,417         $   1,304        $   1,427

Provision for
 impairment of
 investment in
 real estate                   $   1,645        $       --          $     380         $      --        $   2,100

Net income (loss)              $  (1,394)       $      300          $     (69)        $     403        $  (1,655)

Net income (loss)
  allocable to limited
  partners                     $  (1,380)       $      297          $     (62)        $     399        $  (1,314)

Net income (loss)
  per limited
  partnership unit             $  (94.81)       $   20.40           $   (4.26)        $   27.42        $  (90.28)

Total assets                   $   6,531        $    8,159          $   8,483         $   8,905        $   9,232

Cash distributions
  per  limited
  partnership unit             $    7.00        $   33.39           $   37.50         $   50.00        $   50.00
</TABLE>

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

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1996, the Partnership had cash of $426,000.  The remainder of
the  Partnership's  assets consist  primarily of its  investments in properties,
which totaled approximately $6,058,000 at December 31, 1996.

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 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 Southern California and have been
directly affected by the economic weakness of the region.  Management  believes,
however,  that the market  has  flattened  and is no longer  falling in terms of
sales  prices.  While  prices have not  increased  significantly,  the  Southern
California real estate market appears to be improving.  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 33
<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. Due to the uncertainty of the
St. Jude Heritage Health lease renewal in 1997, representing 48% of the space at
Bristol Medical Center,  estimated distributions for 1997 will remain consistent
with the 1996 level but there can be no assurance  that the  distribution  level
will not be adjusted. As the Partnership's properties are owned free of mortgage
indebtedness, the long term operations of the properties and the Partnership are
expected  to be  comparable  to  the  current  operations.  The  Partnership  is
currently  soliciting offers for the sale of Aztec Village Shopping Center. This
rental  property  is  classified  as  rental  property  held  for  sale  on  the
Partnership's 1996 balance sheet.

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 decreased 19% for the year ended December 31, 1996 compared to the
year ended November 30, 1995 as 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  during the year at
Bristol Medical Center due to the depressed market.

The increase in interest  and other income in 1996  compared to 1995 of $115,000
is primarily due to a one-time legal settlement of $111,000 from a former tenant
at Bristol Medical  Center.  The decrease in 1995 compared to the same period in
1994 is due to  lower  prevailing  interest  rates  and  average  invested  cash
balances during 1995.

Operating  expenses  decreased 15% for the year ended December 31, 1996 compared
to the year ended  November 30,  1995.  Due to the  vacancies  at Aztec  Village
Shopping  Center  and  Bristol  Medical  Center,   utilities  expense  and  base
management fees decreased $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 decrease of 11% in 1995 compared to 1994 is due to
one-time repairs and maintenance made to Bristol Medical Center in 1994.

Depreciation and amortization  expense decreased 23% for the year ended December
31, 1996 compared to the year ended  November 30, 1995  primarily as a result of
certain lease commissions becoming fully amortized at Bristol Medical Center and
Aztec  Village  Shopping  Center at the end of 1995.  The increase of 7% for the
year ended  November 30, 1995 as compared to the same period in 1994 is a result
of additional tenant improvements.

In 1996, due to a higher vacancy rate and current cash flow analyses, management
concluded that the carrying value of two of the  Partnership's  investments were
in excess of their estimated fair value. As a result,  the Partnership  recorded
$1,470,000 and $175,000 provisions for impairment of it's investments in Bristol
Medical  Center  and  Wakefield  Industrial  Center,   respectively.   In  1994,
management concluded that the carrying value of the Partnership's  investment in
Aztec Village was in excess of its net realizable value and a $380,000 provision
for  impairment of the  investment  was recorded to reduce the carrying value to
the estimated fair value.

General  and  administrative  expenses  for the year  ended  December  31,  1996
compared to the year ended  November  30, 1995  increased  18%.  The increase is
partially due to a $10,000 increase in quarterly  overhead  expense,  a one-time
payment of $5,000 for  professional  services  rendered in  connection  with the

                                 Page 11 of 33
<PAGE>

valuation of the limited  partner  interests and an increase in data  processing
fees of $7,000.  In addition,  the  Partnership  incurred  professional  fees of
approximately  $13,000,  resulting from the preparation of additional  prior and
current year tax returns in states where returns had not previously  been filed,
and an increase of $9,000 in general legal fees  associated  with the management
of the Partnership's and properties  day-to-day affairs.  The increase of 15% in
1995 as  compared  to the same  period  in 1994 is a result of the  payment  and
expense of 1994 audit and tax return fees in 1995.  Since January 1, 1995, audit
and tax fees have been accrued in the year to which they relate.

