##### Table of Contents

---



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-Q



(Mark One)

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



| | For the quarterly period ended September 30, 2003
| | -------------------------------------------------



OR



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



| | For the transition period from  to
| | ----------------------------------



Commission file number 000-24594



---



MEREDITH ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)



|Delaware                                                     |  | 95-4246740                       
|------------------------------------------------------------ |  | ---------------------------------
|State or other jurisdiction of incorporation or organization |  | (IRS Employer Identification No.)



|3000 SAND HILL ROAD, BUILDING 2, SUITE 120 MENLO PARK, CALIFORNIA |  | 94025     
|----------------------------------------------------------------- |  | ----------
|(Address of principal executive offices)                          |  | (Zip Code)



(650) 233-7140

(Registrants telephone number, including area code)



---



Indicate by check mark whether the registrant (1) has filed all reports 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  þ    No ̈



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



APPLICABLE ONLY TO CORPORATE ISSUERS



As
of October 24, 2003, 975,298 shares of the Registrants Common Stock were outstanding.



---



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.



REPORT ON
FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003



TABLE OF CONTENTS



|                               | 
|------------------------------ | 
|Part I - Financial Information | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|Part II - Other Information    | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 
|                               | 



As used in this Report on Form 10-Q,
unless the context otherwise requires, the terms we, us, and our refer to Meredith Enterprises, Inc., a Delaware corporation.



---

##### Table of Contents

PART I- FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS



MEREDITH ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                |  | September 30,2003 |             |   | December 31,2002 |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ---------------- | -
|                                                                                                                                                |  | (Unaudited)       |             |   | (Audited)        |  
|Assets                                                                                                                                          |  |                   |             |   |                  |  
|Rental real estate, less accumulated depreciation (Notes 1 and 3)                                                                               |  | $                 | 46,437,208  |   |                  | $
|Rental real estate held for sale, net (Note 1)                                                                                                  |  |                   | 5,803,897   |   |                  |  
|Land held for development (Note 1)                                                                                                              |  |                   | 2,593,988   |   |                  |  
|Cash and cash equivalents                                                                                                                       |  |                   | 1,013,927   |   |                  |  
|Deferred rent                                                                                                                                   |  |                   | 546,050     |   |                  |  
|Accounts receivable                                                                                                                             |  |                   | 41,140      |   |                  |  
|Loan origination fees, net of accumulated amortization of $117,037 and $45,929 at September 30, 2003 and December 31, 2002,
respectively        |  |                   | 658,918     |   |                  |  
|Other assets                                                                                                                                    |  |                   | 705,345     |   |                  |  
|Other assets related to rental real estate held for sale                                                                                        |  |                   | 18,191      |   |                  |  
|                                                                                                                                                |  |                   |             |   |                  |  
|Total assets                                                                                                                                    |  | $                 | 57,818,664  |   |                  | $
|                                                                                                                                                |  |                   |             |   |                  |  
|Liabilities and Stockholders Equity                                                                                                            |  |                   |             |   |                  |  
|                                                                                                                                                |  |                  
|Liabilities                                                                                                                                     |  |                   |             |   |                  |  
|Accounts payable and accrued liabilities                                                                                                        |  | $                 | 820,381     |   |                  | $
|Due to related party (Note 4)                                                                                                                   |  |                   | 30,077      |   |                  |  
|Security deposits and prepaid rent                                                                                                              |  |                   | 252,165     |   |                  |  
|Dividend payable                                                                                                                                |  |                   | 243,825     |   |                  |  
|Other liabilities related to rental real estate held for sale                                                                                   |  |                   | 58,364      |   |                  |  
|Notes payable secured by rental real estate (Note 5)                                                                                            |  |                   | 38,159,661  |   |                  |  
|Notes payable secured by rental real estate held for sale (Note 5)                                                                              |  |                   | 2,467,735   |   |                  |  
|                                                                                                                                                |  |                   |             |   |                  |  
|Total liabilities                                                                                                                               |  |                   | 42,032,208  |   |                  |  
|                                                                                                                                                |  |                   |             |   |                  |  
|Commitments and contingencies (Note 9)                                                                                                          |  |                   |            |   |                  |  
|                                                                                                                                                |  |                  
|Stockholders equity                                                                                                                            |  |                   |             |   |                  |  
|Common stock $.01 par value; 15,000,000 shares authorized; 975,298 shares issued and outstanding as of September 30, 2003 and
December 31, 2002 |  |                   | 9,753       |   |                  |  
|Additional paid-in capital                                                                                                                      |  |                   | 27,157,247  |   |                  |  
|Dividends in excess of retained earnings                                                                                                        |  |                   | (11,380,544 | ) |                  |  
|                                                                                                                                                |  |                   |             |   |                  |  
|Total stockholders equity                                                                                                                      |  |                   | 15,786,456  |   |                  |  
|                                                                                                                                                |  |                   |             |   |                  |  
|Total liabilities and stockholders equity                                                                                                      |  | $                 | 57,818,664  |   |                  | $
|                                                                                                                                                |  |                   |             |   |                  |  



See accompanying
summary of accounting policies and notes to consolidated financial statements.



3



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF INCOME



|                                                        |  | Three months ended |           |   | Nine months ended
|------------------------------------------------------- |  | ------------------ | --------- | - | -----------------
|                                                        |  | September 30,2003  |           |   | September 30,2002
|                                                        |  | (Unaudited)        |           |   | (Unaudited)      
|Revenues                                                |  |                    |           |   |                  
|Rental (Notes 1 and 3)                                  |  | $                  | 1,949,746 |   |                  
|Interest                                                |  |                    | 429       |   |                  
|                                                        |  |                    |           |   |                  
|                                                        |  |                    | 1,950,175 |   |                  
|                                                        |  |                    |           |   |                  
|Cost and expenses                                       |  |                    |           |   |                  
|Interest                                                |  |                    | 681,062   |   |                  
|General and administrative                              |  |                    | 341,940   |   |                  
|Depreciation                                            |  |                    | 318,804   |   |                  
|Ground rent (Note 9)                                    |  |                    | 224,875   |   |                  
|Operating                                               |  |                    | 277,361   |   |                  
|Property tax                                            |  |                    | 126,732   |   |                  
|                                                        |  |                    |           |   |                  
|                                                        |  |                    | 1,970,774 |   |                  
|                                                        |  |                    |           |   |                  
|Net (loss) income from continuing operations            |  |                    | (20,599   | ) |                  
|Discontinued operations (Note 2)                        |  |                    | (38,534   | ) |                  
|Gain on sale of rental real estate held for sale        |  |                    | 406,728   |   |                  
|                                                        |  |                    |           |   |                  
|Net income                                              |  | $                  | 347,595   |   |                  
|                                                        |  |                    |           |   |                  
|Net (loss) income per sharebasic (Note 6):             |  |                    |           |   |                  
|Net (loss) income from continuing operations            |  |                    | ($0.02    | ) |                  
|Discontinued operations                                 |  |                    | ($0.04    | ) |                  
|Gain on sale of rental real estate held for sale        |  | $                  | 0.42      |   |                  
|                                                        |  |                    |           |   |                  
|Net income per share-basic                              |  | $                  | 0.36      |   |                  
|                                                        |  |                    |           |   |                  
|Net (loss) income per shareassuming dilution (Note 6): |  |                    |           |   |                  
|Net (loss) income from continuing operations            |  |                    | ($0.02    | ) |                  
|Discontinued operations                                 |  |                    | ($0.04    | ) |                  
|Gain on sale of rental real estate held for sale        |  | $                  | 0.42      |   |                  
|                                                        |  |                    |           |   |                  
|Net income per share-assuming dilution                  |  | $                  | 0.36      |   |                  
|                                                        |  |                    |           |   |                  



See accompanying
summary of accounting policies and notes to consolidated financial statements.



4



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Increase (Decrease) in Cash and Cash Equivalents



|Nine months ended September 30,                                                          |  | 2003        |            |   | 2002 |  
|---------------------------------------------------------------------------------------- |  | ----------- | ---------- | - | ---- | -
|                                                                                         |  | (Unaudited) |           
|Cash flows from operating activities                                                     |  |             |            |   |      |  
|Net income                                                                               |  | $           | 398,036    |   |      | $
|Adjustments to reconcile net (loss) income to net cash provided by operating activities: |  |             |            |   |      |  
|Depreciation expense                                                                     |  |             | 821,008    |   |      |  
|Gain on sale of rental real estate held for sale                                         |  |             | (406,728   | ) |      |  
|Interest expense due to amortization of loan origination fees                            |  |             | 63,759     |   |      |  
|Increase (decrease) in cash flows from changes in operating assets and liabilities:      |  |             |            |   |      |  
|Deferred rent                                                                            |  |             | (25,788    | ) |      |  
|Accounts receivable                                                                      |  |             | 145,116    |   |      |  
|Other assets                                                                             |  |             | (61,047    | ) |      |  
|Other assets related to rental real estate held for sale                                 |  |             | 411,091    |   |      |  
|Accounts payable and accrued liabilities                                                 |  |             | (94,622    | ) |      |  
|Due to related party                                                                     |  |             |           |   |      |  
|Security deposits and prepaid rent                                                       |  |             | (102,443   | ) |      |  
|Other liabilities related to rental real estate held for sale                            |  |             | (522       | ) |      |  
|                                                                                         |  |             |            |   |      |  
|Net cash provided by operating activities                                                |  |             | 1,147,860  |   |      |  
|                                                                                         |  |             |            |   |      |  
|Cash flows from investing activities                                                     |  |             |            |   |      |  
|Capital expenditures on rental real estate                                               |  |             | (432,348   | ) |      |  
|Purchase of land held for development                                                    |  |             | (2,593,988 | ) |      |  
|Purchase of rental real estate                                                           |  |             | (1,505,988 | ) |      |  
|Proceeds from sale of rental real estate held for sale                                   |  |             | 1,910,002  |   |      |  
|Deposits and acquisition costs                                                           |  |             |           |   |      |  
|                                                                                         |  |             |            |   |      |  
|Net cash (used in) investing activities                                                  |  |             | (2,622,322 | ) |      |  
|                                                                                         |  |             |            |   |      |  
|Cash flows from financing activities                                                     |  |             |            |   |      |  
|Dividends paid                                                                           |  |             | (877,769   | ) |      |  
|Proceeds from notes payable                                                              |  |             | 1,500,000  |   |      |  
|Payments on notes payable secured by rental real estate                                  |  |             | (365,371   | ) |      |  
|Payments on notes payable secured by rental real estate held for sale                    |  |             | (1,676,770 | ) |      |  
|Deposits and acquisition costs                                                           |  |             |           |   |      |  
|(Increase) in loan origination fees                                                      |  |             | (15,624    | ) |      |  
|                                                                                         |  |             |            |   |      |  
|Net cash (used in) provided by financing activities                                      |  |             | (1,435,534 | ) |      |  
|                                                                                         |  |             |            |   |      |  
|Net (decrease) increase in cash and cash equivalents                                     |  |             | (2,909,996 | ) |      |  
|Cash and cash equivalents, beginning of year                                             |  |             | 3,923,923  |   |      |  
|                                                                                         |  |             |            |   |      |  
|Cash and cash equivalents, end of period                                                 |  | $           | 1,013,927  |   |      | $
|                                                                                         |  |             |            |   |      |  



See accompanying
summary of accounting policies and notes to consolidated financial statements.



5



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



|                                              |  | Common Stock |  | AdditionalPaid-InCapital |       | Dividendsin Excess ofRetainedEarnings |   |            |  |  
|--------------------------------------------- |  | ------------ |  | ------------------------ | ----- | ------------------------------------- | - | ---------- |  | -
|                                              |  | Shares       |  | Amount                   |       |                                       |   | Total      | 
|(Unaudited)                                   |  |              |  |                          |       |                                       |   |            |  |  
|Balance, January 1, 2002                      |  | 975,989      |  | $                        | 9,760 |                                       | $ | 27,167,292 |  | $
|Net income for the period                     |  |              |  |                          |       |                                       |   |            |  |  
|Dividends declared ($0.60 per share) (Note 6) |  |              |  |                          |       |                                       |   |            |  |  
|                                              |  |              |  |                          |       |                                       |   |            |  |  
|Balance, September 30, 2002                   |  | 975,989      |  | $                        | 9,760 |                                       | $ | 27,167,292 |  | $
|                                              |  |              |  |                          |       |                                       |   |            |  |  
|                                              |  |              |  |                          |      
|Balance, January 1, 2003                      |  | 975,298      |  | $                        | 9,753 |                                       | $ | 27,157,247 |  | $
|Net income for the period                     |  |              |  |                          |       |                                       |   |            |  |  
|Dividends declared ($1.15 per share) (Note 6) |  |              |  |                          |       |                                       |   |            |  |  
|                                              |  |              |  |                          |       |                                       |   |            |  |  
|Balance, September 30, 2003                   |  | 975,298      |  | $                        | 9,753 |                                       | $ | 27,157,247 |  | $
|                                              |  |              |  |                          |       |                                       |   |            |  |  



See accompanying
summary of accounting policies and notes to consolidated financial statements.



6



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

SUMMARY OF ACCOUNTING POLICIES



Business



Meredith Enterprises, Inc. (formerly West Coast Realty Investors, Inc.) was originally organized in October 1989 under the laws of the State
of Delaware. We have elected tax status as a Real Estate Investment Trust (REIT) for federal and state income tax purposes since 1991. From inception to March 31, 2002, West Coast Realty Advisors, Inc. (WCRA) advised us and
West Coast Realty Management (WCRM) (collectively, the Advisor) managed our properties. Both WCRA and WCRM are wholly-owned subsidiaries of Associated Financial Group, Inc. The Advisor managed and oversaw our investments,
subject to the direction of the board of directors, until the Advisor terminated as advisor effective March 31, 2002. On January 15, 2002, our stockholders voted to amend our bylaws to allow us to become self-managed upon the Advisors
termination. On April 1, 2002, we became self-managed and self-administered upon the Advisors termination.



