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, 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 0-16805 ASSOCIATED PLANNERS REALTY FUND (Exact name of registrant as specified in its charter) CALIFORNIA 95-4036980 (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 FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 1. FINANCIAL STATEMENTS In the opinion of the General Partner of Associated Planners Realty Fund (the"Partnership"), all adjustments necessary for a fair presentation of the Partnership's results for the three and six months ended June 30, 1998 and 1997, have been made in the following financial statements which are normal and recurring in nature. However, such financial statements are unaudited and are subject to any year-end adjustments that may be necessary. BALANCE SHEETS JUNE 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997 JUNE 30, 1998 December 31, 1997 ASSETS Rental real estate, less accumulated depreciation (Note 2) $5,690,330 $5,765,095 Cash and cash equivalents 201,572 287,641 Other assets 56,610 39,812 TOTAL ASSETS $5,948,512 $6,092,548 LIABILITIES AND PARTNERS' EQUITY LIABILITIES Accounts payable: Trade $15,409 $16,152 Related party (Note 3) 12,076 13,375 Notes payable (Note 4) 1,454,854 1,469,817 Security deposits and prepaid rent 37,980 32,254 TOTAL LIABILITIES 1,520,319 1,531,598 Minority interest 199,837 204,741 PARTNERS' EQUITY (NOTE 6) Limited partners: $1,000 stated value per unit _ authorized 7,500 units; issued and outstanding 7,499 units 4,180,496 4,303,000 General partner 47,860 53,209 TOTAL PARTNERS' EQUITY 4,228,356 4,356,209 TOTAL LIABILITIES AND PARTNERS' EQUITY $5,948,512 $6,092,548 [FN] SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' EQUITY SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE AT DECEMBER 31, 1997 $4,356,209 7,499 $4,303,000 $53,209 Net income 42,041 -- 30,401 11,640 Distributions to limited partners (152,905) -- (152,905) -- Distributions to general partner (16,989) -- -- (16,989) BALANCE AT JUNE 30, 1998 $4,228,356 7,499 $4,180,496 $47,860 SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE AT DECEMBER 31, 1996 $4,392,108 7,499 $4,350,158 $41,950 Net income 112,429 -- 93,761 18,668 Distributions to limited partners (137,982) -- (137,982) -- Distributions to general partner (15,331) -- -- (15,331) BALANCE AT JUNE 30, 1997 $4,351,224 7,499 $4,305,937 $45,287 [FN] SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF INCOME THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, 1998 1997 1998 1997 REVENUES: Rental $180,599 $209,236 $346,753 $398,192 Interest 2,149 2,221 4,956 4,609 182,748 211,457 351,709 402,801 COSTS AND EXPENSES: Operating 30,660 36,540 68,338 69,626 Property taxes 10,090 9,410 25,327 19,056 Property management fees 9,076 10,502 16,221 19,805 General and administrative 28,972 18,797 43,387 35,601 Depreciation 41,308 41,250 82,615 82,502 Interest expense 33,213 33,869 72,535 67,892 153,319 150,368 308,423 294,482 LESS: MINORITY INTEREST IN NET LOSS OF JOINT VENTURE (4,461) (2,752) 1,245 (4,110) NET INCOME $33,890 $63,841 $42,041 $112,429 NET INCOME PER LIMITED PARTNERSHIP UNIT $ 3.57 $ 7.17 $4.05 $12.50 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, 1998 JUNE 30, 1997 Cash Flow from operating activities: Net income $42,041 $112,429 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 82,615 82,502 Minority interest in net income (loss) (1,245) 4,110 Increase (decrease) from changes in: Other assets (16,798) (31,947) Accounts payable (2,042) 14,846 Security deposits and prepaid rents 5,726 (6,870) Net cash provided by operating activities 110,297 (175,070) Cash flows used in investing activities: Tenant improvement additions (7,850) (20,980) Net cash (used in) investing activities (7,850) (20,980) Cash flows used in financing activities: Repayment of notes payable (14,963) (13,666) Distributions to minority interest (3,659) (6,611) Distributions to general partners (16,989) (15,331) Distributions to limited partners (152,905) (137,982) Net cash (used in) financing activities (188,516) (173,590) Net (decrease) increase in cash and cash equivalents (86,069) (19,500) Cash and cash equivalents at beginning of period 287,641 206,413 CASH AND CASH EQUIVALENTS AT END OF PERIOD $201,572 $186,913 [FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES BUSINESS Associated Planners Realty Fund (the "Partnership"), a California limited partnership, was formed on November 19, 1985 under the Revised Limited Partnership Act of the State of California. 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 purchased such properties on an all cash basis, or operated them on a moderately leveraged 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 consolidated 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. The consolidated financial statements include the accounts of Associated Planners Realty Fund and all joint ventures in which it has a majority interest. RENTAL REAL ESTATE AND DEPRECIATION Assets are stated at cost. Depreciation is computed using the straight-line method over estimated useful lives ranging from five to 35 years. 