In December,  1994, RFC entered into an agreement with Glenborough Inland Realty
Corporation  ("Glenborough") whereby RFC sold to Glenborough,  for approximately
$4,466,000  and the  assumption  of  $1,715,000  of RFC's debt,  the contract to
perform  the  rights  and  responsibilities   under  RFC's  agreement  with  the
Partnership,  eight other related partnerships and third parties  (collectively,
"the Rancon  Partnerships") to perform or contract on the  Partnership's  behalf
for  financial,   accounting,   data  processing,   marketing,  legal,  investor
relations,  asset and  development  management and  consulting  services for the
Partnership.  As  part of  this  agreement,  Glenborough  will  perform  certain
responsibilities  for the  General  Partner of the Rancon  Partnerships  and RFC
agreed to cooperate with  Glenborough,  should  Glenborough  attempt to obtain a
majority vote of the limited  partners to  substitute  itself as the Sponsor for
the Rancon Partnerships.  Glenborough is not an affiliate of RFC. This agreement
was effective January 1, 1995.

RFC entered into the  transaction  with  Glenborough  described  above,  when it
determined to sell that portion of its business  relating to investor  services,
property management services and asset management  services,  and those services
are now rendered to the Rancon  Partnerships  by  Glenborough.  The  Partnership
required  those  services  to be  rendered  to it until  such time as all of its
properties were sold,  whether  performed by the General Partner or Glenborough.
RFC, as General  Partner of the General  Partner  for the  Partnership,  has the
responsibility and obligation to manage the Partnership business,  including the
sale of its properties,  notwithstanding  that certain  property  management and
other  administrative  activities regarding the Partnership are now performed by
Glenborough.

As a result of the agreement between RFC and Glenborough, RFC terminated certain
employees who were  previously  responsible  for performing the  administrative,
legal and development  services to the Partnership.  Upon  termination,  certain
employee costs including severance benefits were allocated to the various Rancon
Partnerships.  Such costs  allocated to the Partnership  aggregated  $48,000 and
were included in administrative expenses for the year ended November 30, 1994.

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

On June 6, 1995, Price Waterhouse LLP was dismissed as the principal independent
accountant for the Partnership. The decision to dismiss Price Waterhouse LLP was
made by the Partnership's General Partner.

The reports of Price Waterhouse LLP on the  Partnership's  financial  statements
for the period ending  November 30, 1994, do not contain an adverse opinion or a
disclaimer  of an opinion,  nor were such opinions  modified as to  uncertainty,
audit scope, or accounting principles.

During the fiscal year ended November 30, 1994 and the subsequent interim period
from December 1, 1994 to June 6, 1995, there were no  disagreements  between the
Partnership and Price  Waterhouse LLP on any matter of accounting  principles or
practices,  financial  statement  disclosure,  or auditing  scope or  procedure,

                                 Page 12 of 33
<PAGE>

which, if not resolved to the  satisfaction of Price  Waterhouse LLP, would have
caused it to make a  reference  to the  subject  matter of the  disagreement  in
connection  with its reports.  For this purpose the term  disagreement  does not
include initial  differences of opinion based on incomplete facts or preliminary
information that were later resolved to the satisfaction of Price Waterhouse LLP
by obtaining additional relevant facts or information.

During the fiscal year ended November 30, 1994 and the subsequent interim period
from December 1, 1994 to June 6, 1995, there were no "reportable  events" of the
type described in Rule 304(a)(1)(v)(A) through (D) of Regulation S-K.

On  June  6,  1995,  the  Partnership  engaged  Arthur  Andersen  LLP as its new
principal independent accountant. During the fiscal year ended November 30, 1994
and the  subsequent  interim  period from December 1, 1994 through June 6, 1995,
the  Partnership  did not consult with Arthur Andersen LLP as to the application
of accounting principles to a specified transaction or the type of audit opinion
that might be rendered on the Partnership's financial statements.




                                 Page 13 of 33
<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 RFC are the General  Partners of Rancon Income  Partners I, L.P.
The executive officer and director of Rancon is:

Daniel L. Stephenson          Director, President, Chief Executive Officer and
                              Chief Financial Officer

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

Mr.  Stephenson,  age 53, founded RFC (formerly known as Rancon  Corporation) in
1971 for the purpose of  establishing  itself as a  commercial,  industrial  and
residential  property  syndication,   development  and  brokerage  concern.  Mr.
Stephenson has, from inception,  held the position of Director. In addition, Mr.
Stephenson was President and Chief  Executive  Officer of RFC from 1971 to 1986,
from August  1991 to  September  1992 and from March 31,  1995 to  present.  Mr.
Stephenson is Chairman of the Board of PacWest  Group,  Inc., a real estate firm
which has acquired a portfolio of assets from the Resolution Trust Corporation.