As of September 30, 2003, all of our properties were located in California and Georgia, and we did not own any residential properties. Many of our leases are
triple-net leases where the tenant is responsible for maintenance, taxes and insurance, either by directly paying such costs or reimbursing us for those costs through additional rental payments.



Rental Real Estate, Rental Real Estate Held for Sale and Depreciation



Assets are stated at lower of cost or net realizable value. Depreciation is computed using
the straight-line method over their estimated useful lives of 31.5 to 39 years for financial reporting purposes.



In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 144 (SFAS 144) which
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of and amends APB No. 30, Reporting the Results of Discontinued Operations- Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. Along with establishing a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed
of by sale, SFAS 144 retains the basic provisions of APB No. 30 for the presentation of discontinued operations in the income statement but broadens the presentation to include a component of an entity. SFAS 144 requires us to include operating
results of properties we consider held for sale, as well as those sold, in discontinued operations in our consolidated statements of earnings prospectively from the date of adoption, which was January 1, 2002. In the event that facts and
circumstances indicate that the carrying value of an asset may be impaired, we perform an evaluation of recoverability. If an evaluation is required, we compare the estimated future undiscounted cash flows associated with the asset to the carrying
amount to determine if a write-down to fair value is required.



Real estate
classified as held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. Depreciation is not recorded on assets classified as held for sale.



In the normal course of business, we may receive solicited or unsolicited offers to purchase
our properties. For those offers we accept, the prospective buyer will usually require a due diligence period before



7



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

SUMMARY OF ACCOUNTING POLICIES



acquiring the property. During this process, matters commonly arise that result in the withdrawal or rejection of the offer. As a result, we do not classify
real estate as held for sale until it is likely, in our opinion, that we will dispose of a property in the near term, even if we are currently negotiating to sell the property. We segregate properties classified as held for sale from
rental real estate in our financial statement presentation. On September 30, 2003, we determined that we were likely to dispose of our Chino property in the near term, and accordingly we segregated that property as held for sale. Further, we
determined that we were not likely to dispose of our Roseville property in the near term, and therefore we removed that property from the held for sale designation and included it in continuing operations. As of September 30, 2003, we classified
five properties as held for sale, as they were listed for sale with real estate brokers and we believed there was a high likelihood of sale in the near term. All of these five properties are located in California: Chino; Fresno;
Riverside; and two Sacramento properties (717 and 721 West Del Paso Road). We can give no assurance that we will in fact sell the properties held for sale in the near term, at prices we consider acceptable, or at all.



Rental Income, Operating Expense and Capitalized Costs



We recognize rental revenue on a straight-line basis to the extent that rental revenue is
deemed collectible. We received no percentage rents in the three and nine-month periods ended September 30, 2003 and 2002. We capitalize improvements and betterments that increase the value of the property or extend its useful life.



Acquisition Costs



We expense internal acquisition costs, including any acquisition costs paid to the Advisor, in accordance with Emerging Issues Task Force
97-11, Accounting for Internal Costs Relating to Real Estate Property Acquisitions. There were no such costs in the three- and nine-month periods ended September 30, 2003 and 2002.



Loan Origination Fees



Loan origination fees are capitalized and amortized over the life of the loan and are included in interest expense.



Cash and Cash Equivalents



We consider cash in the bank, liquid money market funds and all highly liquid certificates
of deposit, with original maturities of three months of less, to be cash and cash equivalents. We place funds in what we believe are creditworthy, high-quality financial institutions. Cash and cash equivalent balances are held with various financial
institutions and at times exceed the Federal Deposit Insurance Corporation limit of $100,000.



8



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

SUMMARY OF ACCOUNTING POLICIES



Consolidation



The accompanying consolidated financial statements include the accounts of Meredith Enterprises, Inc. and other subsidiaries that hold title to individual properties. All
significant intercompany balances and transactions have been eliminated in consolidation. Included in the accompanying consolidated financial statements are the assets of wholly owned entities whose assets are not available to satisfy debts and
other obligations other than those incurred by such entities.



Use of
Estimates



The preparation of financial statements in conformity with
generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.



Comprehensive Income



Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, (SFAS 130) establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is comprised of net income and all changes to stockholders equity except those due to investments by owners and distributions
to owners. We do not have any components of comprehensive income in the three and nine-month periods ended September 30, 2003 and 2002, other than net income.



Reclassifications



Certain reclassifications have been made to the prior years financial statements to conform to the presentation of the current years financial statements.



Descriptive Information about Reportable Segments



Financial Accounting Standards Board Statement No. 131, Disclosures about Segments of
an Enterprise and Related Information (Statement 131) requires certain descriptive information to be provided about an enterprises reportable segments. We have determined that we have one operating and reportable segment,
rental real estate and rental real estate held for sale, which comprised 90% and 89% of our total assets at September 30, 2003 and December 31, 2002, respectively, and over 99% and 98% of our total revenues (including discontinued operations) for
the quarters ended September 30, 2003 and 2002, respectively. All the rental real estate we own is located in California and Georgia. We do not use reporting by geographic region.



All revenues are from external customers, and there are no revenues from transactions with other segments. See Note 1 for tenants that
contributed 10% or more of our total revenues for the nine-month period ended September 30, 2003 and 2002. Interest income is not separately reported, as it is immaterial. Interest expense on debt is not allocated to individual properties, even if
that debt is secured by a particular property or properties. Because we are organized as a REIT and owe no tax, we have not provided for federal or state income taxes. See Note 7.



9



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

SUMMARY OF ACCOUNTING POLICIES



New accounting pronouncements



In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities (SFAS 149). SFAS 149 amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS 149 is generally effective for contracts entered into or modified after September 30, 2003 and for hedging relationships designated after September 30, 2003. The
adoption of SFAS149 did not have a material effect on our financial position, results of operations and cash flows.



In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150). SFAS 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected
include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets and certain obligations that can be settled with shares of stock. SFAS 150
is effective for all financial instruments entered into or modified after May 31, 2003 and must be applied to the our existing financial instruments effective July 1, 2003, the beginning of the first fiscal period after June 15, 2003. We adopted
SFAS 150 on July 1, 2003. The adoption of this statement did not have a material effect on our financial position, results of operations or cash flows.



10



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1RENTAL REAL ESTATE



Our major categories of rental real estate are:



|                              |  | September 30,2003 |            |   | December 31,2002 |  
|----------------------------- |  | ----------------- | ---------- | - | ---------------- | -
|                              |  | (Unaudited)       |            |   | (Audited)        |  
|Land                          |  | $                 | 9,323,107  |   |                  | $
|Buildings and improvements    |  |                   | 40,378,004 |   |                  |  
|                              |  |                   |            |   |                  |  
|                              |  |                   | 49,701,111 |   |                  |  
|Less accumulated depreciation |  |                   | (3,263,903 | ) |                  |  
|                              |  |                   |            |   |                  |  
|Net rental real estate        |  | $                 | 46,437,208 |   |                  | $
|                              |  |                   |            |   |                  |  



In addition, we own land we are
holding for future development, valued at its cost plus development expenditures, at September 30, 2003 of $2,593,988.



Our major categories of rental real estate held for sale are:



|                                     |  | September 30,2003 |           |   | December 31,2002 |  
|------------------------------------ |  | ----------------- | --------- | - | ---------------- | -
|                                     |  | (Unaudited)       |           |   | (Audited)        |  
|Land                                 |  | $                 | 2,462,050 |   |                  | $
|Buildings and improvements           |  |                   | 4,326,539 |   |                  |  
|                                     |  |                   |           |   |                  |  
|                                     |  |                   | 6,788,589 |   |                  |  
|Less accumulated depreciation        |  |                   | (984,692  | ) |                  |  
|                                     |  |                   |           |   |                  |  
|Net rental real estate held for sale |  | $                 | 5,803,897 |   |                  | $
|                                     |  |                   |           |   |                  |  



Once we classify a property as held
for sale, we stop charging depreciation expense. Included in the above table are five properties, all in California, as of September 30, 2003: Chino; Fresno; Riverside; and two Sacramento properties (717 and 721 West Del Paso Road). At December 31,
2002, we classified six properties as held for sale: Fresno; Roseville; Riverside; Vacaville; and two Sacramento properties (717 and 721 West Del Paso Road). In August 2003, we sold the Vacaville property for $2,100,000, resulting in a net gain of
$406,728. On September 30, 2003, we designated the Chino property as held for sale and removed the Roseville property from the held for sale category.



We earned a portion of our rental revenue from tenants whose individual rents represented more than 10% of our total rental revenue including discontinued operations. In
the three months ended September 30, 2003, the California Independent System Operator Corporation represented 10% of our total rental revenue including discontinued operations and Safeguard Business Systems, Inc. accounted for 8%. Northlake Festival
accounted for approximately 50% of our total rental revenue including discontinued



11



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



operations. In the three months ended September 30, 2002, four tenants accounted for 20%, 16%, 13% and 10%, respectively, of our total rental revenue
including discontinued operations.



NOTE 2DISCONTINUED OPERATONS



We adopted SFAS 144 as of January 1, 2002 and designated seven California
properties as held for sale: Fresno; Huntington Beach; Roseville; Riverside; Vacaville; and two Sacramento properties (717 and 721 West Del Paso Road). We sold the Huntington Beach property in April 2002 and the Corona property in September 2002. We
sold the Vacaville property in April 2002 for $2,100,000, resulting in a net gain of $406,728. On September 30, 2003, we designated the Chino property as held for sale and removed the Roseville property from the held for sale category. In accordance
with SFAS 144, we have restated the prior results of the properties designated as held for sale and the properties we sold as discontinued operations for all periods presented. The results of properties included in discontinued operations for the
three and nine months ended September 30, 2003 and 2002 are as follows:



|                                                                                                       |  | Three months ended |         | Nine months ended
|------------------------------------------------------------------------------------------------------ |  | ------------------ | ------- | -----------------
|                                                                                                       |  | September 30,2003  |         |                  
|                                                                                                       |  | (Unaudited)        |         |                  
|Revenues                                                                                               |  |                    |         |                  
|Rental                                                                                                 |  | $                  | 171,314 |                  
|                                                                                                       |  |                    |         |                  
|                                                                                                       |  |                    | 171,314 |                  
|                                                                                                       |  |                    |         |                  
|Cost and expenses                                                                                      |  |                    |         |                  
|Interest                                                                                               |  |                    | 153,748 |                  
|General and administrative                                                                             |  |                    | 95      |                  
|Depreciation                                                                                           |  |                    | 7,340   |                  
|Operating                                                                                              |  |                    | 36,358  |                  
|Property tax                                                                                           |  |                    | 12,307  |                  
|                                                                                                       |  |                    |         |                  
|                                                                                                       |  |                    | 209,848 |                  
|                                                                                                       |  |                    |         |                  
|Net (loss) income from discontinued operations before gain on sale of rental real estate held for sale |  |                    | (38,534 | )                
|Gain on sale of rental real estate held for sale                                                       |  |                    | 406,728 |                  
|                                                                                                       |  |                    |         |                  
|Net income from discontinued operations                                                                |  | $                  | 368,194 |                  
|                                                                                                       |  |                    |         |                  



In accordance with SFAS 144, net
income and gain (loss) on disposition of real estate for properties sold or considered held for sale after December 31, 2001 are reflected in our consolidated statements of



12



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



income as discontinued operations for all periods presented. In addition, we separately reflect the assets and liabilities of properties held for
sale or sold in the current period as Rental real estate held for sale, net, Other assets related to rental real estate held for sale, Notes payable secured by rental real estate held for sale and Other
liabilities related to rental real estate held for sale in the balance sheets during the periods we deem such assets as held for sale.



NOTE 3FUTURE MINIMUM RENTAL INCOME



As of September 30, 2003, future minimum rental income under the existing leases for rental real estate and rental real estate held for sale that have remaining
noncancelable terms in excess of one year are as follows:



|Years ending September 30, |  | Amount
|-------------------------- |  | ------
|2004                       |  | $     
|2005                       |  |       
|2006                       |  |       
|2007                       |  |       
|2008                       |  |       
|Thereafter                 |  |       
|                           |  |       
|Total                      |  | $     
|                           |  |       



Future minimum rental income does not
include lease renewals or new leases that may result after a noncancelable lease expires.



NOTE 4RELATED PARTY TRANSACTIONS



We acquired Northlake Festival in October 2002 and paid a fee of $150,000 to Leeward Investments, LLC, which assisted us in negotiating the transaction. Mr. Eric P. Von der Porten, formerly a director of Meredith Enterprises, Inc., is the
manager for Leeward Investments, LLC. He was not directly involved in the negotiations.



Also in conjunction with the purchase of Northlake Festival, we paid a real estate brokerage commission of $100,000 to Isakson-Barnhart Properties, Inc. and we have retained Isakson-Barnhart Properties, Inc. as the property manager of that
shopping center. Isakson-Barnhart Properties, Inc. manages over 1.0 million square feet of retail and office space in Georgia, North Carolina and Tennessee. Mr. E. Andrew Isakson, one of our directors, is president of Isakson-Barnhart Properties,
Inc. Under the property management agreement, Isakson-Barnhart Properties, Inc. manages, maintains and operates the shopping center for us. In return for its services, we pay a monthly property management fee to Isakson-Barnhart Properties, Inc.
equal to the greater of (a) 3% of the gross income of the property actually collected for that month or (b) $2,500. In addition, we pay Isakson-Barnhart Properties, Inc. a leasing commission, in the range of $2.00 to $4.50 per square foot depending
on the size of the space and whether there is a co-broker, on new leases or expansion of current leases. We also pay a construction maintenance fee of 5% of the total cost of tenant improvements or other construction where Isakson-Barnhart
Properties, Inc. supervises the project. Under this agreement, we paid a total of $30,334 to Isakson-Barnhart Properties,



13



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Inc. in the year ended December 31, 2002 and $104,849 and $160,326 for the three- and nine-month periods ended September 30, 2003. The agreement is renewable
annually, and either party is allowed to terminate the agreement upon 30 days prior written notice to the other. In addition, Mr. Isakson owns a 50% interest in a retail shopping center that is located adjacent to Northlake Festival.