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. RENTAL INCOME Rental revenue is recognized on a straight-line basis to the extent rental revenue is deemed collectible. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES STATEMENTS OF CASH FLOWS For the purpose 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. EARNINGS (LOSS) PER UNIT On March 3, 1997, the FASB issued Statement of Financial Accounting Standards No. 128 -Earnings per unit (SFAS 128). This pronouncement provides a different method of calculating earnings per unit than is currently used in accordance with APB 15, Earnings per Unit. SFAS 128 provides for the calculation of Basic and Diluted earnings per unit. Basic earnings per unit includes no dilution and is computed by dividing income available to common unitholders by the weighted average number of common units outstanding for the period. Diluted earnings per unit reflects the potential dilution of securities that could unit in the earnings of the entity, similar to fully diluted earnings per unit. Except where the provisions of the Securities and Exchange Commission's Staff Accounting Bulletin No. 98 are applicable, common unit 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; early adoption is not permitted. The Partnership had adopted this pronouncement during the fiscal year ended December 31, 1997. The adoption of SFAS 128 does not effect earnings per unit for the fiscal year ended December 31, 1997 and prior years. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES 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 Partnership has not determined the effect on its financial position or results of operations, if 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 unitholders. 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 Partnership has not determined the effect on its financial position or results of operations, if any, from the adoption of this statement. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 NOTE 1- NATURE OF PARTNERSHIP The Partnership began accepting subscriptions in March 1986 and completed its funding in December 1987. Under the terms of the partnership agreement, the General Partner, West Coast Realty Advisors, is entitled to cash distributions ranging from 10% to 15%. The General Partner is also entitled to net income (loss) allocations varying from 1% to 15% and 1% depreciation and amortization allocations in accordance with the partnership agreement. NOTE 2- RENTAL REAL ESTATE The Partnership currently has interests in the following four rental real estate properties. Two are wholly-owned and two are jointly owned by the Partnership (81.2%) and Prado Land Company, an affiliate (18.8%): Location (Property Name) Date Purchased Cost Encinitas, California (179 Calle Magdalena) December 31, 1986 $ 705,918 Encinitas, California (187 Calle Magdalena) December 31, 1986 861,410 Clovis, California January 23, 1987 2,854,221 Simi Valley, California November 12, 1987 2,616,523 The major categories of property are: June 30, 1998 December 31, 1997 Land $2,361,894 $2,361,894 Building and Improvements 4,629,518 4,621,668 Furniture and Fixtures 46,660 46,660 7,038,072 7,030,222 Less accumulated depreciation 1,347,742 1,265,127 Net rental real estate $5,690,330 $5,765,095 ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 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 a tenant whose individual rent represented more than 10% of total rental revenue. Specifically: Four tenants accounted for 41%, 22%, 18% and 13% of total rental revenue in 1998; Four tenants accounted for 41%, 22%, 18% and 13% of total rental revenue in 1997; Two tenants accounted for 34% and 18% of total rental revenue in 1996; NOTE 3 - RELATED PARTY TRANSACTIONS (a) For Partnership management services provided to the Partnership, the General Partner is entitled to receive 10% of all distributions of cash from operations. These amounts totaled $-0- for the quarter ended June 30, 1998 and $7,666 for the quarter ended June 30, 1997, and $16,989 for the six months ended June 30, 1998 and $15,331 for the six months ended June 30, 1997. (b) For administrative services provided to the Partnership, the General Partner is entitled to reimbursement for the cost of certain personnel and relevant expenses. These amounts totaled $3,000 for the three months ended June 30, 1998 and June 30, 1997, and $6,000 for the six months ended June 30, 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 $9,076 for the quarter ended June 30, 1998, and $10,502 for the quarter ended June 30, 1997, and $16,221 for the six months ended June 30, 1998 and $19,805 for the six months ended June 30, 1997. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 (Continued) NOTE 4- NOTES PAYABLE In January 1995, the Partnership closed escrow on a parcel of land adjacent to the Shaw Villa Shopping Center. The purchase price of the land was $206,749, including a $13,102 acquisition fee paid to the Advisor. The purchase was financed using $23,602 in cash, and the remainder by a one year construction loan from Valliwide Bank of Fresno. The total construction loan commitment was for $1,365,000 that matured on October 5, 1996. Borrowings on the construction loan totaled $1,225,950 as of December 31, 1995. The construction was completed during 1995 and total construction costs of $1,372,900 was allocated to land, building and improvements. Included in construction costs is $87,838 in construction loan interest that was capitalized. In October 1996, the Partnership obtained permanent financing from a major insurance Partnership to replace the construction loan with a twenty year loan. The terms of the loan are as follows: Principal - $1,500,000; Interest Rate of 9.1% fixed for five years, then may be adjusted to the weekly average of the five - year Treasury Note yield for the seventh week prior to the Adjustment Date (5th anniversary date) plus 250 basis points, but in no event less than the existing rate, nor to exceed the maximum rate allowed by law; Amortized over twenty years; due November 1, 2006; and current monthly payments of principal and interest of $14,919. The note payable balance was $1,454,854 at June 30, 1998. The carrying amount is a reasonable estimate of fair value of the permanent loan payable because the interest rates approximate the borrowing rates currently available for mortgage loans with similar terms and average maturities. The aggregate annual future maturities at June 30, 1998 are as follows: 1998 ..................................$16,656 1999 .................................. 33,524 2000 .................................. 36,706 2001 .................................. 40,189 2002 .................................. 44,002 Thereafter ..........................1,284,777 Total $1,454,854 ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 (Continued) NOTE 5- NET INCOME AND CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP LIST The Net Income per Limited Partnership Unit was computed in accordance with the partnership agreement using the weighted average number of outstanding limited partnership units of 7,499 for 1998 and 1997. The Limited Partner cash distributions, computed in accordance with the Partnership Agreement, were as follows: Outstanding Amount Total Record Date Units Per Unit Distribution December 31, 1997 7,499 $ 20.39 $152,905 June 30, 1997 7,499 10.20 76,490 March 31, 1997 7,499 9.20 68,991 December 31, 1996 7,499 9.20 68,991 Total $367,377 September 30, 1996 7,499 $ 8.15 $ 61,117 June 30, 1996 7,499 8.15 61,117 March 31, 1996 7,499 8.15 61,117 December 31, 1995 7,499 7.14 53,543 Total $ 236,894 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. 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 FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 NOTE 6 - REALLOCATION OF PARTNER BALANCES In accordance with 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 should have been treated as a general partner withdrawal of capital. In order to properly reflect this inception to date correction, a transfer of $305,548 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 $104,986 ($14.00 per unit) on August 10, 1998 to Limited Partners of record as of June 30, 1998. ASSOCIATED PLANNERS REALTY 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 Partnership to be materially different from any future results, performance or achievements, expressed of implied by such forward-looking statements. INTRODUCTION Associated Planners Realty Fund (the "Partnership") was organized in November 1985, under the California Revised Limited Partnership Act. The Partnership began offering units for sale on March 28, 1986. As of December 27, 1987, the Partnership had raised $7,499,000 in gross capital contributions. The Partnership netted approximately $6,720,000 after sales commissions and syndication costs. 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 FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) INTRODUCTION (CONT.) 