Effective January 1, 1994 RFC acquired all the outstanding shares of Partnership
Asset Management Company, a California  corporation,  which previously performed
or  contracted  on the  Partnership's  behalf for  financial,  accounting,  data
processing,   marketing,   legal,  investor  relations,  asset  and  development
management  and  consulting  services for the  Partnership.  These services were
provided to the  Partnership by RFC subject to the provisions of the Partnership
Agreement during calendar 1994.

Rancon Development Fund VII ("RDFVII"),  a partnership  sponsored by the General
Partners, filed for protection under Chapter 11 of Federal Bankruptcy Law on May
6, 1994 in order to put an automatic stay on RDFVII's  property and to forestall
the pending foreclosure. In March, 1994, the General partners were approached by
a non-affiliated party interested in acquiring the interests of RDFVII's general
partners and attempting to  restructure  the  partnership  and its secured debt.
Although the necessary  majority-in-interest  of RDFVII's  limited  partners was
received,  an  agreement  regarding  the terms of the  transfer  and the plan of
reorganization  could not be reached. The holder of the note secured by RDFVII's
property  filed for and was granted a relief from the stay thereby  allowing the
foreclosure sale to proceed.  Such sale took place on September 15, 1994 and the
bankruptcy was subsequently dismissed, as the property was RDFVII's only asset.

Six Stoneridge L.P.  ("SSRLP"),  a partnership formed by Rancon Development Fund
VI  ("RDFVI"),  a  partnership  sponsored  by the  General  Partners  filed  for
protection under Chapter 11 of Federal Bankruptcy Law in December, 1992. Efforts
to negotiate a modification of the purchase agreement of StoneRidge I, to obtain
loans,  joint  venture  partners  or other  vehicles  to meet or modify the cash
payment  requirements  were  unsuccessful.   In  February,  1993,  an  adversary
complaint  was filed  against  SSRLP in the  bankruptcy  court to determine  the
nature and extent of SSRLP's  interest in  StoneRidge I and the debt  associated
with the property. A tentative agreement has been reached and the bankruptcy was
dismissed  effective  November 8, 1995. As of December 31, 1996, SSRLP and RDFVI
have been dissolved.




                                 Page 14 of 33
<PAGE>


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                                       Beneficial           Percent
  of Class        Name of Beneficial Owner   Ownershipof 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.

Item 13.           Certain Relationships and Related Transactions

The  Partnership  did not incur any costs  reimbursable  to RFC  during the year
ended December 31, 1996, or the one month ended December 31, 1995.



                                 Page 15 of 33
<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:

                   Reports of Independent Public Accountants

                   Balance  Sheets as of December 31, 1996 and 1995 and November
                   30, 1995

                   Statements  of  Operations  for the Year Ended  December  31,
                   1996,  the Month Ended  December 31, 1995 and the Years Ended
                   November 30, 1995 and 1994

                   Statements of Partners'  Equity  (Deficit) for the Year Ended
                   December 31, 1996,  the Month Ended December 31, 1995 and the
                   Years Ended November 30, 1995 and 1994

                   Statements  of Cash  Flows for the Year  Ended  December  31,
                   1996,  the Month Ended  December 31, 1995 and the Years Ended
                   November 30, 1995 and 1994

                   Notes to Financial Statements

              (2)  Financial Statement Schedule:

                   Schedule III -- Real Estate and  Accumulated  Depreciation as
                   of December 31, 1996 and Note thereto

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

              (3)  Exhibits:
                   (27)Financial Data Schedule



         (b)  Reports on Form 8-K

              None.



                                 Page 16 of 33
<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 28, 1997                 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 28, 1997                 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 17 of 33
<PAGE>


                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          INDEX TO FINANCIAL STATEMENTS
                                  AND SCHEDULE



                                                                           Page

Reports of Independent Public Accountants                                19 & 20

Financial Statements:

         Balance  Sheets as of December  31, 1996 and 1995 and
           November 30, 1995                                                  21

         Statements of Operations  for the year ended December
           31, 1996, the month ended December 31, 1995 and the
           years ended November 30, 1995 and 1994                             22

         Statements of Partners' Equity (Deficit) for the year
           ended  December 31, 1996,  the month ended December
           31, 1995 and the years ended  November 30, 1995 and
           1994                                                               23

         Statements of Cash Flows for the year ended  December
           31, 1996, the month ended December 31, 1995 and the
           years ended November 30, 1995 and 1994                             24

         Notes to Financial Statements                                        25

Schedule:

         III -  Real Estate and Accumulated Depreciation
                as of December 31, 1996 and Note thereto                      31



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




                                 Page 18 of 33
<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, 1996 and 1995 and November 30,
1995, and the related  statements of operations,  partners' equity (deficit) and
cash flows for the year ended  December 31, 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, 1996 and 1995 and November
30,  1995,  and the  results of its  operations  and its cash flows for the year
ended  December 31, 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.