Until March 31, 2002, we had two agreements with the Advisor to provide advice
on investments and to administer our day-to-day operations including property management  the Amended and Restated Advisory Agreement dated July 1, 2001 and the Amended and Restated Property Management Agreement dated July 1, 1998. Both
agreements were terminated effective March 31, 2002, and since April 1, 2002, we have been fully self-administered and self-managed, other than the aforementioned property management agreement for Northlake Festival



At September 30, 2003, the Advisor and its affiliates owned 7,584 of our shares, less than 1%
of our outstanding shares. Two of our directors, Patricia F. Meidell and Neal E. Nakagiri are also officers or directors of the Advisor or its affiliates. Associated Securities Corporation is an affiliate of the Advisor.



In addition, we had related party accounts payable as follows:



|                                  |  | September 30, 2003 |        | December 31, 2002
|--------------------------------- |  | ------------------ | ------ | -----------------
|                                  |  | (Unaudited)        |        | (Audited)        
|Associated Securities Corporation |  | $                  | 30,077 |                  
|                                  |  |                    |        |                  



14



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 5NOTES PAYABLE



Notes payable consist of the following:



|                                                                                                                                                                                                                                                                                                                                                                                                         |  | September 30,2003 |            | December 31,2002
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ----------------
|                                                                                                                                                                                                                                                                                                                                                                                                         |  | (Unaudited)       |            | (Audited)       
|Notes payable secured by rental real estate:                                                                                                                                                                                                                                                                                                                                                             |  |                   |            |                 
|7.50% promissory note secured by a deed of trust on the Cerritos, CA property, monthly principal and interest payments are $9,238,
due April 1, 2011 (rate is adjustable on the fourth and eighth anniversary years of the loan, to the weekly average of the five year Treasury Note yield for the seventh week prior to the Adjustment Date plus 275 basis points, but no less than the
existing rate) |  | $                 | 1,160,758  |                 
|6.97% promissory note secured by our Folsom, CA property, monthly principal and interest payments of $32,567 due September 1, 2009
with a balloon payment of $4,479,793                                                                                                                                                                                                                                  |  |                   | 4,859,786  |                 
|6.97% promissory note secured by our Irvine, CA property, monthly principal and interest payments of $25,105 due September 1, 2009
with a balloon payment of $3,453,364                                                                                                                                                                                                                                  |  |                   | 3,746,292  |                 
|7.50% promissory note secured by a deed of trust on the Ontario, CA property, monthly principal and interest payments are $22,390,
due March 1, 2004                                                                                                                                                                                                                                                     |  |                   | 2,787,819  |                 
|6.97% promissory note secured by our Sacramento property (Horn Road), monthly principal and interest payments of $11,276 due
September 1, 2009 with a balloon payment of $1,551,049                                                                                                                                                                                                                      |  |                   | 1,682,614  |                 
|6.97% promissory note secured by our Tustin, CA property, monthly principal and interest payments of $30,677 due September 1, 2009
with a balloon payment of $4,219,765                                                                                                                                                                                                                                  |  |                   | 4,577,701  |                 
|7.64% promissory note secured by our Atlanta, GA property (Northlake Festival), monthly principal and interest payments of
$124,753 fully amortizing with the final payment due December 1, 2027. Starting December, 2010, year 13 of the note, the interest rate increases to a minimum of 9.64%                                                                                                        |  |                   | 16,503,952 |                 



15



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|Notes payable, continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | September 30,2003 |  | December 31,2002
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- |  | ----------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | (Unaudited)       |  | (Audited)       
|Variable rate interest only promissory note secured by our Garden Grove, CA property (Banco Popular) and land we hold for
development in Garden Grove, CA. The note bears interest rate at prime plus 1.25% (5.25% At September 30, 2003) and is due in December, 2003                                                                                                                                                                                                                            |  | 1,500,000         |  |                
|7.50% promissory note secured by a Deed of Trust on the Chino, CA property, monthly principal and interest payments are $6,836,
due October 1, 2010 (rate is adjustable on the fourth and eighth anniversary years of the loan, to the weekly average of the five-year Treasury Note yield for the seventh week prior to the Adjustment Date plus 200 basis points, but no less than the
existing rate). At December 31, 2002, we classified this property as an operating property               |  |                  |  | 863,316         
|8.33% promissory note secured by a Deed of Trust on the Roseville, CA property, monthly principal and interest payments are
$11,510 due July 1, 2008. At December 31, 2002, we classified this property as held for sale                                                                                                                                                                                                                                                                          |  | 1,340,739         |  |                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                   |  |                 
|Subtotal  notes payable secured by rental real estate                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 38,159,661        |  | 36,528,453      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                   |  |                 
|Notes payable secured by rental real estate held for sale:                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                   |  |                 
|7.50% promissory note secured by a Deed of Trust on the Chino, CA property, monthly principal and interest payments are $6,836,
due October 1, 2010 (rate is adjustable on the fourth and eighth anniversary years of the loan, to the weekly average of the five-year Treasury Note yield for the seventh week prior to the Adjustment Date plus 200 basis points, but no less than the
existing rate). At December 31, 2002, we classified this property this property as an operating property |  | 850,025           |  |                
|8.25% promissory note secured by a Deed of Trust on the Fresno, CA property, monthly principal and interest payments are $5,244.
This note was originally due August 1, 2003, but was extended in July 2003 to August 1, 2004 under the same terms                                                                                                                                                                                                                                                |  | 534,291           |  | 548,052         
|8.25% promissory note secured by a Deed of Trust on the Riverside, CA property, monthly principal and interest payments are
$9,116, due November 8, 2004                                                                                                                                                                                                                                                                                                                                          |  | 1,083,419         |  | 1,096,970       



16



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|Notes payable, continued                                                                                                                                                                                                   |  | September 30,2003 |            | December 31,2002
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ----------------
|                                                                                                                                                                                                                           |  | (Unaudited)       |            | (Audited)       
|8.00% promissory note secured by a Deed of Trust on the Sacramento, CA property (721 West Del Paso Road), monthly principal and
interest payments are $3,126, due June 1, 2018. This loan was paid off in February 2003    |  |                   |           |                 
|8.33% promissory note secured by a Deed of Trust on the Roseville, CA property, monthly principal and interest payments are
$11,510 due July 1, 2008. At December 31, 2002, we classified this property as held for sale   |  |                   |           |                 
|7.50% promissory note secured by a Deed of Trust on the Vacaville, CA property, monthly principal and interest payments are
$10,346, due October 1, 2010. This loan was paid off in August 2003 when the property was sold |  |                   |           |                 
|                                                                                                                                                                                                                           |  |                   |            |                 
|Subtotal  notes payable secured by rental real estate held for sale                                                                                                                                                       |  |                   | 2,467,735  |                 
|                                                                                                                                                                                                                           |  |                   |            |                 
|Total notes payable                                                                                                                                                                                                        |  | $                 | 40,627,396 |                 
|                                                                                                                                                                                                                           |  |                   |            |                 



The aggregate fair value of the notes
was approximately $43,005,267 at December 31, 2002, based on current lending rates, which are the approximate industry lending rates on these types of properties and these locations.



The aggregate annual future maturities at September 30, 2003 of notes payable secured by rental real estate and notes payable secured by
rental real estate held for sale are as follows:



|Years ending September 30, |  | Amount
|-------------------------- |  | ------
|2004                       |  | $     
|2005                       |  |       
|2006                       |  |       
|2007                       |  |       
|2008                       |  |       
|Thereafter                 |  |       
|                           |  |       
|Total                      |  | $     
|                           |  |       



NOTE 6NET INCOME AND
DIVIDENDS PER SHARE



Dividends are declared by the board of directors and
based on a variety of factors, including the previous quarters net income or (loss) from operations before depreciation and amortization, cash requirements to meet REIT distribution tests, other cash requirements and other factors as the board
of directors deems appropriate.



17



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



On November 15, 2002, we affected a 1:3 reverse stock split. All share and per share amounts included herein have
been adjusted to give effect to this split.



The 2002 Stock Incentive Plan
provides for the issuance of incentive stock options, non-qualified stock options, restricted shares and other grants. The maximum number of shares that may be issued under the plan is 150,000. The option price may not be less than the fair market
value of a share on the date that the option is granted, and the options generally vest either immediately or over two years. Our stockholders approved and adopted the 2002 Stock Incentive Plan in September 2002. Changes in options outstanding
during the nine months ended September 30, 2003 were as follows:



|                                                          |  | Nine months endingSeptember 30, 2003
|--------------------------------------------------------- |  | ------------------------------------
|                                                          |  | Sharesunderoption                   
|Balance at the beginning of The period                    |  |                                     
|Granted                                                   |  |                                     
|Exercised                                                 |  |                                     
|Cancelled                                                 |  |                                     
|                                                          |  |                                     
|Balance at end of period                                  |  |                                     
|                                                          |  |                                     
|Exercisable                                               |  |                                     
|                                                          |  |                                     
|Shares available for future grants                        |  |                                     
|                                                          |  |                                     
|Estimated fair value of options granted during the period |  | $                                   
|                                                          |  |                                     



At September 30, 2003, the exercise
price of shares under option was $10.25. The exercise price of all options granted in the period ended September 30, 2003 was equal to the market price on the date of grant. The options expire in 2013, and the weighted average remaining contractual
life of these options is approximately 10 years.



Pro forma information
regarding net income and earnings per share required by SFAS 148 was determined as if we had accounted for the employee and non-employee director stock options granted in the period ended September 30, 2003 under the fair value method of that
Statement. The fair value



18



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



for these options was estimated as of the date of grant using a Black-Scholes option pricing model, with the following weighted average assumptions for the
nine months ended September 30, 2003:



|Risk-free interest rate      |  | 3.90%   
|---------------------------- |  | --------
|Dividend yield               |  | 10.80%  
|Volatility                   |  | 22.00%  
|Weighted average option life |  | 10 years



The Black-Scholes option-pricing model
was developed for use in estimating the fair market value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected
stock price volatility. Because the above stock option plans have characteristics significantly different from those of traded options, and because, in managements opinion, changes in the subjective input assumptions can materially affect the
fair value estimate, the existing models do not necessarily provide a reliable single measure of the fair value of the above stock option plans.



For purposes of pro forma disclosures, the estimated fair value of the options is amortized over the options vesting periods. Our pro forma information, as if we
had adopted SFAS 123 as discussed above, follows:



|                                                                                           |  | Three monthsended September 30,2003 |         | Nine monthsended September 30,2003
|------------------------------------------------------------------------------------------ |  | ----------------------------------- | ------- | ----------------------------------
|Net income, as reported                                                                    |  | $                                   | 347,595 |                                   
|Less  total stock-based compensation expense determined under the fair value based method |  |                                     |        |                                   
|                                                                                           |  |                                     |         |                                   
|Pro forma net income                                                                       |  | $                                   | 347,595 |                                   
|                                                                                           |  |                                     |         |                                   
|Net income per share:                                                                      |  |                                     |         |                                   
|Basic-as reported                                                                          |  | $                                   | 0.36    |                                   
|                                                                                           |  |                                     |         |                                   
|Basic-proforma                                                                             |  | $                                   | 0.36    |                                   
|                                                                                           |  |                                     |         |                                   
|Diluted-as reported                                                                        |  | $                                   | 0.36    |                                   
|                                                                                           |  |                                     |         |                                   
|Diluted-proforma                                                                           |  | $                                   | 0.36    |                                   
|                                                                                           |  |                                     |         |                                   



19



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The following table sets forth the computation of basic and diluted earnings per share with respect to net income:



|                                                                                |  | Three months ended |         |   | Nine months ended
|------------------------------------------------------------------------------- |  | ------------------ | ------- | - | -----------------
|                                                                                |  | September 30,2003  |         |   | September 30,2002
|Numerator:                                                                      |  |                    |         |   |                  
|Net (loss) income from continuing operations                                    |  | $                  | (20,599 | ) |                  
|Net (loss) income from discontinued operations                                  |  |                    | (38,534 | ) |                  
|Gain on sale of rental real estate held for sale                                |  |                    | 406,728 |   |                  
|                                                                                |  |                    |         |   |                  
|Net income                                                                      |  | $                  | 347,595 |   |                  
|                                                                                |  |                    |         |   |                  
|                                                                                |  |                    |         |  
|Denominator:                                                                    |  |                    |         |   |                  
|Denominator for basic earnings per share  weighted average shares              |  |                    | 975,298 |   |                  
|Effect of dilutive securities  stock options                                   |  |                    |        |   |                  
|                                                                                |  |                    |         |   |                  
|Denominator for diluted earnings per share adjusted for weighted average shares |  |                    | 975,298 |   |                  
|                                                                                |  |                    |         |   |                  
|Basic earnings per share:                                                       |  |                    |         |   |                  
|Net (loss) income from continuing operations                                    |  |                    | ($0.02  | ) |                  
|Net (loss) income per share from discontinued operations                        |  |                    | ($0.04  | ) |                  
|Income per share from gain on sale of rental real estate held for sale          |  | $                  | 0.42    |   |                  
|                                                                                |  |                    |         |   |                  
|Basic earnings per share                                                        |  | $                  | 0.36    |   |                  
|                                                                                |  |                    |         |   |                  
|                                                                                |  |                    |         |  
|Diluted earnings per share:                                                     |  |                    |         |   |                  
|Net (loss) income from continuing operations                                    |  |                    | ($0.02  | ) |                  
|Net (loss) income per share from discontinued operations                        |  |                    | ($0.04  | ) |                  
|Income per share from gain on sale of rental real estate held for sale          |  | $                  | 0.42    |   |                  
|                                                                                |  |                    |         |   |                  
|Diluted earnings per share                                                      |  | $                  | 0.36    |   |                  
|                                                                                |  |                    |         |   |                  



For the three months ended September
30, 2003, no options were included in the calculation of diluted earnings per share as their inclusion would be anti-dilutive.



