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 MARCH 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 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 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 months ended March 31, 1998 and 1997, have been made in the following financial statements which are 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 MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997 MARCH 31, 1998 December 31, 1997 ASSETS Rental real estate, less accumulated depreciation (Note 2) $4,032,571 $4,058,189 Cash and cash equivalents 170,739 230,503 Other assets 10,627 14,486 TOTAL ASSETS $4,213,937 $4,303,178 LIABILITIES AND PARTNERS' EQUITY LIABILITIES Accounts payable: Trade $ 1,542 $ 4,609 Related party (Note 3) 7,185 8,421 Security deposits 29,400 29,400 TOTAL LIABILITIES 38,127 42,430 PARTNERS' EQUITY (NOTE 6) Limited partners: $1,000 stated value per unit - authorized 12,000 units; issued and outstanding 5,096 4,134,130 4,212,880 General partners 41,680 47,868 TOTAL PARTNERS' EQUITY 4,175,810 4,260,748 TOTAL LIABILITIES AND PARTNERS' EQUITY $4,213,937 $4,303,178 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' EQUITY THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE AT DECEMBER 31, 1997 $4,260,748 5,096 $4,212,880 $47,868 Net income 33,969 -- 28,266 5,703 Distributions to limited partners (107,016) -- (107,016) -- Distributions to general partner (Note 3 (a)) (11,891) -- -- (11,891) BALANCE AT MARCH 31, 1998 $4,175,810 5,096 $4,134,130 $41,680 THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE AT DECEMBER 31, 1996 $4,242,067 5,096 $4,205,288 $36,779 Net income 43,586 -- 36,922 6,664 Distributions to limited partners (50,960) -- (50,960) -- Distributions to general partner (Note 3 (a)) (5,662) -- -- (5,662) BALANCE AT MARCH 31, 1997 $4,229,031 5,096 $4,191,250 $37,781 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) Three Three Months Months Ended Ended March 31, March 31, 1998 1997 REVENUES Rental $85,006 $101,757 Interest 2,595 260 87,601 102,017 COSTS AND EXPENSES Operating 8,495 13,778 Property taxes --- 5,045 Property management fees (Note 3 (c) 4,185 4,356 General and administrative 15,334 9,639 Depreciation and amortization 25,618 25,613 53,632 58,431 NET INCOME $ 33,969 $ 43,586 NET INCOME PER LIMITED PARTNERSHIP UNIT (Note 4) $5.55 $7.25 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALITY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, MARCH 31, 1998 1997 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES Net income $33,969 $43,586 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,618 25,613 Increase (decrease) from changes in: Other assets 3,859 (9,414) Accounts payable (4,303) (2,937) NET CASH PROVIDED BY OPERATING ACTIVITIES 59,143 56,848 CASH FLOWS FROM FINANCING ACTIVITIES Distributions to limited partners (107,016) (50,960) Distributions to general partners (11,891) (5,662) NET CASH (USED IN) FINANCING ACTIVITIES (118,907) (56,622) NET INCREASE (DECREASE) IN CASH AND CASH (59,764) 226 EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 230,503 72,207 CASH AND CASH EQUIVALENTS, END OF PERIOD $170,739 $72,433 [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 intended on owning and operating 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 value 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. INVESTMENTS The difference between historical cost and market value are reported as unrealized gains or losses in the statement of income. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES (CONTINUED) 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. EARNINGS (LOSS) PER SHARE On March 3, 1997, the FASB issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). This pronouncement provides a different method of calculating earnings per share than is currently used in accordance with APB 15, "Earnings Per Share". SFAS 128 provides for the calculation of Basic and Diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of the entity, similar to fully diluted earnings per share. Except where the provisions of the Securities and Exchange Commission's Staff Accounting Bulletin No. 98 are applicable, common share equivalents have been excluded in all years presented in the Statements of Operations when the effect of their inclusion would be anti-dillutive. SFAS 128 is effective for fiscal years and interim periods after December 15, 1997. The Company has adopted this pronouncement during the fiscal year ended December 31, 1997. The adoption of SFAS 128 does not effect earnings per share for fiscal year ended December 31, 1997 and prior years. NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 130 (SFAS No. 130) "Reporting Comprehensive Income," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. Earlier application is permitted. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Company has not determined the effect on its financial position or results of operations, is any, from the adoption of this statement. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES (CONTINUED) NEW ACCOUNTING PRONOUNCEMENTS (CONT.) Statement of Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosure about Segments of an Enterprise and Related Information," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. The new standard requires that public business enterprises report certain information about operating segments in complete sets of financial statements of the enterprises and in condensed financial statements of interim periods issued to shareholders. It also requires that public business enterprises report certain information about their products and services, the geographic areas in which they operate and their major customers. The Company has not determined the effect on its financial position or results of operations, if any, from the adoption of this statement. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 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: Acquisition Location (Property Name) Date Purchased Cost Chino, California (Yorba Center) October 25, 1988 $1,881,147 San Marcos, California (90%) January 9, 1990 2,816,904 San Marcos, California (10%) November 1, 1996 188,001 The major categories of rental real estate: March 31, 1998 December 31, 1997 Land $1,332,861 $1,332,861 Building and improvements 3,554,327 3,554,327 4,887,188 4,887,188 Less accumulated depreciation 854,617 828,999 Net rental real estate 4,032,571 4,058,189 ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1998 AND 1997(UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 (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: One tenant accounted for 58% in 1998 One tenant accounted for 58% in 1997 One tenant accounted for 48% in 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. 