ARTHUR ANDERSEN

San Francisco, California
  February 12, 1997



                                 Page 19 of 33
<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS



To the General and Limited Partners of
Rancon Income Fund I

In our opinion, the accompanying  statements of operations,  of partners' equity
and of cash flows  present  fairly,  in all  material  respects,  the results of
operations  and cash flows of Rancon  Income Fund I for the year ended  November
30, 1994, in conformity with generally  accepted  accounting  principles.  These
financial statements are the responsibility of the Partnership's management; our
responsibility  is to express an opinion on these financial  statements based on
our  audit.  We  conducted  our audit of these  statements  in  accordance  with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audit  provides a reasonable  basis for the opinion  expressed
above. We have not audited the financial  statements of Rancon Income Fund I for
any period subsequent to November 30, 1994.

Our audit for the year ended  November  30,  1994 was made for the  purpose  for
forming an opinion on the basic financial statements taken as a whole. Our audit
also included an audit of the Financial Statement Schedule listed in Item 14 (a)
of this Form 10-K. In our opinion,  the Financial  Statement  Schedule  presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial statements.



PRICE WATERHOUSE LLP

San Diego, California
January 20, 1995




                                 Page 20 of 33
<PAGE>

<TABLE>
<CAPTION>

                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                                 Balance Sheets
                  December 31, 1996, 1995 and November 30, 1995
                    (in thousands, except units outstanding)

                                                                   December 31,        December 31,      November 30,
                                                                       1996                1995               1995
<S>                                                               <C>                  <C>
Assets
Investments in real estate:
    Rental property, net of accumulated
      depreciation of $1,423, $1,583 and $1,566
      at December 31, 1996, 1995, and
      November 30, 1995, respectively                             $     4,954          $    7,742         $    7,758
    Rental property held for sale                                       1,104                  --                 --
                                                                  -----------          ----------         ----------

      Net real estate investments                                       6,058               7,742              7,758
                                                                  -----------          ----------         ----------

Cash and cash equivalents                                                 426                 274                288
Accounts receivable                                                        17                  16                 23
Deferred costs, net of accumulated
    amortization of $196, $172 and $170 at
    December 31, 1996, 1995 and November
    30, 1995, respectively                                                 19                  42                 44
Other assets                                                               11                  11                 46
                                                                   ----------           ---------          ---------

      Total assets                                                $     6,531          $    8,085         $    8,159
                                                                   ==========           =========          =========

Liabilities and Partners' Equity (Deficit)
Liabilities:
Accounts payable and accrued expenses                             $        23          $       75         $       75
Other liabilities                                                          63                  69                 55
                                                                   ----------           ---------          ---------

      Total liabilities                                                    86                 144                130
                                                                   ----------           ---------          ---------

Partners' equity (deficit):
    General Partner                                                      (178)               (164)              (164)
    Limited Partners (14,555 limited partnership
      units outstanding in 1996 and 1995)                               6,623               8,105              8,193
                                                                   ----------           ---------          ---------

      Total partners' equity                                            6,445               7,941              8,029
                                                                   ----------           ---------          ---------

      Total liabilities and partners' equity                      $     6,531          $    8,085         $    8,159
                                                                   ==========           =========          =========



</TABLE>

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

                                 Page 21 of 33
<PAGE>

<TABLE>
<CAPTION>
                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                            Statements of Operations
              For the year ended December 31, 1996, the month ended
        December 31, 1995 and the years ended November 30, 1995 and 1994
                     (in thousands, except per unit amounts)

                                                           For the            For the          For the           For the
                                                         year ended         month ended      year ended        year ended
                                                        December 31,       December 31,     November 30,      November 30,
                                                            1996               1995             1995              1994
Revenue:
<S>                                                    <C>                <C>                <C>               <C>
 Rental income                                         $      1,125       $         57       $     1,397       $    1,417
 Interest and other income                                      122                  1                 7               11
                                                       ------------       ------------       -----------       ----------

       Total revenue                                          1,247                 58             1,404            1,428
                                                       ------------       ------------       -----------       ----------

Expenses:
 Operating, including $6 and $156 paid to
    Sponsor for the years ended November 30,
    1995 and 1994, respectively                                 476                 47               560              626
 Depreciation and amortization                                  227                 19               295              275
 Provision for impairment of investment
    in real estate                                            1,645                 --                --              380
 General and administrative, including
    $7 and $179 paid to Sponsor for the years
    ended November 30, 1995 and 1994,
    respectively                                                293                 20               249              216
                                                       ------------       ------------       -----------       ----------

       Total expenses                                         2,641                 86             1,104            1,497
                                                       ------------       ------------       -----------       ----------