20



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 7TAXES ON INCOME



We have elected to be taxed as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended, for federal income tax
purposes. This requires, among a number of other organizational and operational requirements, that we distribute at least 90% of our taxable income (excluding capital gains) to our stockholders. In addition, California and Georgia, the states in
which we own and operate real estate properties have provisions equivalent to the federal REIT provisions. Accordingly, we have not provided for federal or state income taxes in the accompanying financial statements.



NOTE 8SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION



A supplemental disclosure of cash flow information follows:



|Nine months ended September 30,          |  | 2003 |           | 2002
|---------------------------------------- |  | ---- | --------- | ----
|Cash paid during the period for interest |  | $    | 2,304,341 |     
|                                         |  |      |           |     
|Interest capitalized during the period   |  | $    | 86,467    |     
|                                         |  |      |           |     



NOTE 9COMMITMENTS AND
CONTINGENCIES



We purchased the Northlake Festival Shopping Center in
October 2002 and assumed the existing ground lease. The ground lease expires in October 2057, and any improvements on the property revert back to the ground lessor. The ground lease provides for fixed rent and additional rent calculated on 7% of the
gross rents received from tenants. The fixed rent may escalate based on appraisals, with the following limitations:



|January 2003  October 2007  |  | Fixed at $600,000 per year                                                                                                                                     
|---------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|November 2007  October 2032 |  | Subject to appraisal, but not less than $600,000 per year, nor more than $1,200,000 per year                                                                   
|November 2032  October 2057 |  | Subject to appraisal, but not less than the amount payable in the prior period, nor more than twice amount payable for the period November 2007 to October 2032



We have entered into employment
agreements with our President and Chief Executive Officer and our Chief Financial Officer under which we would be obligated to make severance payments to them, upon either persons termination or resignation for certain reasons, of one
years salary plus bonus, if any.



Under our bylaws, we have agreed to
indemnify our officers and directors for certain events or occurrences arising as a result of the officer or directors serving in such capacity. The term of the indemnification period is for the officers or directors lifetime. We
have separate indemnification agreements with our officers and directors that require us, subject to certain exceptions, to indemnify them to the fullest extent authorized or permitted by our bylaws and the General Corporation Law of the State of
Delaware. The maximum potential amount of future payments we could be required to make



21



---

##### Table of Contents

MEREDITH ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



under these indemnification agreements is unlimited. However, we do currently have a directors and officer liability insurance policy that may limit our
exposure and enable us to recover a portion of any future amounts paid. As a result of the insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal and we have recorded no liabilities for these
agreements as of September 30, 2003.



We are a defendant in a lawsuit entitled
John Lonberg & Ruthee Goldkorn v. Sanborn Theaters, Inc., a California Corporation Doing Business as Marketplace Cinema and So-Cal Cinema, Inc., a California Corporation; and Salts-Troutman-Kaneshiro, Inc., West Coast Realty Investors, Inc.,
USDC Central District of California, Eastern Division Case No. CV-97-6598AHM (JGx). This is an Americans with Disabilities Act claim brought against the Market Place Cinema, our property located in Riverside, CA. We own the theater and have leased
it to Sanborn Theaters, Inc., which operates it. Plaintiffs allege certain features of the theater discriminated against them and violated state and federal disabled access laws. Plaintiffs demand statutory damages, damages for emotional distress, a
lodestar multiplier, attorneys fees and punitive damages. Although plaintiffs have not quantified their damages, we expect that Plaintiffs claims will exceed $300,000. The United States Department of Justice has intervened in
this suit. This case has now been stayed pending the outcome of a similar case filed against AMC Theaters. We cannot determine the likelihood of an unfavorable outcome or range of potential loss, if any. We believe we have complied with all
applicable provisions of law and intend to vigorously defend the allegations contained in the lawsuit. We believe that the lawsuit will not have a material impact on our continuing operations or overall financial condition.



On July 31, 2002, James E. Prock filed an action against us and our Chief Executive Officer,
Mr. Allen Meredith, in Los Angeles County Superior Court. Mr. Prock was an employee of the Advisor and not an employee of West Coast Realty Investors, Inc. He provided services as our Chief Operating Officer from 1992 to August 2001 and as Acting
Chief Operating Officer from August 2001 to March 2002. The lawsuit alleges that during the fall of 2001 and winter of 2002, we purportedly made promises to Mr. Prock that we would hire him as a full time managerial employee after we became a
self-managed REIT. We settled the lawsuit in July 2003 to avoid the expenses and distraction of further litigation. Our portion of the settlement was $50,000, and our insurance company covered the balance. In addition, we have incurred approximately
$125,000 in total legal fees and costs related to this matter, of which our insurance company will pay a small portion. The legal fees and costs incurred from January 1 to September 30, 2003, net of the amount to be paid by our insurance company,
and our portion of the settlement are included in our results for the nine months ended September 30, 2003.



NOTE 10SUBSEQUENT EVENTS



On
September 30, 2003, our board of directors voted to establish a 401(k) profit sharing plan. We plan to implement this plan in the fourth quarter of 2003.



22



---

##### Table of Contents

|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------



Special Note Regarding Forward-Looking Statements



This quarterly report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are
identified by words such as believes, expects, may, will, should, seeks, approximately, intends, plans, pro forma,
estimates, or anticipates or in their negative form or other variations, or by discussions of strategy, plans or intentions. Forward-looking statements are based on assumptions, data or methods that may be incorrect,
imprecise or incapable of being realized. These statements include our statements of this nature concerning the following:



| |  | the commercial real estate market;
| | - | ----------------------------------



| |  | our future revenues;
| | - | --------------------



| |  | our future revenue mix, net operating income and operating results;
| | - | -------------------------------------------------------------------



| |  | our future cash requirements;
| | - | -----------------------------



| |  | our critical accounting estimates;
| | - | ----------------------------------



| |  | competition, our competitors and our ability to compete;
| | - | --------------------------------------------------------



| |  | our financial and managerial controls, reporting systems and procedures, and other systems and processes;
| | - | ---------------------------------------------------------------------------------------------------------



| |  | property values;
| | - | ----------------



| |  | any particular tenants intentions or financial condition, such as its plans to renew or terminate a property lease, or the likelihood that it will default upon a property
lease;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | vacancies;
| | - | ----------



| |  | interest rates;
| | - | ---------------



| |  | our operating costs;
| | - | --------------------



| |  | litigation matters and legal proceedings, our defenses to such matters and our contesting of such matters;
| | - | ----------------------------------------------------------------------------------------------------------



| |  | our ability to meet our debt obligations, including loans that mature in 2003 and 2004 that are secured by our Fresno, Garden Grove and Ontario properties;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the proposed sales of certain properties;
| | - | -----------------------------------------



| |  | our ability to obtain outside financing;
| | - | ----------------------------------------



| |  | identifying, acquiring and successfully integrating new properties:
| | - | -------------------------------------------------------------------



| |  | the type and locations of real estate investments we may make;
| | - | --------------------------------------------------------------



| |  | our ability to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended;
| | - | -------------------------------------------------------------------------------------------------------------



| |  | our ability to successfully construct the planned shopping center on 2.5 acres in Garden Grove, California;
| | - | -----------------------------------------------------------------------------------------------------------



| |  | environmental risks;
| | - | --------------------



| |  | natural disasters and other threats to our properties; and
| | - | ----------------------------------------------------------



| |  | the economies of the geographic areas where our properties are located.
| | - | -----------------------------------------------------------------------



These statements are subject to risks and uncertainties that could cause actual results and events to differ materially. For a detailed discussion of these risks and
uncertainties, see the portion of this Item 2 entitled Risk Factors. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report on Form 10-Q.



23



---

##### Table of Contents

OVERVIEW



Meredith Enterprises, Inc. (formerly West Coast Realty Investors, Inc.) is a real estate company engaged in acquiring, owning and managing suburban office, retail
shopping center and light industrial properties. We have elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes, which requires, among a number of other organizational and operational
requirements, that we distribute at least 90% of our taxable income (excluding capital gains) to our stockholders. From inception to March 31, 2002, West Coast Realty Advisors, Inc. advised us and West Coast Realty Management, Inc. managed our
properties. Each of these companies is a wholly owned subsidiary of Associated Financial Group, Inc., and we sometimes refer to them together as the Advisor. Since March 31, 2002, we have been self-managed and self-administered.



At September 30, 2003, we had a real estate portfolio of 15 properties,
including:



| |  | four light industrial properties totaling 199,578 square feet;
| | - | --------------------------------------------------------------

| |  | one shopping center of 321,621 square feet;
| | - | -------------------------------------------

| |  | one restaurant property of 5,133 square feet;
| | - | ---------------------------------------------

| |  | three suburban office properties totaling 94,806 square feet;
| | - | -------------------------------------------------------------

| |  | five properties held for sale totaling 92,269 square feet; and
| | - | --------------------------------------------------------------

| |  | a 2.5 acre parcel of land held for development.
| | - | -----------------------------------------------



All of our properties are located in California and Georgia. Until 2002, our business focus was the ownership and operation of suburban office properties and light
industrial buildings. We have broadened our focus to include large shopping centers and properties outside of California and have also begun to develop and construct our own properties. We acquired an Atlanta, Georgia shopping center in October 2002
and may pursue other real estate opportunities in Georgia and in other states. Most of our leases are triple-net leases where the tenant is responsible for maintenance, taxes and insurance.



SIGNIFICANT RECENT EVENTS



| |  | On September 30, 2003, our board of directors declared a dividend of $0.25 per share for the quarter then ended, $0.05 per share lower than the previous quarter.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On September 30, 2003 our board of directors authorized the establishment of a 401(k) plan for our employees.
| | - | -------------------------------------------------------------------------------------------------------------



| |  | Wherehouse Entertainment, Inc., a tenant in our Fresno property declared bankruptcy in January 2003. Based on filings with the bankruptcy court in September 2003, we believe
Wherehouse will vacate the premises on or before January 2004. Wherehouse has paid rent through October 31, 2003.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On August 27, 2003, we entered into a contract to sell our vacant Chino property for $2,300,000. Although we currently expect this sale to close in November 2003, we can give no
assurance that we will indeed sell the property for that price at that time, or at all.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On August 12, 2003, we sold our vacant Vacaville property for $2,100,000, resulting in a net gain of $406,728 and net cash proceeds of approximately $550,000.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On June 23, 2003, we paid $1,500,000 to acquire a 4,880 square foot office building on a 0.5 acre parcel on a corner surrounded by the land we purchased in Garden Grove, CA in March
2003.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On March 26, 2003, we acquired a 2.5 acre parcel of undeveloped land in Garden Grove, CA for $2,200,000. We intend to construct a multi-tenant shopping center comprising
approximately 30,000 square feet.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On March 24, 2003, we changed our name from West Coast Realty Investors, Inc. to Meredith Enterprises, Inc.
| | - | -----------------------------------------------------------------------------------------------------------



24



---

##### Table of Contents

| |  | On March 3, 2003, we granted a total of 91,669 options to purchase our common stock to three employees and four directors at $10.25 per share, the fair market value at the date of
grant. At September 30, 2003, 88,960 options were vested. To date, no options have been exercised.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The tenant in our Chino, CA property vacated upon the end of the lease in early April and owes approximately $75,000 in rent.
| | - | -----------------------------------------------------------------------------------------------------------------------------



| |  | The tenant in our Ontario property is a subsidiary of Adelphia Communications, which has declared bankruptcy. The rent has been paid through October 31, 2003.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



In the future, we believe our financial results will also be
affected by the following:



| |  | Our ability to retain our existing lease arrangement with our tenant in bankruptcy in our Ontario property and to refinance the property upon the maturity of the related note
payable
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our ability to either sell or re-lease our vacant Chino property, and upon the completion of the Wherehouse Entertainment, Inc. bankruptcy proceedings, to sell or re-lease the
Fresno property they occupied.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The October 15, 2002 acquisition of Northlake Festival, a 321,000 square foot shopping center.
| | - | ----------------------------------------------------------------------------------------------



| |  | The August 2002 refinancing of four loans.
| | - | ------------------------------------------



As of September 30, 2003, we had total assets of $57,818,664, total secured indebtedness of $40,627,396, total liabilities of $42,032,208 and a debt-to-total assets ratio
of 73%, using amounts calculated on the basis of generally accepted accounting principles. Because this calculation method reflects accumulated depreciation and does not reflect any appreciation of the properties beyond their cost, it may result in
assets being valued at less than their fair market values as determined by the board of directors. Further, this calculation excludes the effects, if any, of the ground lease on the Northlake Festival property.



Our aggregate monthly debt service has increased from approximately $150,000 to $300,000 or
100%, from June 2002 to June 2003, which reflects the August 2002 refinancing and the new debt on the Banco Popular property, offset in part by the sale of our Huntington Beach, CA and Corona, CA properties and the assumption of debt with the
purchase of the Northlake Festival. We are using the revenues in excess of operating costs from the Northlake Festival property to pay the increased debt service.



During 2002 and the first six months of 2003, the total of dividends based on our quarterly dividend rate of $0.30 per share of common stock
and scheduled principal amortization on notes payable exceeded our net cash provided by operating activities (excluding changes in operating assets and liabilities). To address this shortfall, we used proceeds from sales of properties and existing
cash balances during this period. On September 30, 2003, our board of directors reduced the dividend for the quarter ended September 30, 2003 to $0.25 per share. For additional information regarding our cash sources and needs, see Liquidity and
Capital Resources below.