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. 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 $11,891 for the three months ended March 31, 1998 and $5,662 for the three months ended March 31, 1997. See Note 6. (b) For administrative services rendered to the Partnership, the General Partner, in accordance with the partnership agreement, was reimbursed $3,000 for the three months ended March 31, 1998 and 1997. (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 $4,185 for the three months March 31, 1998, and $4,356 for the three months ended March 31, 1997. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 (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 1998 and 1997. The Limited Partner cash distributions, computed in accordance with the Partnership Agreement, were as follows: Record Date Outstanding Amount Total Units Per Unit Distribution December 30, 1997 5,096 $ 21.000 $ 107,016 June 30, 1997 5,096 10.500 53,508 March 31, 1997 5,096 10.500 53,508 December 31, 1996 5,096 10.000 50,960 Total $ 264,992 September 30, 1996 5,096 $ 10.000 $ 50,960 June 30, 1996 5,096 10.000 50,904 March 31, 1996 5,096 13.000 66,248 December 31, 1995 5,096 12.500 63,700 Total $ 231,812 The Partnership began paying distributions on a semi-annual basis with the first record date and payment date being December 31, 1997 and February 6, 1998, respectively. This change will permit the Partnership to operate more efficiently with lower Partnership operating expenses. These semi-annual distributions will include cash distributions for the previous six months of operations. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 (CONTINUED) NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 130 (SFAS No. 130) "Reporting Comprehensive Income," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. Earlier application is permitted. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Company has not determined the effect on its financial position or results of operations, is any, from the adoption of this statement. Statement of Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosure about Segments of an Enterprise and Related Information," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. The new standard requires that public business enterprises report certain information about operating segments in complete sets of financial statements of the enterprises and in condensed financial statements of interim periods issued to shareholders. It also requires that public business enterprises report certain information about their products and services, the geographic areas in which they operate and their major customers. The Company has not determined the effect on its financial position or results of operations, if any, from the adoption of this statement. 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" within the Agreement. The ambiguity involved the treatment of the partnership management fee, being paid to the General Partner, as an expense of the Partnership, as opposed to a general partner withdrawal of capital. It was determined that the partnership management fee shall be treated as a withdrawal of capital in 1996 and beyond with a retroactive reallocation of capital for partnership management fees paid prior to 1996. In order to properly reflect this reallocation, 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. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements in the Management Discussion and Analysis constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements, expressed of implied by such forward-looking statements. INTRODUCTION The Partnership began offering for sale limited partnership units in October 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 intended on owning and operating 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 The Partnership began offering for sale limited partnership units in October 1987. On February 26, 1988, the Partnership reached its minimum offering 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 began paying distributions on a semi-annual basis with the first record date and payment date being December 31, 1997 and February 6, 1998, respectively. This change will permit the Partnership to operate more efficiently with lower Partnership operating expenses. These semi-annual distributions will include cash distributions for the previous six months of operations. During the quarter ended March 31, 1998, the Partnership made distributions to the general and limited partners totaling $118,907, which represented a income distribution for the period from July 1, 1997 thru December 31, 1997. 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 semi-annual distributions of cash, subject to maintenance of reasonable reserves. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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. Distributions to partners. 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 March 31, 1998. 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 effectively completed its acquisition phase, and entered the operating phase. The subsequent purchase of the remaining 10% interest in San Marcos property was achieved utilizing a combination of reserves and, undistributed operating profits that were held back for the purpose of facilitating the acquisition. The fourth point relates to partner distributions. The Partnership makes distributions from operations semi-annually. Such distributions are subject to payment of Partnership expenses and reasonable reserves for expenses, maintenance, and replacements. During the quarter ended March 31, 1998 the Partnership paid the General Partner a partnership management fee of $11,891. Partnership management fees were 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. 