Net income (loss)                                      $     (1,394)      $        (28)      $       300       $      (69)
                                                        ===========        ===========        ==========        =========

Net income (loss) per limited partnership unit         $     (94.81)      $      (1.92)      $    20.40        $    (4.26)
                                                        ===========        ===========        =========         =========

Distributions per limited partnership unit:
 Representing return of capital                        $       7.00       $       4.12       $    12.99        $    37.50
 From net income                                                 --                 --            20.40                --
                                                        -----------        -----------        ---------         ---------
       Total distributions per limited
          partnership unit                             $       7.00       $       4.12       $    33.39        $    37.50
                                                        ===========        ===========        =========         =========

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 22 of 33
<PAGE>

<TABLE>
<CAPTION>

                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                    Statements of Partners' Equity (Deficit)
              For the year ended December 31, 1996, the month ended
        December 31, 1995 and the years ended November 30, 1995 and 1994
                                 (in thousands)


                                       General          Limited
                                       Partner         Partners         Total

<S>                 <C> <C>          <C>             <C>             <C>
Balance at November 30, 1993         $     (160)     $   8,990       $    8,830

Distributions                                --           (546)            (546)

Net loss                                     (7)           (62)             (69)
                                      ---------       --------        ---------

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
                                       ========       ========         ========

</TABLE>



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

                                 Page 23 of 33
<PAGE>

<TABLE>
<CAPTION>

                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                            Statements of Cash Flows
              For the year ended December 31, 1996, the month ended
        December 31, 1995 and the years ended November 30, 1995 and 1994
                                 (in thousands)

                                                           For the             For the         For the            For the
                                                          year ended         month ended      year ended        year ended
                                                         December 31,       December 31,     November 30,      November 30,
                                                             1996               1995             1995              1994
<S>                                                       <C>               <C>                <C>            <C>
Cash flows from operating activities:
 Net income (loss)                                        $  (1,394)        $      (28)        $      300     $      (69)
Adjustments to reconcile net income (loss)
 to net cash provided by operating activities:
    Depreciation and amortization                               227                 19                295            275
    Provision for impairment of investment
      in real estate                                          1,645                 --                 --            380
Changes in certain assets and liabilities:
    Accounts receivable                                          (1)                 7                 (9)            37
    Deferred costs                                               (1)                --                 --             --
    Other assets                                                 --                 35                  7              8
    Payable to sponsor                                           --                 --               (158)           155
    Accounts payable and accrued expenses                       (52)                --                 32             33
    Other liabilities                                            (6)                14                (12)             5
                                                           --------          ---------          ---------      ---------
 Net cash provided by operating activities                      418                 47                455            824
                                                           --------          ---------          ---------      ---------

Cash flows used for investing activities:
 Additions to investments in real estate                       (164)                (1)                (53)          (62)
                                                           ---------         ----------         -----------    ----------

Cash flows used for financing activities:
 Cash distributions to limited partners                        (102)               (60)               (486)         (546)
                                                           --------          ---------          ----------     ---------

Net increase (decrease) in cash and cash equivalents            152                (14)                (84)          216

Cash and cash equivalents at beginning of period                274                288                 372           156
                                                           --------          ---------          ----------     ---------

Cash and cash equivalents at end of period                $     426         $      274         $       288    $      372
                                                           ========          =========          ==========     =========


</TABLE>


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

                                 Page 24 of 33
<PAGE>


                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                  December 31, 1996, November 30, 1995 and 1994

Note 1.           ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

Rancon Income Fund I, a California Limited Partnership,  ("the Partnership") was
organized in accordance  with the provisions of the California  Revised  Limited
Partnership  Act for the  purpose  of  acquiring,  operating  and  disposing  of
existing income  producing  commercial,  industrial and residential  real estate
properties.   The  Partnership   reached  final  funding  in  April,  1989.  The
Partnership  was formed with initial  capital  contributions  from Rancon Income
Partners I, L.P. (the General  Partner) and Daniel Lee  Stephenson,  the initial
limited  partner,  who  indirectly  owns and controls the General  Partner.  The
General Partner and its affiliates are  hereinafter  referred to as the Sponsor.
At December 31, 1996 and 1995 and  November  30, 1995,  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 profits,  losses and cash  distributions  from operations and from
sale or financing of any Partnership  property are made pursuant to the terms of
the  Partnership  Agreement.   Generally,  net  income  and  distributions  from
operations  are  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 losses for any period.

All of the Partnership's assets are located in Southern California and have been
directly affected by the economic weakness of the region.  Management  believes,
however,  that the market  has  flattened  and is no longer  falling in terms of
sales  prices.  While  prices have not  increased  significantly,  the  Southern
California real estate market appears to be improving.  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.  The Partnership is currently
soliciting  offers for the sale of Aztec Village  Shopping  Center.  This rental
property is  classified as rental  property  held for sale on the  Partnership's
1996 balance sheet.