25



---

##### Table of Contents

RESULTS OF OPERATIONS



Quarter ended September 30, 2003 compared to the quarter ended September 30, 2002



We adopted SFAS 144 as of January 1, 2002 and designated seven California properties as held for sale: Fresno; Huntington Beach; Roseville;
Riverside; Vacaville; and two Sacramento properties (717 and 721 West Del Paso Road). We sold the Huntington Beach property in April 2002 and the Corona property in September 2002. We sold the Vacaville property in August 2003. On September 30,
2003, we designated the Chino property as held for sale and removed the Roseville property from the held for sale category. In accordance with SFAS 144, we have restated the prior results of the properties designated as held for sale and the
properties we sold as discontinued operations for all periods presented.



Operations for the three months ended September 30, 2003 and 2002 represented full quarters of rental operations for all of our properties we classify as continuing operations, except for the Northlake Festival, which we acquired in October
2002, and the Banco Popular property in Garden Grove, which we acquired in June 2003. The eight properties designated as held for sale or sold during 2002 are included in the line items under discontinued operations with revenues netted
against expenses.



Rental revenue increased by $1,175,843 (152%) for the
quarter ended September 30, 2003, as compared to the quarter ended September 30, 2002, primarily due to the addition of revenues from Northlake Festival and offset in part by the loss of revenues from the Chino, CA property, where we recorded no
revenue in the quarter ended September 30, 2003.



Interest income decreased by
$14,484 (97%) for the quarter ended September 30, 2003, as compared to the quarter ended September 30, 2002, due to lower average balances maintained in interest earning assets.



Interest expense increased by $277,661 (69%) for the quarter ended September 30, 2003, as compared to the quarter ended September 30, 2002,
due to:



| |  | the August 2002 refinancing of four notes payable to balances approximately $6,500,000 higher in total than their previous aggregate amount, and, to a lesser extent, the replacement
in this refinancing of variable rate debt secured by our Folsom and Irvine properties by fixed rate debt bearing interest at significantly higher rates; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the addition of the approximately $16,600,000 note payable secured by Northlake Festival and $1,500,000 note payable secured by the Banco Popular property.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



General and administrative costs decreased by $29,799 (8%) for the quarter ended September
30, 2003, as compared to the quarter ended September 30, 2002. This decrease was principally due to higher legal expenses in 2002 due to the negotiations to acquire Northlake Festival and the preparation of extensive proxy materials for the
September 2002 annual meeting of stockholders, at which our stockholders adopted an amended and restated certificate of incorporation and amended and restated bylaws in addition to electing directors. In 2003, we held our annual stockholders meeting
in June, and the election of directors was the only matter presented to stockholders.



Depreciation expense increased by $214,347 (205%) for the quarter ended September 30, 2003, as compared to the quarter ended September 30, 2002, due largely to the addition of Northlake Festival.



26



---

##### Table of Contents

Ground rent was $224,875 in 2003, due to the ground lease for Northlake Festival; we incurred no ground rent expense in
2002.



Operating expenses increased by $178,984 (182%) for the quarter ended
September 30, 2003, as compared to the quarter ended September 30, 2002, due largely to the addition of Northlake Festival property in October 2002.



Property tax expense increased by $102,478 (422%) for the quarter ended September 30, 2003, as compared to the quarter ended September 30, 2002, primarily due to the
addition of Northlake Festival.



Net loss from discontinued operations was
$38,534 for the quarter ended September 30, 2003, as compared net income of $53,614 to the quarter ended September 30, 2002. This $92,148 (172%) decrease in net income from discontinued operations was primarily due to the vacancy of the Chino
property for the entire quarter ended September 30, 2003 and additional interest expense on the Vacaville property due to a prepayment penalty we incurred on its sale in August 2003.



Net gain on sale of real estate held for sale was $406,728 in the three months ended September 30, 2003 due to the sale of the Vacaville
property; the net gain on sale of real estate held for sale was $503,270 in the three months ended September 30, 2002 due to the sale of the Corona property. In the third quarter of 2001, we wrote the value of the Vacaville property down by
$1,200,000 to $1,500,000 based on an MAI appraisal; the above gain incorporates the write down in 2001.



Net income for the three months ended September 30, 2003 was $347,595, compared to net income of $343,464 in the three months ended September 30, 2002. This slight increase in net income was primarily due to excess of
revenue over expenses from the Northlake Festival property more than offsetting the higher gain on sale of rental real estate held for sale in 2002.



The diluted weighted average number of shares outstanding (after adjusting for the November 15, 2002 1:3 reverse stock split) was 975,298 and 975,989 for three months
ended September 30, 2003 and 2002, respectively. For the reasons explained in the preceding paragraph, net income per share assuming dilution increased to $0.36 in the three months ended September 30, 2003 from net income per share of $0.35 in the
three months ended September 30, 2002.



Nine months ended September 30,
2003 compared to the nine months ended September 30, 2002



Operations
for the nine months ended September 30, 2003 and 2002 represented full periods of rental operations for all of our properties we classify as continuing operations, except for Northlake Festival, which we acquired in October 2002, and the Banco
Popular property in Garden Grove, which we acquired in June 2003. The eight properties designated as held for sale or sold during 2002 are included in the line items under discontinued operations with revenues netted against expenses.



Rental revenue increased $3,463,784 (147%) for the nine months ended September
30, 2003, as compared to the nine months ended September 30, 2002, primarily due to the addition of revenues from Northlake Festival.



Interest income decreased by $13,880 (59%) for the nine months ended September 30, 2003, as compared to the nine months ended September 30, 2002 due to lower balances in
interest earning accounts.



27



---

##### Table of Contents

Interest expense increased $1,182,599 (138%) for the nine months ended September 30, 2003, as compared to the nine months
ended September 30, 2002, due to:



| |  | the August 2002 refinancing of four notes payable to balances approximately $6,500,000 higher in total than their previous aggregate amount, and, to a lesser extent, the replacement
in this refinancing of variable rate debt secured by our Folsom and Irvine properties by fixed rate debt bearing interest at significantly higher rates; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the addition of the approximately $16,600,000 note payable secured by Northlake Festival and $1,500,000 note payable secured by the Banco Popular property.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



General and administrative costs increased $360,851 (43%) for the nine months ended
September 30, 2003, as compared to the nine months ended September 30, 2002. This increase was principally due to higher legal expenses (including amounts related to our defense of the claim by James Prock), the costs of relocating our corporate
office and our hiring one new employee and engaging a consultant to perform functions previously performed by the Advisor.



Depreciation expense increased by $485,613 (155%) for the nine months ended September 30, 2003, as compared to the nine months ended September 30, 2002, due largely to
the addition of Northlake Festival.



Ground rent was $686,528 in 2003, due to
the ground lease for Northlake Festival; we incurred no ground rent expense in 2002.



Operating expenses increased by $542,375 (283%) for the nine months ended September 30, 2003, as compared to the nine months ended September 30, 2002, due largely to the addition of Northlake Festival.



Property tax expense increased by $301,946 (433%) for the nine months ended September 30,
2003, as compared to the nine months ended September 30, 2002, primarily due to the addition of Northlake Festival.



Net loss from discontinued operations for the nine months ended September 30, 2003 was $10,611 as compared to net income of $218,377 for the nine months ended September
30, 2002. This $228,988 (105%) decrease in net income from discontinued operations was primarily due to our receiving no revenue from the vacant Chino property in 2003 and no revenues from the Huntington Beach and Corona properties in 2003, which we
sold in April 2002 and September 2002, respectively.



Net gain on sale of real
estate held for sale was $406,728 for the nine months ended September 30, 2003 due to the sale of the Vacaville property; the net gain on sale of real estate held for sale was $734,210 in the nine months ended September 30, 2003 due to the sales of
the Huntington Beach and Corona properties.



Net income for the nine months
ended September 30, 2003 was $398,036, compared to net income of $1,064,514 in the nine months ended September 30, 2002. This decrease in net income was primarily due to the higher gains on sales of rental real estate held for sale in 2002, offset
in part in 2003 by higher revenue from the Northlake Festival property. The decrease in net income from 2002 also reflects higher interest, property expenses and general and administrative expenses, and, to a lesser extent, the lack of revenue from
the Chino property in 2003.



The diluted weighted average number of shares
outstanding (after adjusting for the November 15, 2002 1:3 reverse stock split) was 983,047 and 975,989 for nine months ended September 30,



28



---

##### Table of Contents

2003 and 2002, respectively. For the reasons explained in the preceding paragraph, net income per share assuming dilution decreased to $0.41 in the nine
months ended September 30, 2003 from net income per share of $1.09 in the nine months ended September 30, 2002.



INFLATION



Inflation and changing prices have not had a material effect on our operations.



LIQUIDITY AND CAPITAL RESOURCES



We have both short-term and long-term needs for liquidity and capital resources. In the near term, we need to fund dividends to our stockholders, principal payments on
notes payable, minor capital expenditures on existing properties and leasing commissions. Also in the near term, we intend to fund the development and construction of a shopping center on the 2.5 acres of land we own in Garden Grove, CA, as well as
other development and construction activities related to new properties we may acquire. We are in the preliminary stages of developing and constructing the Garden Grove shopping center and do not yet know the total costs we will incur to complete
the project. We intend to keep cash balances on hand for reserves to meet unexpected cash requirements. We believe our properties are in good condition without significant deferred maintenance obligations. Many of our properties are leased under
triple-net leases, which reduce our risk pertaining to excessive maintenance and operating costs. In the longer term, we need to fund asset acquisitions, major capital expenditures and balloon payments on notes payable.



The following table presents our contractual cash obligations as of September 30, 2003:



|Contractual Obligations                                                   |  | Less ThanOne year |           | One toThree Years |   | Three toFive Years |  | Over FiveYears |           | Total
|------------------------------------------------------------------------- |  | ----------------- | --------- | ----------------- | - | ------------------ |  | -------------- | --------- | -----
|Notes payable secured by rental real estate and real estate held for sale |  | $                 | 5,300,389 |                   | $ | 2,134,627          |  | $              | 2,419,107 |      
|Minimum payments due under the ground lease for Northlake Festival        |  |                   | 600,000   |                   |   | 1,200,000          |  |                | 1,200,000 |      
|                                                                          |  |                   |           |                   |   |                    |  |                |           |      
|Total Contractual Cash Obligations                                        |  | $                 | 5,900,389 |                   | $ | 3,334,627          |  | $              | 3,619,107 |      
|                                                                          |  |                   |           |                   |   |                    |  |                |           |      



In addition to the payments due in the
table above, we have a lease commitment for our corporate office for approximately $7,000 per month through February 2005, and we also have two employment contracts with officers (see Note 9 of the Notes to the consolidated financial statements
included under Item 1 herein).



Our primary source of liquidity to fund
quarterly dividend distributions, monthly principal payments on notes payable and minor capital expenditures is our cash flow from operating activities. To qualify as a REIT for federal income tax purposes, we must, among other things, distribute
annually at least 90% of our REIT taxable income (excluding capital gains). Accordingly, we have paid, but are not contractually bound to make, regular quarterly dividends to our stockholders. As disclosed in detail in the section below entitled
Risk Factors That May Affect Future Results, we face numerous risks in connection with our real estate investments and



29



---

##### Table of Contents

the financing secured by those assets. As a result of these and other risks, our cash flow from operating activities has decreased and may again decrease in
the future.



During 2002 and the first six months of 2003, the total of (a)
dividends based on our quarterly dividend rate of $0.30 per share of common stock and (b) scheduled principal amortization on notes payable exceeded our net cash provided by operating activities (excluding changes in operating assets and
liabilities). To address this shortfall, we used proceeds from sales of properties and existing cash balances. In light of our decreased cash flow, our board of directors voted on September 30, 2003 to reduce the dividend for the quarter ended
September 30, 2003 to $0.25 per share, or $1.00 per share on an annualized basis. This reduction will result in aggregate dividend payments that are approximately $195,000 lower on an annualized basis than they would have been at the former
quarterly rate of $0.30 per share (an annualized rate of $1.20 per share). To the extent that our cash flow continues to decease, we may elect to decrease the dividend rate further or eliminate the dividend entirely, except that we intend to pay
dividends as required to maintain our status as a REIT for tax purposes. We may also use the net proceeds from property sales to fund dividends and other near term liquidity needs, even though we would prefer to use those proceeds for longer-term
purposes.



At September 30, 2003, our total investments in rental real estate
and rental real estate held for sale totaled $54,835,093 for our 15 properties and our land held for development. Depending upon the availability and cost of external capital, we anticipate making additional investments in suburban office, retail
shopping center and light industrial properties, although we may make other types of investments.



We intend to fund the acquisition of new properties, major capital expenditures and balloon payments on notes payable from:



| |  | existing cash balances (subject to maintaining reasonable cash reserves);
| | - | -------------------------------------------------------------------------



| |  | the proceeds of refinancing of selected existing mortgage debt to higher balances; and
| | - | --------------------------------------------------------------------------------------



| |  | the proceeds from asset sales.
| | - | ------------------------------



To increase our financial flexibility, we may consider other sources of possible funding, including raising equity by selling shares of common stock, entering into joint
ventures or obtaining a revolving line of credit, although we can provide no assurance that we will be successful in any of these possible efforts.



On September 24, 2002, our stockholders voted to amend and restate our certificate of incorporation and bylaws to, among other items, eliminate the limit on our leverage.
Unlike our previous certificate of incorporation and bylaws, these new organizational documents do not limit the amount of debt that we may incur. We have adopted a policy that we shall not incur any additional liabilities if, after giving effect to
the additional liabilities, total liabilities would exceed 65% of what the board of directors believes is the fair market value of our portfolio. If we decide to change this policy to increase the percentage of debt we incur above 65% of our overall
portfolio fair market value, we will implement the change only after we seek and obtain the approval of the holders of a majority in voting power of our outstanding shares. Given our current debt-to-total-assets ratio, we are unlikely to increase
our leverage materially other than to finance the construction of the Garden Grove shopping center.



