FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (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, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 33-11013 ASSOCIATED PLANNERS REALTY INCOME FUND (Exact name of registrant as specified in its charter) CALIFORNIA 95-4120092 (State or other Jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5933 W. CENTURY BLVD., SUITE 900 LOS ANGELES, CALIFORNIA 90045 (Address of principal executive offices) (Zip Code) (310) 670-0800 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes u No ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 1. FINANCIAL STATEMENTS In the opinion of the General Partner of Associated Planners Realty Income Fund (the "Partnership"), all adjustments necessary for a fair presentation of the Partnership's results for the three and nine months ended September 30, 1996 and 1995, have been made in the following financial statements which are of normal recurring entries in nature. However, such financial statements are unaudited and are subject to any year-end adjustments that may be necessary. BALANCE SHEETS SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 SEPTEMBER 30, DECEMBER 31, 1995 1996 ASSETS RENTAL REAL ESTATE, net of accumulated depreciation (Note 2) $3,999,183 $4,072,847 CASH & CASH EQUIVALENTS 245,154 261,728 OTHER ASSETS 50,898 46,443 $4,295,235 $4,381,018 LIABILITIES AND PARTNERS' EQUITY ACCRUED LIABILITIES $14,830 $23,496 PROPERTY SECURITY DEPOSITS 26,545 26,290 TOTAL LIABILITIES 41,375 49,786 COMMITMENTS AND CONTINGENCIES PARTNERS' EQUITY: Limited Partner: $1,000 stated value per unit; authorized 12,000 units; issued and outstanding - 5,096 4,218,291 4,124,520 General Partner: 35,569 206,712 TOTAL PARTNERS EQUITY 4,253,860 4,331,232 $4,295,235 $4,381,018 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE, DECEMBER 31, 1995 $4,331,232 5,096 $4,124,520 $206,712 Net income 123,581 --- 104,593 18,988 Reallocation of balances prior to January 1, 1996 (Note 6) --- --- 170,030 (170,030) Distributions to general partners (20,101) --- --- (20,101) Distributions to limited partners (180,852) --- (180,852) --- BALANCE, SEPTEMBER 30, 1996 $4,253,860 5,096 $4,218,291 $35,569 NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE, DECEMBER 31, 1994 $4,380,915 5,096 $4,196,996 $183,919 Net income 97,606 --- 81,225 16,381 Distributions to limited partners (126,289) --- (126,289) --- BALANCE, SEPTEMBER 30, 1995 $4,352,232 5,096 $4,151,932 $200,300 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF INCOME THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS ENDED ENDED ENDED ENDED SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER 30, 30, 1996 30, 1995 30, 1996 1995 REVENUES: Rental $100,928 $103,082 $302,887 $287,043 Interest 2,350 3,330 13,162 8,857 103,278 106,412 316,049 295,900 COSTS AND EXPENSES: Operating 7,946 8,660 39,802 41,999 Property taxes 17,925 5,003 34,882 14,296 Property management fees 4,963 5,167 14,476 12,595 General and administrative 9,777 21,368 29,643 58,936 Unrealized (gain) loss from investment in government securities --- (840) --- (3,089) Depreciation and amortization 24,555 24,519 73,665 73,557 65,166 63,877 192,468 198,294 NET INCOME $38,112 $42,535 $123,581 $97,606 NET INCOME PER LIMITED PARTNERSHIP UNIT $6.30 $7.08 $20.52 $15.94 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) NINE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 Cash flows from operating activities: Net Income $123,581 $97,606 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 73,665 73,557 Proceeds from (purchases) of Investments in government securities --- (6,192) Unrealized (gain) from investment in government securities --- (3,089) Increase (decrease) from changes in: Other assets (4,455) (28,347) Accounts payable (8,667) (1,991) Security deposits 255 (4,408) Net cash provided by operating activities 184,379 127,136 Cash flows from investing activities: Additions to rental real estate --- (10,000) Cash (used in) investing activities --- (10,000) Cash flows from financing activities: Distributions to general partners (20,101) --- Distributions to limited partners (180,852) (126,289) Cash (used in) financing activities (200,953) (126,289) Net (decrease) in cash and cash equivalents (16,574) (9,153) Cash and cash equivalents at beginning of period 261,728 85,804 CASH AND CASH EQUIVALENTS AT END OF PERIOD $245,154 $76,651 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES BUSINESS Associated Planners Realty Income Fund (the "Partnership), a California limited partnership, was formed on December 23, 1986 under the Revised Limited Partnership Act of the State of California for the purpose of developing or acquiring, managing and operating unleveraged income producing real estate. The Partnership met its minimum funding of $1,200,000 on February 26, 1988 and terminated its offering on September 5, 1989. The Partnership was formed to acquire income-producing real property throughout the United States with emphasis on properties located in California and southwestern states. The Partnership purchases such properties on an all cash basis and intends to own and operate such properties for investment over an anticipated holding period of approximately five to ten years. BASIS OF PRESENTATION The financial statements do not give effect to any assets that the partners may have outside of their interest in the partnership, nor to any personal obligations, including income taxes, of the partners. RENTAL REAL ESTATE AND ESTATE AND DEPRECIATION Assets are stated at cost. Depreciation is computed using the straight-line method over estimated useful lives ranging from 31.5 to 40 years for financial reporting and income tax reporting purposes. In the event that facts and circumstances indicate that the cost of an asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the carrying amount to determine if a write- down to market vale is required. LEASE COMMISSIONS Lease commissions which are paid to real estate brokers for locating tenants are capitalized and amortized over the life of the lease. RENTAL REVENUE Rental revenue is recognized when the amount is due and payable under the terms of a lease agreement. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES (CONTINUED) INVESTMENTS During 1994, the Partnership changed its method of accounting for Investments. Investments which represent trading securities, are accounted for in accordance with SFAS No. 115. The difference between historical cost and market value are reported as unrealized gains or losses in the statement of income. The effect of this change in accounting policy is not material to the financial statements. STATEMENTS OF CASH FLOWS For purposes of the statements of cash flows, the Partnership considers cash in the bank and all highly-liquid investments purchased with original maturities of three months or less to be cash and cash equivalents. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles 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 from those estimates. RECLASSIFICATIONS For comparative purposes, certain prior year amounts have been reclassified to conform to the current year presentation. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1995 NOTE 1 - NATURE OF PARTNERSHIP BUSINESS Associated Planners Realty Income Fund, a California limited partnership (the "Fund"), was formed on December 23, 1986 under the Revised Limited Partnership Act of the State of California for the purpose of acquiring, managing, and operating income-producing real estate. The Partnership began accepting subscriptions in October 1987 and closed the offering on September 5, 1989. The Partnership began operations in March 1988. Under the terms of the partnership agreement, the General Partners (West Coast Realty Advisors, Inc. and W. Thomas Maudlin Jr.) are entitled to cash distributions from 10% to 15%. The General Partners are also entitled to net income (loss) allocations varying from 1% to 15% and 1% of depreciation and amortization in accordance with the partnership agreement. Further, the General Partners receive acquisition fees for locating and negotiating the purchase of rental real estate, management fees for operating the Partnership and a commission on the sale of the partnership properties. NOTE 2 - RENTAL REAL ESTATE The Partnership owns two rental real estate properties. The first property is wholly-owned and the second property is a 90% undivided interest: Original Location (Property Name) Date Purchased Acquisition Cost Chino, California (Yorba Center) October 25, 1988 $ 1,851,147 San Marcos, California January 9, 1990 2,806,905 The major categories of rental real estate: September 30, 1996 December 31, 1995 Land $1,282,861 $1,282,861 Building and Improvements 3,416,326 3,416,326 4,699,187 4,699,187 Less accumulated depreciation 700,004 626,340 Net rental real estate 3,999,183 4,072,847 ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1995 (CONTINUED) NOTE 2 - RENTAL REAL ESTATE (CONTINUED) A significant portion of the Partnership's rental revenue was earned from tenants whose individual rents represented more than 10% of total rental revenue: Two tenants accounted for 54% and 10%, respectively, in 1996 Two tenants accounted for 12% and 53%, respectively, in 1995 NOTE 3 - RELATED PARTY TRANSACTIONS (a) For Partnership management services rendered to the Partnership, the General Partner is entitled to receive 10% of all distributions of Cash from Operations. These amounts totaled $5,662 for the quarter ended September 30, 1996 and $5,662 for the quarter ended September 30, 1995, and $20,101 for the nine months ended September 30, 1996 and $14,014 for the nine months ended September 30, 1995. The amounts paid to the general partner in 1995 were treated as an expense of the Partnership, while the amounts paid in 1996 were treated as distributions of capital to the general partner (see Note 6). (b) For administrative services provided to the Partnership, the General Partner, in accordance with the partnership agreement, is entitled to reimbursement for the cost of certain personnel and relevant expenses. These amounts totaled $9,000 for the nine months ended September 30, 1996 and September 30, 1995 and $3,000 for the quarters ending September 30, 1996 and 1995. (c) Property management fees incurred in accordance with the Partnership Agreement to West Coast Realty Management, Inc., an affiliate of the corporate General Partner, totaled $4,963 for the quarter ended September 30, 1996, and $5,167 for the quarter ended September 30, 1995, and $14,476 for the nine months ended September 30, 1996 and $12,595 for the nine months ended September 30, 1995 (d) During 1990, the Partnership acquired a 90% undivided interest in property located in San Marcos, California (Note 2). The remaining 10% interest is owned by Associated Planners Realty Growth Fund, an affiliate (Note 7). ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1995 (CONTINUED) NOTE 4 - NET INCOME AND CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT The Net Income per Limited Partnership Unit was computed in accordance with the partnership agreement on the basis of the weighted average number of outstanding Limited Partnership Units of 5,096 for 1996 and 1995. The Limited Partner cash distributions, computed in accordance with the Partnership Agreement, were as follows: Record Date Outstanding Amount Total Units Per Unit Distribution June 30, 1996 5,096 $10.00 $50,904 March 31, 1996 5,096 13.00 66,248 December 31, 1995 5,096 12.50 63,700 Total $180,852 June 30, 1995 5,096 $10.00 50,960 March 31, 1995 5,096 8.50 43,479 December 31, 1994 5,096 6.25 31,850 Total $126,289 Distributions were paid in the fiscal quarter following the record date. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1995 (CONTINUED) NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 121. "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of" (SFAS No. 121) issued by the Financial Accounting Standards Board (FASB) is effective for financial statements for fiscal years beginning after December 15, 1995. The new standard establishes new guidelines regarding when impairment losses on long-lived assets, which include plant and equipment, and certain identifiable intangible assets, should be recognized and how impairment losses should be measured. The Partnership elected adoption of SFAS No. 121 on January 1, 1996. This adoption had no effect on the statement of income for the nine months ended September 30, 1996 as there were no impairment amounts recorded during the period. NOTE 6 - REALLOCATION OF PARTNER BALANCES Per the provisions of Section 11.1 (V)(ii) of the Partnership Agreement, the General Partner determined that action was necessary to "cure the ambiguities" caused by the Agreement itself. The ambiguity involved the treatment of the partnership management fee, being paid to the General Partner, as an expense of the Partnership, when in fact, it was recently determined, that these fees should have been treated as a general partner withdrawal of capital. In order to properly reflect this inception to date correction, a transfer of $170,030 was made from the General Partner's capital account to the Limited Partners capital account during the quarter ended March 31, 1996. NOTE 7 - SUBSEQUENT EVENTS The Partnership distributed $50,960 ($10.00 per unit) on November 5, 1996 to Limited Partners as of September 30, 1996. On November 1, 1996, Associated Planners Realty Income Fund ("Income Fund") purchased the remaining real estate asset from Associated Planners Realty Growth Fund ("Growth Fund"). This asset consisted of the 10% interest that Income Fund had not already owned in an office building located in San Marcos, California. This purchase was done to increase the level of cash distributions to the limited partners in 1997, and ultimately, increase the value of their investment in the Partnership. Income Fund paid $185,968 on November 2, 1996 for the 10% interest in the San Marcos property. This amount consisted of $188,000 for the property itself, less $2,032 for the share of a cash security deposit from the current tenant that Growth Fund retained. There is no debt in connection with the property. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The Partnership began offering for sale limited partnership units on October 20, 1987. On February 26, 1988, the Partnership reached its minimum offer level of $1,200,000. The Partnership sold units throughout the remainder of the year, and had raised $3,891,000 in gross proceeds or $3,483,788 net of syndication costs and sales commissions as of December 31, 1988. During 1989, the Partnership continued to raise funds through the sale of Units and had raised $5,106,000 in gross proceeds or $4,594,101 net of syndication costs and sales commissions as of September 5, 1989, the day the Partnership terminated its offering of limited partnership units. The Partnership was organized for the purpose of investing in, holding, and managing improved, leveraged income-producing property, such as residential property, office buildings, commercial buildings, industrial properties, and shopping centers. The Partnership intends to own and operate such properties for investment over an anticipated holding period of approximately five to ten years. The Partnership's principal investment objectives are to invest in rental real estate properties which will: (1) Preserve and protect the Partnership's invested capital; (2) Provide for cash distributions from operations; (3) Provide gains through potential appreciation; and (4) Generate Federal income tax deductions so that during the early years of property operations, a portion of cash distributions may be treated as a return of capital for tax purposes and, therefore, may not represent taxable income to the limited partners. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The ownership and operation of any income-producing real estate is subject to those risks inherent in all real estate investments, including national and local economic conditions, the supply and demand for similar types of properties, competitive marketing conditions, zoning changes, possible casualty losses, increases in real estate taxes, assessments, and operating expenses, as well as others. The Partnership is operated by West Coast Realty Advisors, Inc. ("WCRA") (the corporate General Partner) and Mr. W. Thomas Maudlin Jr. (an individual General Partner), collectively the "General Partner," subject to the terms of the Amended and Restated Agreement of Limited Partnership. The Partnership has no employees, and all administrative services are provided by WCRA, the corporate General Partner. LIQUIDITY AND CAPITAL RESOURCES On February 6, May 6, and August 6, 1996, the Partnership made distributions to the limited partners totaling $63,700, $66,248 and $50,904 ($12.50, $13.00 and $10.00 per unit), of which approximately $14,700, $17,248 and $14,491 constituted a return of capital to the unit holders of record at December 31, 1995, March 31, 1996 and June 30, 1996 respectively. Distributions are determined by management based on cash flow and the liquidity position of the Partnership and anticipated occupancy of the properties. It is the intention of management to make quarterly distributions of cash, subject to maintenance of reasonable reserves. Management uses cash as its primary measure of a partnership's liquidity. The amount of cash that represents adequate liquidity for a real estate limited partnership depends on several factors. Among them are: 1. Relative risk of the partnership; 2. Condition of the partnership's properties; 3. Stage in the partnership's life cycle (e.g., money-raising, acquisition, operating or disposition phase); and 4. Distribution to partners ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) The Partnership has adequate liquidity based upon the above four points. The first point refers to the approximately 1% property reserve requirement of capital funds raised that the Partnership currently has; this relatively low reserve level is appropriate since all Partnership properties are acquired without the use of debt financing. This is a minimum guideline that is disclosed in the Partnership's prospectus; the Partnership had more than enough funds to meet this requirement as of September 30, 1996. Related to the property reserve requirement is the second point - the condition of the Partnership's properties. Since the properties are in good condition, no unusual maintenance and repair expenditures are anticipated. The third point is relevant to the Partnership because after the January 1990 purchase of the San Marcos property, the Partnership had completed its acquisition phase, and entered the operating phase. The fourth point relates to partner distributions. The Partnership makes distributions from operations quarterly. Such distributions are subject to payment of Partnership expenses and reasonable reserves for expenses, maintenance, and replacements. During the nine months ended September 30, 1996 the Partnership paid the General Partner a partnership management fee of $14,476 and distributed $180,852 to the limited partners of which $57,271 constituted a return of capital. The partnership management fee distribution to the general partner was calculated and paid in accordance with the Partnership Agreement. The Tax Reform Acts of 1986 and 1987 and the Revenue Reconciliation Acts of 1990 and 1993 did not have a material impact on the Partnership's operations. The effects of the slowdown in the economy's growth, inflation and changing prices have not had a material impact on the Partnership's revenues and income from operations. During the years of the Partnership's existence, inflationary pressures in the U.S. economy have been minimal, and this has been consistent with the experience of the Partnership in operating rental real estate in California. The Partnership has several clauses in the leases with its properties' tenants that would help alleviate much of the negative impact of inflation. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) NEW ACCOUNTING PRONOUNCEMENTS Statements of Financial Accounting Standards No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of" (SFAS No. 121) issued by the Financial Accounting Standards Board (FASB) is effective for financial statements for fiscal years beginning after December 15, 1995. The new standard establishes new guidelines regarding when impairment losses on long-lived assets, which include plant and equipment, and certain identifiable intangible assets, should be recognized and how impairment losses should be measured. The Partnership elected adoption of SFAS No.121 on January 1, 1996. This adoption had no effect on the statement of income for the nine months ended September 30, 1996 as there were no impairment amounts recorded during the period. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS Operations for the nine months ended September 30, 1996 and 1995 reflect full quarters of rental activities for the Partnership's properties. However, the San Marcos property was not leased from January 8 to February 12, 1995. This was due to vacancy at the property between the time that the Professional Care Products (previous tenant) lease terminated and the No Fear (current tenant) lease began. In addition to the vacancy at the property, the lease rate that No Fear entered into was approximately 30% less than the rate that Professional Care Products was paying during its tenancy. The occupancy rate at the Yorba Center Shopping Center was at 100% as of September 30, 1996 (as compared to 90% at September 30, 1995). The increased occupancy at the Yorba Center Shopping Center, offset by the drop in rental rates at the San Marcos property, was responsible for a 5.5% ($15,844) increase in rental revenue for the nine months ended September 30, 1996 as compared to the nine months ended September 30, 1995. Operating expenses decreased 5.2% ($2,197) as the result of less repairs and maintenance costs at the Yorba Center Shopping Center property. The Partnership also experienced a 49.7% decrease in general and administrative costs ($29,293) due to lower insurance costs and lower legal & accounting expenses. Interest income increased $4,305 due to larger cash reserve balances maintained during the first nine months of 1996 as compared to the first nine months of 1995. Overall, the Partnership generated $197,246 in income from operations before depreciation expense of $73,665 for the nine months ended September 30, 1996. This compares favorably to 1995 when income from operations totaled $174,252 before depreciation of $73,557 and gain on government securities of $3,089. Net income per limited partnership unit rose from $15.94 in 1995 to $20.52 in 1996. The number of limited partnership units outstanding in each period was 5,096. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONT.) In 1994, the Partnership purposely started reducing the amount of distributions to investors in anticipation of lower rental revenues from the San Marcos property. Up until January 1995, it was not clear to the General Partner as to what rent, if any, could be realized on an ongoing basis from the San Marcos Property. Distributions to limited partners fell from a high of $47.50 per unit in 1993, to $43.75 in 1994, to $37.16 in 1995. With the placement of a tenant in the San Marcos Building (No Fear, Inc.) and the build-up of a track record of rent collections from the tenant, the general partner now feels it would be prudent to make cash distributions to limited partners so that a large portion of the large cash balance is gradually paid out (contingent upon maintenance of reasonable reserve levels). Therefore, distributions are expected to total between $40.00 and $45.00 per unit for 1996. In addition, the Partnership was planning to purchase the 10% portion of the San Marcos Building that it does not already own. This purchase was contemplated in order to increase the level of cash distributions to the limited partners in 1997, and ultimately, increase the value of their investment in the Partnership. This purchase did take place in November 1996, and $185,968 in cash was used to purchase the 10% interest. In order to facilitate the purchase , the general partner anticipates that cash distributions will remain at a lower level of $10.00 per unit through February 1997. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONT.) During the nine months ended September 30, 1996, $184,379 in cash was provided by operating activities. This resulted primarily from a net cash basis income of $197,246 from operations (net income plus depreciation expense). These amounts were offset by a $4,455 increase in other assets (primarily due to a increase in rent receivable), and a $8,667 decrease in accounts payable (primarily due to a decrease in the amount of trade payables). In contrast, during the nine months ended September 30, 1995, $127,136 in cash was provided by operating activities. This resulted from a cash basis income of $171,163 (net income with depreciation expense added back). These operating cash flow additions were offset by a $28,347 increase in other assets (due to prepaid leasing costs paid in connection with the new tenant, No Fear, Inc.) a $1,991 decrease in accounts payable (attributable to a normal decrease in trade accounts payable), a $6,192 increase in an investment in government securities (due to re-invested interest from government securities holdings), a $3,089 unrealized gain in government securities and $4,408 decrease in security deposits (due to a lower security deposit received from the new tenant, No Fear, Inc. compared to the previous tenant, Professional Care Product). There were no investing activities for the nine months ended September 30, 1996. In contrast, $10,000 in investing activities was used for tenant improvements on the San Marcos property during the nine months ended September 30, 1995. Cash used in financing activities totaled $200,953 due to $180,852 distributed to the limited partners and $20,101 distributed to the general partner for partnership management fees during the nine months ended September 30, 1996. In contrast, $126,289 in financing activities was used for distributions to limited partners during the nine months ended September 30, 1995. The area in which Yorba Center operates continues to experience a relatively high level of economic vitality, and the General Partner does not foresee significant challenges in keeping the center occupied by various small retailers and service businesses. The Partnership anticipates continuing to operate properties during 1996 for the purpose of generating the maximum amount of cash available for distribution to the limited partners, while maintaining a reasonable level of cash reserves. There are currently no plans to dispose of either of the two properties. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) PART II O T H E R I N F O R M A T I O N ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None 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. EXHIBIT AND REPORTS ON FORM 8-K (a) Information required under this section has been included in the financial statements. (b) Reports on Form 8-K None ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) S I G N A T U R E S Pursuant to the requirements 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. ASSOCIATED PLANNERS REALTY INCOME FUND A California Limited Partnership (Registrant) November 13, 1996 By: WEST COAST REALTY ADVISORS, INC. A California Corporation, A General Partner Neal E. Nakagiri Vice President / Secretary November 13, 1996 Michael G. Clark Vice President/Treasurer