General Partner and Management Matters

Effective January 1, 1994, Rancon Financial Corporation ("RFC"), wholly owned by
Daniel Lee Stephenson,  performed or contracted on the Partnership's  behalf for
financial,  accounting,  data processing,  marketing, legal, investor relations,
asset and development  management and consulting  services.  These services were
provided by RFC subject to the provisions of the Partnership Agreement. Prior to
January  1,  1994,  the  Partnership  had  contracted  with  Partnership   Asset
Management  Company  (PAMCO),  a  California  corporation,  to perform  the same
services.  Effective  January 1, 1994,  RFC entered into an  agreement  with the

                                 Page 25 of 33
<PAGE>
                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                  December 31, 1996, November 30, 1995 and 1994

owner of PAMCO to purchase all of its outstanding shares of stock. PAMCO was not
an affiliate of the Partnership or RFC at the time of purchase.

In December,  1994, RFC entered into an agreement with Glenborough Inland Realty
Corporation  ("Glenborough")  whereby RFC sold to  Glenborough  the  contract to
perform  the  rights  and  responsibilities   under  RFC's  agreement  with  the
Partnership   and  other  related   Partnerships   (collectively,   "the  Rancon
Partnerships")  to perform or contract on the  Partnership's  behalf  financial,
accounting,  data processing,  marketing,  legal, investor relations,  asset and
development  management and consulting services for the 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.

As a result of this agreement,  RFC terminated  several of its employees between
December 31, 1994 and February  28,  1995.  Also as a result of this  agreement,
certain of the officers of RFC resigned from their positions  effective February
28, 1995, March 31, 1995 and July 1, 1995.

Significant Accounting Policies

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

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

Risks and Uncertainties - The Partnership's ability to (i) achieve positive cash
flow  from   operations,   (ii)  meet  its  debt   obligations,   (iii)  provide
distributions  either  from  operations  or  the  ultimate  disposition  of  the
Partnership's properties or (iv) continue as a going concern, may be impacted by
changes in interest rates, property values,  geographic economic conditions,  or
the entry of other  competitors  into the  market.  The  accompanying  financial
statements do not provide for adjustments with regard to these uncertainties.

Investments in Real Estate - In March, 1995, the Financial  Accounting Standards
Board issued  Statement of Financial  Accounting  Standards  No. 121 (SFAS 121),
"Accounting  for  Impairment of Long-Lived  Assets and  Long-Lived  Assets to be
Disposed Of." The  Partnership  adopted SFAS 121 in the fourth quarter of fiscal
1995.  SFAS 121  requires  that  long-lived  assets be  carried  at the lower of

                                 Page 26 of 33
<PAGE>
                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                  December 31, 1996, November 30, 1995 and 1994

carrying  amount or fair value and that an evaluation of an individual  property
for  possible  impairment  must be  performed  whenever  events  or  changes  in
circumstances  indicate  that an  impairment  may have  occurred.  The  specific
accounting  policy for assets to be held and used is  described  in more  detail
below.

Rental Property - Rental  properties are stated at cost, and include the related
land,  unless events or circumstances  indicate that cost cannot be recovered in
which case carrying  value is reduced to estimated  fair value.  Estimated  fair
value: (i) is based upon the Partnership's  plans for the continued operation of
each property;  (ii) is computed using  estimated  sales price, as determined by
prevailing   market  values  for  comparable   properties   and/or  the  use  of
capitalization  rates multiplied by annualized rental income based upon the age,
construction and use of the building, and (iii) does not purport, for a specific
property, to represent the current sales price that the Partnership could obtain
from third parties for such property. The fulfillment of the Partnership's plans
related to each of its  properties is dependent  upon,  among other things,  the
presence of economic conditions which will enable the Partnership to continue to
hold  and  operate  the  properties   prior  to  their  eventual  sale.  Due  to
uncertainties  inherent  in the  valuation  process  and in the  economy,  it is
reasonably  possible  that the actual  results of operating and disposing of the
Partnership's   properties   could  be   materially   different   than   current
expectations.

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

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

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 $24,000 for the year ended December 31, 1996 and $58,000 and $45,000
for the years ended November 30, 1995 and 1994, respectively.

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  (deficit)  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.

Reclassifications  - Certain 1995 and 1994  balances have been  reclassified  to
conform with the current year presentation.

                                 Page 27 of 33
<PAGE>
                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                  December 31, 1996, November 30, 1995 and 1994

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 and $156,000 for the years ended November 30, 1995 and
1994, respectively.