As noted above, asset sales are an important source of funds for both short- and long-term purposes. On August 13, 2003, we sold our Vacaville property for $2,100,000, resulting in a net gain of $406,728 and net cash
proceeds of approximately $550,000. We have used or expect to use these net proceeds to pay dividends and for working capital. On August 27, 2003, we



30



---

##### Table of Contents

entered into a contract to sell our vacant Chino property for $2,300,000. Although we currently expect this sale to close in November 2003, we can give no
assurance that we will indeed sell the property for that price at that time, or at all. We expect to use the estimated $1,250,000 in net cash proceeds from this sale for general corporate purposes such as working capital, repayment of notes payable
or capital improvements. As of September 30, 2003, we have four other properties designated as held for sale: Fresno; Riverside; and two Sacramento properties (717 and 721 West Del Paso Road). We anticipate using the net cash proceeds from any sales
of those properties for general corporate purposes.



In light of the foregoing,
we believe our liquidity and various sources of capital described above are sufficient to meet both our short-term and long-term needs.



CASH FLOWS IN 2003



Our cash resources decreased $2,909,996 during the nine months ended September 30, 2003. During 2003, cash provided by operating activities was $1,147,860, primarily from net income adjusted for non-cash items such as
depreciation, amortization and gain on sale of rental real estate held for sale. Investing activities in 2003 resulted in a $2,622,322 net use of cash resources primarily for purchase of the Banco Popular property and the land held for future
development. Financing activities used $1,435,534, largely from the payment of dividends to our stockholders and principal payments on notes payable secured by rental real estate and notes payable secured by rental real estate held for sale,
including the pay off of two notes secured by the Vacaville and Sacramento, CA (721 West Del Paso Road) properties and offset, in part, by the proceeds from notes payable issued during the period.



CASH FLOWS IN 2002



Our cash resources increased $3,318,356 during the nine months ended September 30, 2002. During 2002, cash provided by operating activities
was $503,637, primarily from net income adjusted for non-cash items such as depreciation, amortization and gain on sale of rental real estate held for sale. Investing activities in 2002 resulted in a net use of cash of $648,436, primarily from the
sale of rental real estate held for sale and partially offset by deposits and acquisition costs. For the nine months ended September 30, 2002, financing activities provided $3,463,155, due largely to the August 2002 refinancing of four loans and
offset in part by principal payments on notes payable secured by rental real estate and notes payable secured by rental real estate held for sale.



CRITICAL ACCOUNTING POLICIES AND ESTIMATES



The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing
basis based on a combination of historical information and various other assumptions that we believe are reasonable under the particular circumstances. Actual results may differ from these estimates based on different assumptions or conditions. We
have described our material accounting policies in the portion of Item 1 above entitled Summary of Accounting Policies. We believe the critical accounting policies and estimates that have or are likely to have a material impact on our consolidated
financial statements are described below.



31



---

##### Table of Contents

Revenue Recognition  We recognize minimum rents on the straight-line method over the terms of the leases, as
required under Statement of Financial Accounting Standard No. 13. Certain of the leases also provide for additional revenue based on contingent percentage income, which is recorded on an accrual basis once the specified target that triggers this
type of income is achieved. The leases also typically provide for tenant recoveries of common area maintenance, real estate taxes and other operating expenses. These recoveries are recognized as revenue in the period the applicable costs are
incurred, except for several tenants where the revenue is recognized when the revenue is billable to the tenant under the lease. Rents due, but not yet collected, are recognized to the extent determined by management to be collectible. We believe
that the likelihood of collection of amounts due over six months old is low. As of September 30, 2003, we have provided for uncollectible receivables, on a case-by-case basis, approximately $80,000.



Capital Expenditures  We capitalize those expenditures related to conducting
significant rehabilitation of existing assets and extending the useful life of existing assets. These expenditures are depreciated over estimated useful lives determined by management. We expense certain improvements related to the operation of our
properties, as well as those expenditures necessary to maintain our property in ordinary operating condition. The determination as to whether expenditures should be capitalized or expensed, and the period over which depreciation is recognized,
requires managements judgment.



Real Estate  We record real estate
assets at the lower of cost or fair value if impaired. Costs incurred to unaffiliated third parties for the acquisition of properties are capitalized.



We evaluate the recoverability of our investment in real estate whenever events or changes in circumstances indicate that the carrying amount of an asset may be impaired.
Our assessment of recoverability of our real estate assets includes, but is not limited to, recent operating results, expected cash flows, discussions with real estate professionals familiar with the area and the property and our plans for future
operations.



Properties classified as held for sale are segregated from rental
real estate in our financial statement presentation. We stop recording depreciation on a property once it is classified as held for sale.



On January 1, 2002, we adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, (SFAS 144) which requires that the
assets and liabilities and the results of operations of any properties that have been sold since the adoption of SFAS 144, or otherwise qualify as held for sale as of September 30, 2003, be presented as discontinued operations in our consolidated
financial statements in both current and prior periods presented. The real estate classified as held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. We do not record depreciation on assets
classified as held for sale.



In accordance with SFAS 144, our investments in
real estate are carried at cost and are periodically evaluated for indicators of impairment. The evaluation of impairment and the determination of values are based on several factors, and future events could occur which would cause management to
conclude that indicators of impairment exist and a reduction in carrying value to estimated fair value is warranted.



In the normal course of business, we receive offers, either solicited or unsolicited, to purchase our properties. For the offers we accept, the prospective buyer usually
requires a due diligence period before consummation of the transaction. It is not unusual for matters to arise during this process that result in the buyer withdrawing the offer. We classify real estate as held for sale when it is
probable, in the opinion of management, that a property will be disposed of within one year.



32



---

##### Table of Contents

NEW ACCOUNTING PRONOUNCEMENTS



Information on new accounting pronouncements is contained in that heading Summary of Accounting Policies under Item 1 in this
Report on Form 10-Q.



33



---

##### Table of Contents

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS



Stockholders should carefully consider the risks described below. These risks are not the
only ones we face. Additional risks not presently known to us or that we currently consider immaterial may also materially impair our business operations and hinder financial performance, including our ability to pay dividends to our stockholders.



Risks Due to Investment in Real Estate



Decreased yields from an investment in real property may result
from factors that may cause a decrease in revenues or values or an increase in operating expenses.



Real property investments are subject to varying degrees of risk. The yields available from equity investments in real estate depend upon the amount of revenues generated and expenses incurred. If our properties do
not generate revenues sufficient to meet operating expenses, debt service and capital expenditures, our results of operations and ability to pay dividends to stockholders and to pay amounts due on our debt will be adversely affected. The performance
of the economy in each of the areas in which the properties are located can affect occupancy, market rental rates and expenses, which in turn can affect the revenues from the properties and their underlying values. The financial results of major
local employers may also affect the revenues and value of some properties. Other factors include:



| |  | the general economic climate;
| | - | -----------------------------



| |  | local conditions in the areas in which properties are located, such as an oversupply of properties like ours or a reduction in the demand for properties like ours;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the attractiveness of the properties to tenants; and
| | - | ----------------------------------------------------



| |  | competition from other properties like ours.
| | - | --------------------------------------------



Our tenants may go bankrupt.



Our tenants may file for bankruptcy protection or become insolvent in the future. Currently, one of our tenants and the parent company of another tenant have filed for
bankruptcy protection. We cannot evict a tenant solely because of its bankruptcy. A court might authorize the tenant to reject and terminate its lease with us. We believe our lease with one tenant in our Fresno property will be rejected by the
bankruptcy court and the tenant will vacate on or before January 2004. In the case where the lease is terminated by the bankruptcy court, our claim against the bankrupt tenant for unpaid, future rent would be subject to a statutory cap that might be
substantially less than the remaining rent actually owed under the lease, and, even so, our claim for unpaid rent would likely not be paid in full.



Our tenants may not renew their leases.



We cannot predict whether current tenants will renew their leases upon the expiration of their terms or whether current tenants will attempt to terminate their leases
before they expire. Because the tenants in our Irvine, CA and Tustin, CA properties are either subletting the property or not fully using the property for their operations, and they may be less likely to re-lease the properties when the leases
expire or may re-lease a smaller space. Further, the leases for our two Sacramento, CA properties (717 and 721 West Del Paso Road) will expire in March 2004, and we do not expect our current tenants will renew those leases. If we are unable to
promptly sell significant vacant properties or re-lease or renew the leases for them, or if the rental rates upon such renewal or re-leasing are significantly lower than expected rates, then our ability to pay dividends to stockholders and to pay
amounts due on our debt may be adversely affected.



34



---

##### Table of Contents

We may be unable to lease vacant space in our properties.



To lease vacant space, we may need to pay substantial leasing commissions and renovation
costs. We may acquire properties that are not fully leased, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with those properties until they are fully leased. Operating costs,
including real estate taxes, insurance and maintenance costs, and mortgage payments, if any, do not, in general, decline when circumstances cause a reduction in income from a property from a vacancy or other reason. In addition, because many of our
leases are triple-net leases that make the tenant responsible for property taxes, insurance and maintenance, we, and not the tenant would bear such costs, once the tenant no longer leases the property for any reason. We could sustain a
loss as a result of foreclosure on the property if a property is mortgaged to secure payment of indebtedness and we were unable to meet our mortgage payments. As a result, our ability to pay dividends to our stockholders could be adversely affected.



Investments in newly acquired properties may not perform as we expect.



In the normal course of business, we typically evaluate potential
acquisitions, enter into non-binding letters of intent, and may, at any time, enter into contracts to acquire and may acquire additional properties. We can give no assurance, however, that we will have the financial resources to make suitable
acquisitions or that properties that satisfy our investment policies will be available for acquisition. The acquisition of property entails risks that investments will fail to perform in accordance with expectations. Those risks may include
financing not being available on favorable terms or at all. Estimates of the costs of improvements to bring an acquired property up to standards established for the market position intended for that property might prove inaccurate. Although we
evaluate the physical condition of each new property before we acquire it, we may not detect some defects or necessary repairs until after we acquire the property. This could significantly increase our total acquisition cost, which could have a
material adverse effect on us and our ability to pay dividends to stockholders and to pay amounts due on our debt.



The value of our property interests depends on conditions beyond our control.



General and local economic conditions, neighborhood values, competitive overbuilding, weather, casualty losses and other factors beyond our
control may adversely affect real property income and capital appreciation. We are unable to determine the precise effect, if any, the performance of the worldwide or U.S. economies will have on us or on the value of our common stock.



The lack of liquidity of real estate may reduce economic returns to investors.



Because real estate investments are relatively illiquid, our ability to
adjust our portfolio in response to changes in economic or other conditions is somewhat limited. Additionally, the Internal Revenue Code places certain limits on the number of properties a REIT may sell without adverse tax consequences. To effect
our current operating strategy, we will seek to raise funds, both through outside financing and through the orderly disposition of assets that no longer meet our investment criteria. Depending upon interest rates, current acquisition opportunities
and other factors, generally we will reinvest the proceeds in suburban office, retail shopping center and light industrial properties, although we may use those proceeds for other purposes.



35



---

##### Table of Contents

The risk that we may be unable to reinvest in attractive properties may affect our returns to stockholders.



In the markets we have targeted for future acquisition of properties,
there is considerable buying competition from other real estate companies, many of whom may have greater resources, experience or expertise than we do. In many cases, this competition for acquisition properties has resulted in an increase in
property prices and a corresponding decrease in property yields. We can give no assurances that we can reinvest the proceeds realized from the disposition of assets into new assets that will produce economic returns comparable to those being
realized from the properties disposed of, or that we will be able to acquire properties meeting our investment criteria. To the extent that we are unable to reinvest those proceeds, or if the properties we acquire with those proceeds produce a lower
rate of return than the properties we disposed, those results may have a material adverse effect on us.



If we are unable to reinvest sales or refinancing proceeds as quickly as we expect, our returns to stockholders may be adversely affected.



A delay in reinvestment of sales or refinancing proceeds may have a material adverse effect on us. We may seek to structure future
dispositions as tax-free exchanges, where appropriate, using the non-recognition provisions of Section 1031 of the Internal Revenue Code to defer income taxation on the disposition of the exchanged property. For an exchange to qualify for tax-free
treatment under Section 1031 of the Internal Revenue Code, we must meet certain technical requirements. Given the competition for properties meeting our investment criteria, it may be difficult for us to identify suitable properties within the
required time frames to meet the requirements of Section 1031.



Substantial
competition among properties and real estate companies may adversely affect our rental revenues and acquisition opportunities.



All of our properties are located in developed areas where we face substantial competition from other properties and from other real estate companies who may develop or
renovate competing properties. The number of competitive properties and real estate companies could have a material adverse effect on our ability to rent our properties, the rents we charge and our acquisition opportunities. The activities of these
competitors could cause us to pay a higher price for a new property than we otherwise would have paid or may prevent us from purchasing a desired property at all, which could have a material adverse effect on us and our ability to pay dividends to
stockholders and to pay amounts due on our debt.



Our geographic
concentration of properties in California and Georgia may adversely affect us.



Our portfolio is located entirely in California and Georgia. Economic conditions in, and other factors relating to, California and Georgia, including supply and demand for properties, zoning and other regulatory conditions and competition
from other properties, could adversely affect our performance. In that regard, these regions have in the past experienced economic recessions and depressed conditions in the local real estate markets. To the extent general economic or social
conditions in any of these areas deteriorate or any of these areas experiences natural disasters, the value of the portfolio, our results of operations and our ability to pay dividends to stockholders and to pay amounts due on our debt could be
materially adversely affected.



36



---

##### Table of Contents

We depend on single tenants in many of our properties, and some of them represent a significant percentage of our
revenues.