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 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. CASH FLOWS - MARCH 31, 1998 VS. MARCH 31, 1997 Cash resources decreased $59,764 during the three months ended March 31, 1998 compared to a $226 increase in cash resources for the three months ended March 31, 1997. Cash provided by operating activities increased by $59,143 with the largest contributor being $59,587 in cash basis net income (net income plus depreciation expense) for the three months ended March 31, 1998. In contrast, the three months ended March 31, 1997 provided $56,848 in cash from operating activities due primarily to $69,199 in cash basis net income. During 1998, $118,907 was distributed to the limited and general partners as noted in a large use of cash under financing activities. This continues the Partnership's trend of paying virtually all the cash basis income out to partners in the form of semi-annual distributions. In contrast, 1997's cash used for financing activities was $56,622 due to distributions to the limited and general partners. There were no investing activities during the three months ended March 31, 1998 or 1997. RESULTS OF OPERATIONS Operations for the quarter ended March 31, 1998 represented a full quarter of rental operations for the Partnership's two properties. The net income for the quarter ended March 31, 1998 ($33,969) was lower than the quarter ended March 31, 1997 ($43,586) due to lower rents collected from the San Marcos property. The Partnership did not have any adverse events that significantly impacted net income during the quarter ended March 31, 1998, and all properties that have been purchased by the Partnership have operated at levels equal to current expectations. All tenants are current on their lease obligations. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) RESULTS OF OPERATIONS (CONT.) Rental revenue decreased $16,751 (16%) for the three months ended March 31, 1998 as compared to the three months ended March 31, 1997, due to lower rents collected from the San Marcos property. Interest income increased $2,335 for the three months ended March 31, 1998 as compared to the three months ended March 31, 1997. This increase was due to the Partnership converting from a quarterly distribution cycle to a semi-annual distribution cycle with the first record date and payment date being December 31, 1997 and February 6, 1998, respectively. Hence, net income for the third quarter 1997 was held in a interest bearing account and paid on February 6, 1998. In contrast, the net income for the third quarter in 1996 was paid in November 1996. Operating expenses decreased $5,283 (38%) as a result of lower property taxes and leasing commission expenses during the quarter ended March 31, 1998 compared to the quarter ended March 31, 1997. General and administrative expenses increased $5,695 (59%) due to higher legal and accounting fees. Depreciation expense remained constant for the quarters ending March 31, 1998 and March 31, 1997. During the quarter ended March 31, 1998, the Partnership distributed $107,016 to the limited partners and $11,891 to the general partners, as compared to the quarter ended March 31, 1997 when the Partnership distributed $50,960 to the limited partners and $5,662 to the general partners. This increase was due to the Partnership converting from a quarterly distribution cycle to a semi-annual distribution cycle with the first record date and payment date being December 31, 1997 and February 6, 1998, respectively. Cash basis income for the quarter ended March 31, 1998 was $59,587. This was derived by adding depreciation and amortization expense to net income. In contrast, cash basis income for the quarter ended March 31, 1997 was $69,199. Overall, the Partnership generated $59,587 in income from operations before depreciation expense of $25,618 for the quarter ended March 31, 1998. This compares unfavorably to the quarter ending March 31, 1997 when income from operations totaled $69,199 before depreciation of $25,613. Net income per limited partnership unit decreased from $7.38 in 1997 to $5.55 in 1998. The number of limited partnership units outstanding in each quarter was 5,096. In summary then, despite lower rents at the San Marcos property all properties and the Partnership itself, were operating profitably. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) SALE OF PROPERTIES The Yorba Center located in Chino, California was listed for sale with a commercial real estate broker in October 1997. The acquisition cost of this property was $1,882,283. There is no debt associated with the property. At this time, there is no clear indication as to the amount of net proceeds to be realized from the sale of the property. However, the General Partner expects to be able to consummate a sale of the property during 1998. The proceeds from the sale of the property will be distributed to the limited partners and the General Partner in accordance with the terms of the Partnership Agreement. Although the Partnership intends to aggressively market the Yorba Center property, there is no guarantee that a sale will actually take place, within the time frame mentioned above, and at a sales price acceptable to the Partnership. NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 130 (SFAS No. 130) "Reporting Comprehensive Income," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. Earlier application is permitted. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Company has not determined the effect on its financial position or results of operations, is any, from the adoption of this statement. Statement of Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosure about Segments of an Enterprise and Related Information," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. The new standard requires that public business enterprises report certain information about operating segments in complete sets of financial statements of the enterprises and in condensed financial statements of interim periods issued to shareholders. It also requires that public business enterprises report certain information about their products and services, the geographic areas in which they operate and their major customers. The Company has not determined the effect on its financial position or results of operations, if any, from the adoption of this statement. 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) May 5, 1998 By: WEST COAST REALTY ADVISORS, INC. A California Corporation, A General Partner Neal E. Nakagiri Director and Executive Vice President/Secretary May 5, 1998 Michael G. Clark Vice President/Treasurer