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 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 West Coast Realty Advisors, Inc., the General Partner. RESULTS OF OPERATIONS _ SIX MONTHS ENDED JUNE 30, 1998 VS. SIX MONTHS ENDED JUNE 30, 1997 Operations for the six months ended June 30, 1998 reflect an entire period of operations for the four properties owned by the Partnership. During 1998, the 187 Calle Magdalena building located in the Santa Fe Business Park was converted from executive suites to a single occupying tenant. While initially this change has had the effect of decreasing rental revenue, the partnership anticipates that operating costs reductions in subsequent quarters will more than offset such reduced revenue. Rental revenue decreased $51,439 (13%) due primarily to the successful phase out of the small tenants at the Santa Fe Business Park properties. Interest income increased $347 (7.5%) during the six months ended June 30, 1998 as compared to the six months ended June 30, 1997 due primarily to a large amount of funds held from approximately January 1, 1998 to June 30, 1998 as a result of the Partnership electing to pay distributions semiannually instead of quarterly. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS _ SIX MONTHS ENDED JUNE 30, 1998 VS. SIX MONTHS ENDED JUNE 30, 1997 (CONT.) The Partnership's overall costs and expenses increased for the six months ended June 30, 1998 compared to the six months ended June 30, 1997. Total expenses increased from $294,482 as of June 30, 1997 to $308,423 as of June 30, 1998, a $13,941 (4.7%) increase. This increase was the result of increases in three major expense categories, offset by a decrease in operating expenses and property management fees. General and administrative expenses increased $7,786 (21.9%) primarily due to an increase in legal and accounting expenses. Property taxes increased $6,271 (32.9%) primarily due to an increase in property taxes in connection with the Shaw Villa Shopping Center. Interest expense increased $4,643 (6.8%) as a result of interest charges incurred after the completion of construction at the Shaw Villa Shopping Center. Depreciation expense increased $113 (.1%) as a result of $7,850 in fixed asset additions during the six months ended June 30, 1998. Property management fees decreased $3,584 (18.1%) as a result of lower rental revenue collected during the six months ended June 30, 1998 compared to the six months ended June 30, 1997. Operating expenses decreased $1,288 (1.8%) due to lower consulting fees and utilities paid during the six months ended June 30, 1998 compared to the six months ended June 30, 1997. Net income for the six months ended June 30, 1998 was $70,388 (62.6%) lower than the six months ended June 30, 1998. This decrease can be attributed to the successful phase out of the small tenants at the Santa Fe Business Park properties as well as a reduction to Countrywide's monthly rent payment. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1998 VS. THREE MONTHS ENDED JUNE 30, 1997 Operations for the quarter ended June 30, 1998 reflect an entire period of operations for the four properties owned by the Partnership. During 1998, the 187 Calle Magdalena building located in the Santa Fe Business Park was converted from executive suites to a single occupying tenant. While initially this change has had the effect of decreasing rental revenue, the partnership anticipates that operating costs reductions in subsequent quarters will more than offset such reduced revenue. Rental revenue decreased $28,637 (13.7%) due primarily to the successful phase out of the small tenants at the Santa Fe Business Park properties. Interest income decreased $347 (3.2%) during the quarter ended June 30, 1998 as compared to the quarter ended June 30, 1997 due to lower cash balances maintained in money market accounts. The Partnership's overall costs and expenses increased for the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997. Total expenses increased from $150,368 as of June 30, 1997 to $153,319 as of June 30, 1998, a $2,951 (2%). This increase was the result of increases in two major expense categories, offset by a decrease in interest expense, operating expenses and property management fees. General and administrative expenses increased $10,175 (54.1%) primarily due to an increase in legal and accounting expenses. Property taxes increased $680 (7.2%) primarily due to an increase in property taxes in connection with the Shaw Villa Shopping Center. Depreciation expense increased $58 (.1%) as a result of $7,850 in fixed asset additions during the quarter ended June 30, 1998. Operating expenses decreased $5,880 (16.1%) due to lower consulting fees and utilities paid during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997. Property management fees decreased $1,426 (13.6%) as a result of lower rental revenue collected during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997. Interest expense decreased $656 (2%) as a result of larger amounts being allocated to principal as the loan on the Shaw Villa Shopping Center approaches maturity. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1998 VS. THREE MONTHS ENDED JUNE 30, 1997 (CONT.) Net income for the quarter ended June 30, 1998 was $29,951 (46.9%) lower than the quarter ended June 30, 1997. This decrease can be attributed to the successful phase out of the small tenants at the Santa Fe Business Park properties as well as a reduction to Countrywide's monthly rent payment. LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 1998 the Partnership made distributions to the general and limited partners totaling $118,907 (for the record date of December 31, 1997), of which approximately $78,000 constituted a return of capital. Distributions of $169,894 compared favorably to the $172,473 in cash generated from property operations (net income plus depreciation expense), for the six months ended December 31, 1997 on which such distributions were based. On February 6, 1998 the Partnership made a distribution to limited partners totaling $152,905. Additionally, the partnership distributed $16,989 to the general partner and $3,659 to the minority interest in certain joint ventures during the six months ended June 30, 1998. The record date for these distributions was 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. The Partnership began paying distributions on a semi-annual basis and made related payments on February 6, 1998. 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. 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, in the short-term and long-term, depends on several factors. Among them are: ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(CONTINUED) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) 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. The Partnership believes that it has the ability to generate sufficient cash to meet both short-term and long-term liquidity needs, based upon the above four factors. The first factor refers to the risk of Partnership's investments. The Partnership's investments in properties were paid for in cash or on a moderately leveraged basis. The second factor relates to the condition of the Partnership's properties. All Partnership properties are in good condition. There is no foreseeable need to increase reserves to fund deferred or unusual maintenance and repair expenditures. The third factor relates to life cycle. The Partnership completed its funding and acquisition of properties in previous years. Thus, the Partnership is in the property operating stage. As part of these operating activities, the partnership was involved in purchasing and developing the aforementioned parcel in Clovis, California in 1994 and 1995. This activity is expected to enhance rental revenues and increase the value of the Shaw Villa Shopping Center. The Partnership believes that cash flows provided by operating activities will continue. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(CONTINUED) LIQUIDITY AND CAPITAL RESOURCES (CONT.) The fourth factor relates to Partnership distributions. The Partnership is currently making semi-annual distributions from operations. Such distributions are subject to payments of Partnership expenses and reasonable reserves for expenses, maintenance, and replacements. In addition, at least six months of cash profits are left in the Partnership's balance sheet at each quarter end, since the Partnership makes distributions to the limited partners one month after each record date of June 30, and December 31. The General Partner believes that the Partnership will have the ability to meet its cash requirements in both the short-term and long-term. The Partnership began making distributions on a semi-annual basis and related payments were made on February 6, 1998. 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. The Partnership is attempting to sell the two office buildings located in Encinitas, California (179 and 187 Calle Magdalena), and the Shaw Villa Shopping Center located in Clovis, California. The net proceeds from such sales will be distributed to the limited partners and General Partner in accordance with the terms of the Partnership Agreement. The cost basis of these properties are: 179 Calle Magdalena $ 705,918 187 Calle Magdalena 861,410 Shaw Villa Shopping Center 2,854,221 During the six months ended June 30, 1998, the General Partner earned partnership management fees of $16,989. Subsequent to June 30, 1998, the General Partner received a partnership management fee of $11,655. Partnership management fees were paid and calculated in accordance with the partnership agreement. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(CONTINUED) LIQUIDITY AND CAPITAL RESOURCES (CONT.) 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. Slowdowns in the economy, inflation and changing prices have had a nominal effect on the Partnership's revenues and income from continuing operations. During the twelve 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 lease clauses with its tenants that will help alleviate much of the negative impact of inflation. Among these are: Triple net leases at the Shaw Villa Shopping Center and Pacific Bell Building which give the Partnership an ability to pass on higher operating costs to its tenants. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CASH FLOWS - SIX MONTHS ENDED JUNE 30, 1998 VS. SIX MONTHS ENDED JUNE 30, 1997 Cash and cash equivalents decreased $86,069 for the six months ended June 30, 1998 compared to a $19,500 decrease for the six months ended June 30, 1997. The continued decrease in cash resources is primarily due to distributions in excess of current earnings and fixed asset additions in the Santa Fe Business Park property. Cash provided from operating activities increased by $110,297 for the six months ended June 30, 1998, with the largest contributor being $124,656 in cash basis net income. In contrast, during the six months ended June 30, 1997, cash provided from operating activities amounted to $175,070 with the largest contributor being $194,931 in cash basis net income. Investing activities resulted in a $7,850 decrease in cash resources during the six months ended June 30, 1998 due to tenant improvements relating to the Santa Fe Business Park property. In contrast, the six months ended June 30, 1997 resulted in a $20,980 decrease in investing activities due to tenant improvements relating to the Santa Fe Business Park property. Cash from financing activities decreased $188,516 during the six months ended June 30, 1998 due to $173,553 being distributed to the limited, general and minority interest and $14,963 used as payments on notes payable. In contrast, cash used in financing activities for the six months ended June 30, 1997 decreased $173,590 due to $159,924 being distributed to the limited, general and minority interest partners and $13,666 used as payments on notes payable. 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 Partnership has not determined the effect on its financial position or results of operations, is any, from the adoption of this statement. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (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 unitholders. 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 Partnership has not determined the effect on its financial position or results of operations, if any, from the adoption of this statement. IMPACT OF YEAR 2000 Many existing computer systems and applications, and other control devices, use only two digits to identify a year in the date field, without considering the impact of the upcoming change in the century. As a result, such systems and applications could fail or create erroneous results unless corrected so that they can process data related to the Year 2000. The Partnership relies on its systems, applications and devices in operating and monitoring all major aspects of its business, including financial systems (such as general ledger, accounts receivable, accounts payable and unitholder servicing), and embedded computer chips, networks and telecommunications equipment and end products. The Partnership also relies, directly and indirectly, on external systems of business enterprises such as its advisor, lessees, suppliers, creditors, financial organizations, and of governmental entities for accurate exchange of data. The Partnership's current estimate is that the costs associated with the Year 2000 issue will not have a material adverse effect on the results of operations or financial position of the Partnership. However, despite the Partnership's efforts to address the Year 2000 impact on its internal systems, the Partnership may not have fully identified such impact or whether it can resolve it without disruption of its business and without incurring significant expense. In addition, even if the internal systems of the Partnership are not materially affected by the Year 2000 issue, the Partnership could be affected through disruption in the operations of the enterprises with which the Partnership interacts. ASSOCIATED PLANNERS REALTY 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 The Partnership was named as a defendant in CARMEN MARGALA V. DAVID L. MURDOCK, WILBUR HORWITZ, ASSOCIATED PLANNERS REALTY FUND AND DOES 1-100, INCLUSIVE. The lawsuit was filed on July 31, 1997 and served on the Partnership on November 14, 1997. The plaintiff alleged breach of contract, fraud and deceit, intentional misrepresentation, conversion, interference with third party economic benefit and sexual harassment. All defendants denied the allegations in their entirety. After a lengthy and contentious discovery process, the trial court dismissed the entire case on May 8, 1998. Plaintiff's motion for a re-hearing on the merits was denied on July 30, 1998. It is unknown whether plaintiff will pursue a further appeal. 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 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 FUND A California Limited Partnership (Registrant) August 13, 1998 By: WEST COAST REALTY ADVISORS, INC. A California Corporation, General Partner W. Thomas Maudlin Jr. President August 13, 1998 John R. Lindsey Vice President/Treasurer