Many of our properties are leased to a single tenant, and some
of these single tenant properties are individually significant to our total revenue. In the three months ended September 30, 2003, two tenants, the California Independent System Operator Corporation and Safeguard Business Systems, Inc. accounted for
10% and 8%, respectively, of our total rental revenue, including discontinued operations. A tenant may attempt to terminate its lease before its scheduled term, or we may be unable to renew the lease with the tenant. In that event, we may be unable
to re-lease the space to another anchor tenant of similar or better quality upon expiration of the current lease on similar or better terms, and we could experience material adverse consequences such as higher vacancy, re-leasing on less favorable
economic terms, reduced net income and reduced funds from operations. Similarly, if one or more of our single tenants goes bankrupt, we could experience material adverse consequences like those described above. There can be no assurance that our
sole tenants will renew their leases when they expire or will be willing to renew on similar economic terms.



Northlake Festival represents a significant percentage of our revenues.



The Northlake Festival accounted for approximately 50% of our total rental revenue, including discontinued operations. If economic conditions in the area of Northlake
Festival become depressed and the performance of that center is adversely affected, our overall financial condition and results of operations will be adversely affected as well.



Construction and development risks could adversely affect our profitability.



We currently are renovating some of our properties and may in the future renovate or build
other properties, including tenant improvements required under leases. Further, in March 2003, we acquired undeveloped land and intend to build an approximately 30,000 square foot shopping center on the land. We may incur renovation or development
costs for a property that exceed our original estimates due to increased costs for materials or labor or other costs that are unexpected. We also may be unable to complete renovation or development of a property on schedule, which could result in
increased debt service expense or construction costs and loss of rents until the property is ready for occupancy. Additionally, the time required to recoup our renovation and construction costs and to realize a return, if any, on such costs can
often be lengthy.



We may be unable to implement our growth strategy and may
fail to identify, acquire or integrate new acquisitions.



Our future
growth will be dependent upon a number of factors, including our ability to identify acceptable properties for acquisition, complete acquisitions on favorable terms, successfully integrate acquired properties and obtain financing to support
expansion. We can give no assurances that we will be successful in implementing our growth strategy, that growth will indeed occur at all or that any expansion will improve operating results. The failure to identify, acquire and integrate new
properties effectively could have a material adverse affect on us and our ability to pay dividends to stockholders and to pay amounts due on our debt. We intend to acquire properties that meet our investment criteria. Acquisitions of properties
entail risks that investments will fail to perform in accordance with expectations. Estimates of the costs of improvements to bring an acquired property up to standards established for the market position intended for that property may prove
inaccurate.



We may suffer uninsured and underinsured losses, and our
insurance coverage may be limited.



We carry (or require our tenants to
carry) liability, fire, extended coverage and rental loss insurance on our properties. This insurance has policy specifications, limits and deductibles.



37



---

##### Table of Contents

We do not carry flood and earthquake insurance for our properties. In addition, some types of extraordinary losses (such as those resulting from civil unrest
or acts of war) are not generally insured (or fully insured against) because they are either uninsurable or not economically insurable. In addition, we do not carry insurance coverage for environmental liabilities. If an uninsured or underinsured
loss occurs to a property, we could be required to use our own funds for restoration or lose all or part of our investment in, and anticipated revenues from, the property and would continue to be obligated on any mortgage indebtedness on the
property. Any loss of that nature could have a material adverse effect on us and our ability to pay dividends to stockholders and pay amounts due on our debt.



Adverse changes in laws may affect our potential liability relating to the properties and our operations.



Increases in real estate taxes and income, service and transfer taxes cannot always be
passed through to tenants in the form of higher rents (or charges on triple-net leases), and may adversely affect our cash available for distribution and our ability to pay dividends to stockholders and to pay amounts due on our debt. Similarly,
changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting construction and safety requirements, may
result in significant unanticipated expenditures, which could have a material adverse effect on us and our ability to pay dividends to stockholders and pay amounts due on our debt.



Compliance with laws benefiting disabled persons may increase our costs and adversely affect our performance.



A number of federal, state and local laws (including the Americans with Disabilities Act)
and regulations may require modifications to existing buildings or restrict certain renovations by requiring improved access to such buildings by disabled persons and may require other structural features that add to the cost of buildings under
construction. Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons. The costs of compliance with these laws and regulations may be substantial, and
restrictions on construction or completion of renovations may limit implementation of our investment strategy in certain instances or reduce overall returns on our investments, which could have a material adverse effect on us and our ability to pay
dividends to stockholders and to pay amounts due on our debt. We are a defendant in one California civil lawsuit in which the plaintiffs have alleged violations of the Americans with Disabilities Act, and we cannot determine the likelihood of an
unfavorable outcome or range of potential loss, if any.



We may have
liability under environmental laws.



Under federal, state and local
environmental laws, ordinances and regulations, we may be required to investigate and clean up the effects of releases of hazardous or toxic substances or petroleum products at our properties, regardless of our knowledge or responsibility, simply
because of our current or past ownership or operation of the real estate. Thus, we may have liability with respect to properties we have already sold. If unidentified environmental problems arise, we may have to take extensive measures to remediate
the problems, which could adversely affect our cash flow and our ability to pay dividends to our stockholders because:



| |  | we may have to pay for property damage and for investigation and clean-up costs incurred in connection with the contamination;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| |  | the law typically imposes clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



38



---

##### Table of Contents

| |  | even if more than one person may be responsible for the contamination, each person who shares legal liability under the environmental laws may be held responsible for all of the
clean-up costs; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | governmental entities or other third parties may sue the owner or operator of a contaminated site for damages and costs.
| | - | ------------------------------------------------------------------------------------------------------------------------



These costs could be substantial and in extreme cases could exceed the value of the
contaminated property. The presence of hazardous or toxic substances or petroleum products and the failure to properly remediate that contamination may materially and adversely affect our ability to borrow against, sell or rent an affected property.
In addition, applicable environmental laws create liens on contaminated sites in favor of the government for damages and costs it incurs in connection with a contamination.



We face particular environmental risks related to asbestos.



Environmental laws also govern the presence, maintenance and removal of asbestos. Those laws require that owners or operators of buildings
containing asbestos:



| |  | properly manage and maintain the asbestos;
| | - | ------------------------------------------



| |  | notify and train those who may come into contact with asbestos; and
| | - | -------------------------------------------------------------------



| |  | undertake special precautions, including removal or other abatement, if asbestos would be disturbed during renovation or demolition of a building.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



Those laws may impose fines and penalties on building owners or operators who fail to comply
with these requirements and may allow others to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers. Some of our properties are located in urban, industrial and previously developed areas where fill
or current or historic industrial uses of the areas may have caused site contamination.



Recently, there has been an increasing number of lawsuits against owners and managers of properties alleging personal injury and property damage caused by the presence of mold in real estate. Some of these lawsuits have resulted in
substantial monetary judgments or settlements. Our insurance policy presently in effect does not exclude mold related claims; however, we cannot assure you we will be able to obtain coverage in the future for such claims or at a commercially
reasonable price. The presence of significant mold could expose us to liability from tenants and others if property damage, health concerns, or allegations thereof, arise.



Our environmental due diligence may be inadequate.



Our policy is to retain independent environmental consultants to conduct Phase I environmental site assessments and asbestos surveys of
properties we intend to acquire. These assessments generally include a visual inspection of the properties and the surrounding areas, an examination of current and historical uses of the properties and the surrounding areas and a review of relevant
state, federal and historical documents, but they do not involve invasive techniques such as soil and ground water sampling. Where appropriate, on a property-by-property basis, our practice is to have these consultants conduct additional testing,
including sampling for asbestos, for lead in drinking water, for soil contamination where underground storage tanks are or were located or where other past site usages create a potential environmental problem, and for contamination in groundwater.
Notwithstanding these environmental assessments, we still face the risk that:



| |  | the environmental assessments and updates did not identify all potential environmental liabilities;
| | - | ---------------------------------------------------------------------------------------------------



39



---

##### Table of Contents

| |  | a prior owner created a material environmental condition that is not known to us or the independent consultants preparing the assessments;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| |  | new environmental liabilities have developed since the environmental assessments were conducted; or
| | - | ---------------------------------------------------------------------------------------------------



| |  | future uses or conditions, such as changes in applicable environmental laws and regulations, could result in environmental liability for us.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



We may acquire properties that are subject to liabilities for which we have no recourse,
or only limited recourse, against the seller.



These liabilities can
include:



| |  | claims by tenants, vendors or other persons dealing with the former owners of the properties;
| | - | ---------------------------------------------------------------------------------------------



| |  | liabilities incurred in the ordinary course of business; and
| | - | ------------------------------------------------------------



| |  | claims for indemnification by directors, officers and others indemnified by the former owners of the properties.
| | - | ----------------------------------------------------------------------------------------------------------------



If we are required to spend time and money to deal with these claims, our intended returns
from the affected property may be materially reduced.



Risks Due to Real Estate Financing



We have a
significant amount of indebtedness. As of September 30, 2003, we had total assets of $57,818,664, total secured indebtedness of $40,627,396, total liabilities of $42,032,208 and a debt-to-total assets ratio of 73%, using amounts calculated on the
basis of generally accepted accounting principles. Because this calculation method reflects accumulated depreciation and does not reflect any appreciation of the properties beyond their cost, it may result in assets being valued at less than their
fair market values as determined by the board of directors. Further, this calculation excludes the effects, if any, of the ground lease on the Northlake Festival property.



We anticipate that future acquisitions and properties we develop, if any, will be financed under a line of credit, construction loans, other
forms of secured or unsecured financing or through our issuing additional debt or equity. We expect to review periodically our financing options regarding the appropriate mix of debt and equity financing. Equity, rather than debt, financing of
future acquisitions could have a dilutive effect on the interests of our existing stockholders.



40



---

##### Table of Contents

Increased debt and leverage can reduce cash available for distribution and cause losses.



Using debt, whether with recourse to us generally or only with respect to a particular
property, to acquire properties creates an opportunity for increased net income, but at the same time creates risks. We use debt to fund investments only when we believe it will enhance our risk-adjusted returns. We cannot be sure, however, that our
use of leverage will prove to be beneficial. Additional leverage may:



| |  | increase our vulnerability to general adverse economic and industry conditions,
| | - | -------------------------------------------------------------------------------



| |  | limit our flexibility in planning for, or reacting to, changes in our business and the REIT industry, which may place us at a competitive disadvantage compared to our competitors
that have less debt, and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | limit, along with the possible financial and other restrictive covenants in our indebtedness, our ability to borrow additional funds.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



Any of the foregoing could have a material adverse effect on us and our ability to pay
dividends to stockholders and to pay amounts due on our debt.



We may be
unable to renew, repay or refinance our debt financing.



We are subject to
the normal risks associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest, the risk that we will not be able to renew, repay or refinance our debt when it matures
or that the terms of any renewal or refinancing will not be as favorable as the existing terms of that debt. In many of the mortgage notes on our properties, the mortgage payment terms do not fully amortize the loan balance, and a balloon payment of
the balance will be due upon its maturity. If we are unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or more of the properties on disadvantageous terms, which might result in losses to us.
Those losses could have a material adverse effect on us and our ability to pay dividends to stockholders and pay amounts due on our debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage
payments, the mortgagee could foreclose upon the property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of our revenues and asset value. Foreclosures could also create taxable
income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Internal Revenue Code.



The cost of our indebtedness may increase due to rising interest rates.



We have incurred and may in the future again incur debt that bears interest at a variable rate. As of September 30, 2003, we have one note payable in the amount
$1,500,000 that bears interest at a variable rate. If we are successful in obtaining a construction loan for the development and construction of our Garden Grove shopping center, that loan may bear interest at a variable rate. Accordingly, increases
in interest rates would increase our interest costs, which could have a material adverse effect on us and our ability to pay dividends to stockholders. In addition, an increase in market interest rates may lead holders of our common shares to expect
a higher dividend yield, which could adversely affect the market price of our common stock.



We may incur additional debt and related debt service.



We intend to fund the acquisition of additional properties partially through borrowings and from other sources such as sales of properties that no longer meet our investment criteria or the contribution of property to
joint ventures or other financing methods. Unlike our previous



41



---

##### Table of Contents

certificate of incorporation and bylaws, our new organizational documents do not limit the amount of debt that we may incur.



If we incur additional debt, the agreement governing our debt could contain various
covenants that limit our discretion in the operation of our business.



Any
additional debt we incur will be governed by an agreement with our lenders. Typically, these types of agreements contain various provisions that could limit our discretion in the operation of our business by restricting our ability to:



| |  | incur additional debt and issue preferred stock,
| | - | ------------------------------------------------



| |  | pay dividends and make other distributions,
| | - | -------------------------------------------



| |  | make investments and other payments,
| | - | ------------------------------------



| |  | redeem or repurchase our capital stock,
| | - | ---------------------------------------



| |  | consolidate or merge,
| | - | ---------------------



| |  | create liens,
| | - | -------------



| |  | sell assets, or
| | - | ---------------



| |  | enter into certain transactions with our affiliates.
| | - | ----------------------------------------------------



Further, the loan documents from our August 5, 2002 refinancing contain cross-collateral provisions. If one of the loans is in default and the lender
forecloses on the property securing that loan, and the proceeds from the foreclosure are not sufficient to repay the defaulted loan in full, the lender can foreclose upon one or more of the other properties to recover the loan. Previously, we had no
such cross-collateral provisions in our loans. In addition, the land we hold for development also secures the loan on our Banco Popular property in Garden Grove, CA.



If we are unable to pay our obligations to our secured lenders, they could proceed against any or all of the collateral securing our
indebtedness to them. In addition, a breach of the restrictions or covenants contained in our loan documents could cause an acceleration of our indebtedness. We may not have, or be able to obtain, sufficient funds to repay our indebtedness in full
upon acceleration.



Risks Related to our Stock



The market value of our common stock could decrease based on our
performance and market perception and conditions.