The Partnership  Agreement also provided for the  reimbursement  of actual costs
incurred  by RFC in  providing  certain  administrative,  legal and  development
services  necessary for the prudent  operation of the Partnership.  Reimbursable
costs  incurred by the  Partnership  totaled  $7,000 and  $179,000 for the years
ended November 30, 1995 and 1994, respectively. Effective January 1, 1995, these
services are provided by Glenborough as described in Note 1.

Note 3.           INVESTMENTS IN REAL ESTATE
<TABLE>
<CAPTION>

Rental  property as of December  31, 1996 and 1995 and  November  30, 1995 is as
follows:

                                    December 31,      December 31,        November 30,
                                        1996               1995               1995
<S>                             <C>                 <C>               <C>
Land                            $      2,072,000    $    3,065,000    $     3,065,000
Buildings and improvements             3,851,000         5,743,000          5,742,000
Tenant improvements                      454,000           517,000            517,000
                                 ---------------     -------------     --------------
                                       6,377,000         9,325,000          9,324,000
Less: accumulated depreciation        (1,423,000)       (1,583,000)        (1,566,000)
                                 ---------------     -------------     --------------
         Total                  $      4,954,000    $    7,742,000    $     7,758,000
                                 ===============     =============     ==============
</TABLE>

Rental property held for sale at December 31, 1996 is as follows:

Land                                    $      461,000
Buildings and improvements                     920,000
Tenant improvements                             86,000
                                        --------------
                                             1,467,000
Less: accumulated depreciation                (363,000)
                                        --------------
         Total                          $    1,104,000
                                        ==============

At December 31, 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, 1996.

In 1996, due to a higher vacancy rate and current cash flow analyses, management
concluded that the carrying value of two of the  Partnership's  investments were
in excess of their estimated fair value. As a

                                 Page 28 of 33
<PAGE>
                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                  December 31, 1996, November 30, 1995 and 1994

result,  the  Partnership   recorded  $1,470,000  and  $175,000  provisions  for
impairment  of  it's   investments  in  Bristol  Medical  Center  and  Wakefield
Industrial Center, 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, 1996 is as follows:

         1997                    $     956,000
         1998                          503,000
         1999                          451,000
         2000                          367,000
         2001                          332,000
         Thereafter                  1,281,000
                                     ---------
           Total                 $   3,890,000
                                  ============

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.
<TABLE>
<CAPTION>

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, 1996 and
November 30, 1995 and 1994,  determined in accordance with accounting  practices
used in preparation of federal income tax returns (in thousands).

                                                       1996            1995            1994
                                                       -----           ----            ----
<S>                                              <C>             <C>              <C>
Net income (loss) per financial statements       $     (1,394)   $        300     $        (69)
Provision for impairment of investments in
      real estate                                       1,645              --              380
Financial reporting depreciation in excess
      of tax reporting depreciation                        (4)             --               --
Rental income reported in a different period
      for tax than for financial reporting                114             112               --
Operating expenses recognized in a different
      period for financial reporting than
      for tax reporting                                  (111)           (190)             173
                                                 -------------   ------------     ------------
Estimated net income for federal
      income tax purposes                        $        250    $        222     $        484
                                                  ===========     ===========      ===========
</TABLE>
<TABLE>
<CAPTION>

                                 Page 29 of 33
<PAGE>
                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                  December 31, 1996, November 30, 1995 and 1994

The following is a reconciliation  as of December 31, 1996 and November 30, 1995
of partner's  equity for  financial  reporting  purposes to estimated  partners'
equity for Federal income tax purposes (in thousands).

                                                                         1996            1995
                                                                         ----            ----
<S>                                                                <C>             <C>
Partners' equity per financial statements                          $      6,445    $      8,029
Cumulative provision for impairment of
      investments in real estate                                          4,125           2,480
Financial reporting depreciation in excess
      of tax reporting depreciation                                        (266)             --
Operating expenses recognized in a different
      period for financial reporting than for
      tax reporting, net                                                      3              --
Other, net                                                                   (7)           (212)
                                                                    -----------    ------------
Estimated partners' equity for federal
      income tax purposes                                          $     10,300    $     10,297
                                                                    ===========    ============
</TABLE>



                                 Page 30 of 33
<PAGE>

<TABLE>
<CAPTION>


                              RANCON INCOME FUND I,
                        A California Limited Partnership

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1996
                                 (In Thousands)


                COLUMN A            COLUMN D                COLUMN E     COLUMN F    COLUMN G   COLUMN H COLUMN I
----------------------------------------------------------------------------------------------------------------------
                                        Gross Amount Carried
                                        at December 31, 1996
                                               Building                                  Date                   Life
                                                  and        (1 , 2)    Accumulated  Construction   Date     Depreciated
               Description             Land   Improvements     Total    Depreciation    Began      Acquired     Over
----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>          <C>              <C>           <C>     <C>        <C>
Rental Properties:

