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 JUNE 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 X 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 six months ended June 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. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS JUNE 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 JUNE 30, 1996 DECEMBER 31, 1995 ASSETS RENTAL REAL ESTATE, net of accumulated depreciation (Note 2) $4,023,738 $4,072,847 CASH AND CASH EQUIVALENTS 199,973 261,728 OTHER ASSETS 77,634 46,443 $4,301,345 $4,381,018 LIABILITY AND PARTNERS' EQUITY ACCRUED LIABILITIES $ 1,663 $ 23,496 SECURITY DEPOSITS & PREPAID RENTS 27,368 26,290 29,031 49,786 COMMITMENTS & CONTINGENCIES PARTNERS' EQUITY: Limited Partner: $1,000 stated value per unit; authorized 12,000 units;issued - 5,096 4,237,104 4,124,520 General Partners: 35,210 206,712 TOTAL PARTNERS' EQUITY 4,272,314 4,331,232 $4,301,345 $4,381,018 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' EQUITY SIX MONTHS ENDED JUNE 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 85,469 --- 72,502 12,967 Reallocation of balances prior to January 1, 1996 (Note 6) --- --- 170,030 (170,030) Distribution to general partners (14,439) --- --- (14,439) Distributions to limited partners (129,948) --- (129,948) --- BALANCE, JUNE 30, 1996 $4,272,314 5,096 $4,237,104 $35,210 SIX MONTHS ENDED JUNE 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 55,071 --- 45,150 9,921 Distributions to limited partners (75,329) --- (75,329) --- BALANCE, JUNE 30, 1995 $4,360,657 5,096 $4,166,817 $193,840 [FN] SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF INCOME THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, 1996 1995 1996 1995 REVENUES: Rental $98,579 $102,270 $201,959 $175,633 Interest 7,905 3,549 10,812 5,526 106,484 105,819 212,771 181,159 COSTS AND EXPENSES: Operating 16,345 20,504 31,857 33,338 Property taxes 13,267 5,003 16,957 9,293 Property management fees 5,115 4,226 9,513 7,428 General and administrative 10,733 15,493 19,866 29,021 Unrealized (gain) loss from investment in government securities --- 2,607 --- (2,030) Depreciation and amortization 24,555 24,519 49,109 49,038 70,015 72,352 127,302 126,088 NET INCOME $36,469 $33,467 $85,469 $55,071 NET INCOME PER LIMITED PARTNERSHIP UNIT $6.01 $5.48 $14.23 $8.86 [FN] SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, 1996 JUNE 30, 1995 Cash flows from operating activities: Net Income $85,469 $55,071 Adjustments to reconcile net income to net cashprovidedbyoperating activities: Depreciation and amortization 49,109 49,038 Net proceeds from sales of investments in government securities --- (3,647) Unrealized (gain) from investment in government securities --- (2,030) Increase (decrease) from changes in: Other assets (31,191) (40,651) Accounts payable (21,833) (6,629) Security deposits and prepaid rents 1,078 (150) Net cash provided by operating activities 82,632 51,002 Cash flows from investing activities: Additions to real estate --- (10,000) Net cash used by investing activities --- (10,000) Cash flows from financing activities: Distributions to general partners (14,439) --- Distributions to limited partners (129,948) (75,329) Net cash used in financing activities (144,387) (75,329) Net (decrease) in cash and cash equivalents (61,755) (34,327) Cash and cash equivalents at beginning of period 261,728 85,804 CASH AND CASH EQUIVALENTS AT END OF PERIOD $199,973 $51,477 [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 SIX MONTHS ENDED JUNE 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 the following two rental real estate properties, one is wholly-owned and the second, 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: June 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 675,449 626,340 Net rental real estate 4,023,738 4,072,847 ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 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. Specifically: 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 $7,361 for the quarter ended June 30, 1996 and $4,813 for the quarter ended June 30, 1995, and $14,439 for the six months ended June 30, 1996 and $8,352 for the six months ended June 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 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 $6,000 for the six months ended June 30, 1996 and June 30, 1995 and $3,000 for the quarters ending June 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 $5,115 for the quarter ended June 30, 1996, and $4,226 for the quarter ended June 30, 1995, and $9,513 for the six months ended June 30, 1996 and $7,428 for the six months ended June 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. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 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 March 31, 1996 5,096 $13.00 $66,248 December 31, 1995 5,096 12.50 63,700 Total $129,948 March 31, 1995 5,096 8.5000 43,479 December 31, 1994 5,096 6.2500 31,850 Total $75,329 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 SIX MONTHS ENDED JUNE 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 six months ended June 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 August 6, 1996 to Limited Partners as of June 30, 1996. 