Our common stock has
been listed on the American Stock Exchange since October 31, 2002. Trading volumes to date have been relatively light, and the market price may not reflect the fair market value of our common stock at any particular moment. Stockholders are
cautioned that prior sales data do not necessary indicate the prices at which our common stock would trade in a more active market. The market value of our common stock may be based primarily upon the markets perception of our growth potential
and current and future cash dividends, and may be secondarily based upon the real estate market value of our underlying assets. The market price of our common stock can also be influenced by the dividend on our common stock relative to market
interest rates. Rising interest rates may lead potential buyers of our common stock to expect a higher dividend rate, which would adversely affect the market price of our common stock. In addition, the value of our common stock could be adversely
affected by general market conditions or market conditions of real estate companies in general.



42



---

##### Table of Contents

We cannot assure stockholders that we will be able to make future dividend payments at any particular rate, or at all.



While we have declared quarterly dividends on our common stock regularly
in the past, the declaration and payment of dividends is subject to the discretion of our board of directors. Any determination as to the payment of dividends, as well as the level of those dividends, will depend on, among other items, our financial
results and condition, general economic and business conditions, our strategic plans and contractual, legal and regulatory restrictions on our ability to pay dividends. During 2002 and the first six months of 2003, the total of dividends based on
our quarterly dividend rate of $0.30 per share of common stock and scheduled principal amortization on notes payable exceeded our net cash provided by operating activities (excluding changes in operating assets and liabilities). To address this
shortfall, we used proceeds from sales of properties and existing cash balances. On September 30, 2003, our board of directors reduced the dividend for the quarter ended September 30, 2003 to $0.25 per share. We cannot assure stockholders that we
will maintain this quarterly dividend level or that we will pay dividends in any future period.



We may change some of our policies without obtaining the approval of our stockholders.



Our board of directors determines some of our operating and financial policies, including our policies with respect to acquisitions, growth, operations, leverage,
capitalization and dividends. For example, unlike our previous certificate of incorporation and bylaws, our new organizational documents do not limit the amount of debt that we may incur. Accordingly, stockholders will have little direct control
over these policies.



Additional issuances of equity securities may be
dilutive to current stockholders.



The interests of our existing
stockholders could be diluted if we issue additional equity securities to finance future developments and acquisitions instead of incurring additional debt. Our ability to execute our business strategy depends on our access to an appropriate blend
of debt financing, which could include a line of credit and other forms of secured and unsecured debt, equity financing, including common and preferred equity, or joint ventures.



Provisions that Could Limit a Change in Control or Deter a Takeover



Restrictions in our organizational documents and Delaware law could limit a change in
control or deter a takeover.



A number of the provisions in our
certificate of incorporation and bylaws have or may have the effect of deterring a takeover of the company. These provisions include:



| |  | REIT protective provisions that limit stock ownership to 5.0% for anyone other than Mr. Allen Meredith, our President, Chairman and Chief Executive Officer;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | a classified board of directors with staggered, three-year terms;
| | - | -----------------------------------------------------------------



| |  | provisions giving the board of directors sole power to set the number of directors;
| | - | -----------------------------------------------------------------------------------



| |  | provisions giving stockholders the right to remove directors only for cause and only by the affirmative vote of a majority of the total voting power of the outstanding shares;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | prohibition on stockholders from calling special meetings of stockholders; and
| | - | ------------------------------------------------------------------------------



| |  | establishment of advance notice requirements for stockholder proposals and nominations for election to the board of directors at stockholder meetings.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



43



---

##### Table of Contents

In addition, Section 203 of the Delaware General Corporation Law provides, in relevant part, that the corporation shall
not engage in any business combination for a period of three years following the time on which such stockholder first becomes an interested stockholder unless



| | (a) | before the stockholder first becomes an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder (the board of directors has approved Mr. Meredith becoming an Interested Stockholder),
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | upon becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced
(excluding certain shares) or
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | on or after the time on which the stockholder becomes an interested stockholder, the business combination is approved by the board of directors and authorized at an
annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These provisions may prevent our stockholders from receiving the benefit from any premium to
the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as
discouraging takeover attempts in the future. These provisions may facilitate management entrenchment that may delay, defer or prevent a change in our control, which may not be in the best interests of our stockholders.



Change of control agreements could deter a change of control.



We have entered into change of control agreements with Mr. Meredith, our President, Chairman
and Chief Executive Officer and Mr. Wingard, our Chief Financial Officer providing for the payment of money to them upon the occurrence of a change of control, as defined in these agreements. If, within one year following a change of control, either
Mr. Meredith or Mr. Wingard resigns or is terminated, we will make a severance payment equal to a portion of the executives base salary, his average bonus over last three years and medical and other benefits. Based upon their current salaries
and benefit levels, this provision would result in payments totaling at least $200,000 to Mr. Meredith and $125,000 to Mr. Wingard. The agreements with Mr. Meredith and Mr. Wingard may deter changes of control because of the increased cost for a
third party to acquire control of us, thus limiting the opportunity for stockholders to receive a premium for our common stock over then-prevailing market prices.



Tax Risks



Although we believe we are organized and are operating so as to qualify as a REIT under the Internal Revenue Code, we cannot give assurances that we have in fact operated
or will be able to continue to operate in a manner so as to qualify or remain so qualified.



We may incur tax liabilities as a consequence of failure to qualify as a REIT.



Qualification as a REIT involves the both application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or
administrative interpretations and the determination of various factual matters and circumstances not entirely within our control. For example, to qualify as a REIT in 2003, at least 95% of our taxable gross income in any year must be derived from
qualifying sources and we must pay dividends to



44



---

##### Table of Contents

stockholders aggregating annually at least 90% of our REIT taxable income (excluding net capital gains). Thus, to the extent revenues from non-qualifying
sources represent more than 5% of our gross income in any taxable year, we will not satisfy the 95% income test and may fail to qualify as a REIT, unless certain relief provisions apply. Even if those relief provisions apply, a tax would be imposed
with respect to excess net income, which could have a material adverse effect on us and our ability to pay dividends to stockholders and to pay amounts due on our debt. We cannot give assurances that new legislation, new regulations, administrative
interpretations or court decisions will not change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification. If we fail to qualify as a REIT, we will be subject to federal income tax
(including any applicable alternative minimum tax) on our taxable income at corporate rates, which would likely have a material adverse effect on us and our ability to pay dividends to stockholders and to pay amounts due on our debt. In addition,
unless entitled to relief under certain statutory provisions, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which REIT qualification is lost. This treatment would reduce funds available
for investment or distributions to stockholders because of the additional tax liability to us for the year or years involved. In addition, we would no longer be required to make, and indeed may not make, distributions to stockholders. To the extent
that distributions to stockholders would have been made in anticipation of qualifying as a REIT, we might be required to borrow funds or to liquidate certain investments to pay the applicable tax. Further, to maintain our real estate investment
trust status, we may borrow funds on a short-term basis to meet the real estate investment trust distribution requirements, even if the then-prevailing market conditions are not favorable for these borrowings.



Gain on disposition of assets deemed held for sale in the ordinary course is subject to
100% tax.



We currently are attempting to sell five of our properties. If
we sell any of our properties, the Internal Revenue Service may determine that the sale is a disposition of an asset held primarily for sale to customers in the ordinary course of a trade or business. Gain from this kind of sale generally will be
subject to a 100% tax. Whether an asset is held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances of the sale. Although we will attempt to comply with the
terms of safe-harbor provisions in the Internal Revenue Code prescribing when asset sales will not be so characterized, we cannot assure stockholders that we will be able to do so.



|ITEM 3. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- |  | ----------------------------------------------------------



As of December 31, 2002, all of our debt instruments had fixed rates, and we did not have exposure to market risk for changes in interest rates. As of September 30, 2003,
only one note payable, in the amount of $1,500,000, carries a variable interest rate. Unless and until we obtain other variable rate loans, changes in market interest rates will only affect the rate of that one variable rate loan. We have in the
past and may in the future, however, obtain loans that bear interest at a variable rate. In the past, we have borrowed to support general corporate purposes, including acquisitions, capital expenditures and working capital needs. We periodically
evaluate the level of variable rate debt with respect to total debt and other factors, including our assessment of the current and future economic environment. We did not have any derivative financial instruments on September 30, 2003 or December
31, 2002. A hypothetical 10% increase in interest rates on our variable rate debt would be immaterial to our results of operations and cash flows for the three months ended September 30, 2003 and 2002.



45



---

##### Table of Contents

The fair values of our financial instruments (including the items in the financial statements labeled cash, other assets
and liabilities other than notes payable) approximate their carrying or contract values based on their nature, terms and interest rates that approximate current market rates. The fair value of notes payable is estimated based on a discounted cash
flow analysis with interest rates similar to that of current market borrowing arrangements. Under this analysis, the fair value of our notes payable exceeded their carrying value by approximately $1,836,000 at December 31, 2002.



Many of our fixed rate loans have significant balloon payments that we will need to refinance
at maturity, possibly at unfavorable rates. We cannot predict the effect of adverse changes in interest rates on our variable rate debt and, therefore, our exposure to market risk. We can give no assurances that fixed rate, long-term debt will be
available to us at advantageous pricing, or at all.



|ITEM 4. |  | CONTROLS AND PROCEDURES
|------- |  | -----------------------



As of September 30, 2003, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and
Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our current
disclosure controls and procedures are effective as of September 30, 2003.



The
design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.



46



---

##### Table of Contents

PART II - OTHER INFORMATON



|ITEM 1. |  | LEGAL PROCEEDINGS
|------- |  | -----------------



We are a defendant in a lawsuit entitled John Lonberg; Ruthee Goldkorn v. Sanborn Theaters, Inc. and So-Cal Cinema, Inc.; Salts, Troutman and Kaneshiro, Inc.; West Coast Realty Investors, Inc., in the U.S. District
Court for the Central District of California (Case #CV-97-6598AHM(JGx)). We were added as a defendant in the plaintiffs First Amended Complaint filed May 7, 1998.



The plaintiffs alleged violations of the federal Americans with Disabilities Act and the California Unruh Civil Rights Act with respect to
their movie-going experiences, including inadequate physical accommodations for individuals with disabilities and insensitive theater personnel. Sanborn Theaters, Inc (Sanborn) is the tenant and theater operator. Salts, Troutman and
Kaneshiro, Inc. is the architect who designed the theater and its interiors.



The plaintiffs seek actual damages of $1,000 for each violation of law; three times actual damages; and attorneys fees, expenses and costs. The plaintiffs also seek mandatory injunctive relief requiring the defendants to reconfigure
the theater.



The plaintiffs have agreed to dismiss their claims under the
Unruh Civil Rights Act.



The U.S. Department of Justice, Civil Rights Division
(DOJ) filed a Motion to Intervene in the case on March 1, 1999. DOJ has sued Sanborn only, and preliminary discussions have been held between the DOJ and Sanborn. Sanborn intends to vigorously defend against the DOJ.



We cannot determine the likelihood of an unfavorable outcome or range of potential loss, if
any. We believe we have complied with all applicable provisions of law and intend to vigorously defend against the allegations contained in the lawsuit. We believe that the lawsuit will not have a material impact on our continuing operations or
overall financial condition.



On July 31, 2002, James E. Prock filed an action
against us and our Chief Executive Officer, Mr. Allen Meredith, in Los Angeles County Superior Court. Mr. Prock was an employee of the Advisor and not an employee of West Coast Realty Investors, Inc. He provided services as our Chief Operating
Officer from 1992 to August 2001 and as Acting Chief Operating Officer from August 2001 to March 2002. The lawsuit alleges that during the fall of 2001 and winter of 2002, we purportedly made promises to Mr. Prock that we would hire him as a full
time managerial employee after we became a self-managed REIT. We settled the lawsuit in July 2003 to avoid the expenses and distraction of further litigation. Our portion of the settlement will be $50,000, and our insurance company will cover the
balance. In addition, we have incurred approximately $125,000 in total legal fees and costs related to this matter, of which our insurance company will pay a small portion. The legal fees and costs incurred from January 1 to September 30, 2003, net
of the amount to be paid by our insurance company and our portion of the settlement, are included in our results for the nine months ended September 30, 2003.



|ITEM 2. |  | CHANGES IN SECURITIES AND USE OF PROCEEDS
|------- |  | -----------------------------------------



None.



47



---

##### Table of Contents

|ITEM 3. |  | DEFAULTS UPON SENIOR SECURITIES
|------- |  | -------------------------------



None.



|ITEM 4. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- |  | ---------------------------------------------------



None.



|ITEM 5. |  | OTHER INFORMATION
|------- |  | -----------------



None.



|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K
|------- |  | --------------------------------



|(a) | EXHIBITS
|--- | --------



|No. |  | Description                                                                                                                                                                                                                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 
|31  |  | Certifications of Allen K. Meredith and Charles P. Wingard pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                                                                 
|    | 
|32  |  | Certification of Allen K. Meredith and Charles P. Wingard pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This exhibit is not filed for purposes of Section
18 of the Securities Exchange Act of 1934 but is instead furnished as provided by applicable rules of the Securities and Exchange Commission.



|(b) | REPORTS ON FORM 8-K
|--- | -------------------



| |  | On August 25, 2003 we filed a Current Report on Form 8-K dated August 13, 2003 under Item 5 concerning the sale of our Vacaville property. No financial statements were filed.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On September 10, 2003 we filed a Current Report on Form 8-K August 27, 2003 under Item 5 announcing a contract to sell our Chino property. No financial statements were filed.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



48



---

##### Table of Contents

SIGNATURES



Pursuant to the
requirements of the 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |  |  | Meredith Enterprises, Inc.                                                             
|---------------------- |  |  |  | ---------------------------------------------------------------------------------------
|                       |  | 
|Date: October 29, 2003 |  |  |  | /s/ Charles P. Wingard                                                                 
|                       |  |  | 
|                       |  |  |  | Charles P. Wingard Chief Financial Officer (principal financial and accounting officer)



49