 Wakefield Industrial Center        $    741   $  1,384     $  2,125         $  296        N/A     4/20/87    40yrs
  Less:  write-down to
    estimated fair value  (2)           (135)      (240)        (375)           --

  Bristol Medical Center               1,937      4,160        6,097         1,127         N/A     5/04/88    40yrs
  Less:  write-down to
    estimated fair value(2)             (470)    (1,000)      (1,470)          --
                                    ---------  ---------    ---------        -----

       Subtotal                        2,073      4,304        6,377        1,423
                                     --------   --------     --------       ------

Rental property held for sale:

  Aztec Village Shopping Center        1,205      2,542        3,747          363         N/A     2/20/89    40yrs
  Less:  write-down to
    estimated fair value  (2)           (744)    (1,536)      (2,280)          --
                                    --------   --------     --------       -------

      Subtotal                           461      1,006        1,467          363
                                    --------   --------     --------       -------

      Totals                        $  2,534   $  5,310     $  7,844     $  1,786
                                    ========   ========     ========       =======

<FN>

(1)  The aggregate cost for Federal income tax purposes is $11,425
(2)  See Note 3 to Financial Statements
</FN>
</TABLE>



                                 Page 31 of 33
<PAGE>

<TABLE>
<CAPTION>

                              RANCON INCOME FUND I,
                        A California Limited Partnership

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1996
                                 (In Thousands)


                COLUMN A            COLUMN B                     COLUMN C
-------------------------------------------------------------------------------------------------
                                                          Cost Capitalized
                                   Initial Cost to          Subsequent to
                                     Partnership                Acquisition
                                                         Buildings
                                                            and                     Carrying
               Description Encumbrances     Land       Improvements  Improvements     Cost
-------------------------------------------------------------------------------------------------
<S>                           <C>         <C>           <C>             <C>         <C>
Rental Properties:

 Wakefield Industrial Center  $    --     $    741      $   1,158       $   226     $      --
  Less:  write-down to
    estimated fair value  (2)      --         (135)           (34)         (206)           --

  Bristol Medical Center           --        1,937          3,433           727            --
  Less:  write-down to
    estimated fair value(2)        --         (470)          (273)         (727)           --
                              -------      -------       --------      --------      ---------

       Subtotal                    --        2,073          4,284             20            --
                              -------      -------       --------      ---------       -------

Rental property held for sale:

  Aztec Village Shopping Center    --        1,205           2,152          390            --
  Less:  write-down to
    estimated fair value  (2)      --         (744)         (1,154)        (382)           --
                              -------     --------        --------      -------     ---------

      Subtotal                     --          461             998            8            --
                              -------     --------        --------      -------       -------

      Totals               $       --    $   2,534$          5,282    $      28    $       --
                             ========     ========        ========      =======     =========

<FN>

(1)  The aggregate cost for Federal income tax purposes is $11,425
(2)  See Note 3 to Financial Statements
</FN>
</TABLE>


                                 Page 31 of 33
<PAGE>

                              RANCON INCOME FUND I,
                        A CALIFORNIA LIMITED PARTNERSHIP


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

<TABLE>
<CAPTION>

Reconciliation  of gross  amount at which real  estate was carried for the years
ended December 31, 1996 and 1995 and November 30, 1995 and 1994:

                                             Dec. 31,      Dec. 31,       Nov. 30,       Nov. 30,
                                               1996          1995           1995           1994
INVESTMENT IN REAL ESTATE
<S>                                      <C>            <C>             <C>           <C>
  Balance at beginning of period         $     9,325    $     9,324     $     9,362   $     9,680
     Additions during period:
         Improvements, etc.                      164              1              53            62
     Deletions during period:
         Disposals--                              --             --             (91)           --
         Provision for impairment of
           investment in real estate          (1,645)            --              --          (380)
                                          -----------     ---------      ----------    ----------

  Balance at end of period               $     7,844    $     9,325     $     9,324   $     9,362
                                          ==========     ==========      ==========    ==========

ACCUMULATED DEPRECIATION

  Balance at beginning of period         $     1,583    $     1,566     $     1,420   $     1,190
     Additions charged expenses                  203             17             237           230
     Disposals                                    --             --             (91)         --
                                          ----------         -------        ---------     -------

  Balance at end of period               $     1,786    $     1,583     $     1,566   $     1,420
                                          ==========        ========        =========     ========


</TABLE>



                                 Page 32 of 33
<PAGE>

                                INDEX TO EXHIBITS


           Exhibit Number                              Exhibit

                 27                            Financial Data Schedule



                                 Page 33 of 33
<PAGE>