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, and May 6, 1996, the Partnership made distributions to the limited partners totaling $63,700 and $66,248, ($12.50 and $13.00 per unit), of which approximately $14,700 and $17,248 constituted a return of capital to the unit holders of record at December 31, 1995 and March 31, 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 June 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 six months ended June 30, 1996 the Partnership paid the General Partner a partnership management fee of $14,439 and distributed $129,948 to the limited partners of which $31,948 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, 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 six months ended June 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 six months ended June 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 June 30, 1996 (as compared to 90% at June 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 15% ($26,326) increase in rental revenue for the six months ended June 30, 1996 as compared to the six months ended June 30, 1995. Operating expenses decreased 4.4% ($1,481) as the result of less repairs and maintenance costs at the Yorba Center Shopping Center property. The Partnership also experienced a 31.5% decrease in general and administrative costs ($9,155) due to lower insurance costs and lower legal & accounting expenses. Interest income increased $5,286 due to larger cash reserve balances maintained during the first six months of 1996 as compared to the first six months of 1995. Overall, the Partnership generated $134,578 in income from operations before depreciation expense of $49,109 for the six months ended June 30, 1996. This compares favorably to 1995 when income from operations totaled $104,109 before depreciation of $49,038 and gain on government securities of $2,030. Net income per limited partnership unit rose from $8.86 in 1995 to $14.23 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 is currently considering purchasing the 10% portion of the San Marcos Building that it does not already own. This purchase is being 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 is contingent upon a number of factors including approval from the State of California to allow the seller (Associated Planners Realty Growth Fund, an affiliated partnership) to sell the interest, acceptance by the Partnership of the sales price as being reasonable, and sufficient cash resources to purchase the interest. Given these contingencies, there is no assurance that the Partnership will purchase this additional interest in the San Marcos property. However, in anticipation of the purchase taking place, the general partner anticipates that cash distributions will remain at a lower level of $10.00 per unit through February 1997 to finance the purchase of the 10% interest. If it appears the purchase will not take place, it is anticipated that distributions to the limited partners would be restored to the $12.00 to $13.00 per unit level. 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 six months ended June 30, 1996, $82,632 in cash was provided by operating activities. This resulted from a net cash basis income of $134,578 from operations (net income plus depreciation expense) plus a $1,078 increase in security deposits and prepaid rents (primarily due to a new tenant security deposit receivable plus prepaid April 1996 rent received in March 1996). These amounts were offset by a $31,191 increase in other assets (primarily due to a increase in prepaid assets and deferred rent receivable due to free tenant rent for January 1996), and a $21,833 decrease in accounts payable (primarily due to a decrease in the amount of trade payables). In contrast, during the six months ended June 30, 1995, $51,002 in cash was provided by operating activities. The increase in operating activities of $31,604 ($85,632 minus $51,002) was primarily the result of the $30,398 increase in net income for the six months ended June 30,1996 compared to the six months ended June 30, 1995. There were no investing activities for the six months ended June 30, 1996. In contrast, $10,000 in investing activities was used for tenant improvements on the San Marcos property during the six months ended June 30, 1995. Cash used in financing activities totaled $144,387 due to $129,948 distributed to the limited partners and $14,439 distributed to the general partner for partnership management fees during the six months ended June 30, 1996. In contrast, $75,329 in financing activities was used for distributions to limited partners during the six months ended June 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) August 14, 1996 By: WEST COAST REALTY ADVISORS, INC. A California Corporation, A General Partner Neal E. Nakagiri Vice President / Secretary August 14, 1996 Michael G. Clark Vice President/Treasurer