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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2005

OR

Commission File Number: 0-16645

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

(650) 343-9300

(Registrant’s telephone number)

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  ¨

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

Total number of units outstanding as of May 16, 2005: 12,600

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INDEX

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

Balance Sheets

(in thousands, except units outstanding)

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

Statements of Operations

(in thousands, except per unit and unit amounts)

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

Statement of Partners’ Equity

For the three months ended March 31, 2005

(in thousands)

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

Statements of Cash Flows

(in thousands)

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Financial Statements

(Unaudited)

Note 1. ORGANIZATION

Rancon Income Fund I, a California Limited Partnership (“Partnership”) was organized in accordance with the provisions of the California Revised Limited Partnership Act for the purpose of acquiring, operating and disposing of existing income producing commercial, industrial and residential real estate properties. The Partnership reached final funding in April 1989. The Partnership was formed with initial capital contributions from Rancon Income Partners I, L.P. (“General Partner”) and Daniel L. Stephenson and Rancon Financial Corporation (RFC), the initial limited partner, who indirectly owns and controls the General Partner. RFC is wholly-owned by Daniel L. Stephenson. The General Partner and its affiliates are hereinafter referred to as the Sponsor or the General Partner. The Partnership has no employees.

As of March 31, 2005 and December 31, 2004, there were 12,600 Units outstanding, respectively.

In the opinion of RFC, the General Partner and Glenborough Realty Trust Incorporated (“Glenborough”), the Partnership’s asset and property manager, the accompanying unaudited financial statements contain all adjustments (consisting of only normal accruals) necessary to present fairly the financial position of the Partnership as of March 31, 2005, and December 31, 2004, and the related statements of operations for the three months ended March 31, 2005 and 2004, partners’ equity for the three months ended March 31, 2005, and cash flows for the three months ended March 31, 2005 and 2004.

On January 18, 2005, the Partnership entered into a contract to sell the remaining property of the Partnership—Wakefield Industrial Center (Wakefield) for a price of $3,900,000. On March 15, 2005, the sale closed and generated net proceeds of approximately $3,663,000 and a gain on sale of approximately $2,442,000.

After the close of escrow for the sale of Wakefield, the Partnership commenced with the final distributions of the available funds, net of expenses for audit, tax return preparation, tax consulting service, investor service, filing of all required SEC reports, legal service, dissolution service and others, and commenced with the dissolution of the Partnership per the Partnership agreement. The process will be done under the direction of our attorney and tax accountant in a timely manner.

In April 2005, the Partnership distributed proceeds from the sale of Wakefield, consisting of $3,175,000 to the Limited Partners and $65,000 to the General Partner.

Allocation of Net Income and Net Loss

Allocations of the profits and losses from operations are made pursuant to the terms of the Partnership Agreement.

Generally, net income from operations is allocated to the General Partner and the limited partners in proportion to the amounts of cash from operations distributed to the partners for each fiscal year. In no event shall the General Partner be allocated less than 1% of the net income from any period. If there are no distributions of cash from operations during such fiscal year, net income shall be allocated 90% to the limited partners and 10% to the General Partner. Net losses from operations are allocated 90% to the limited partners and 10% to the General Partner until such time as a partner’s account is reduced to zero. Additional losses will be allocated entirely to those partners with positive account balances until such balances are reduced to zero. In no event will the General Partner be allocated less than 1% of net loss for any period.

Net income other than net income from operations shall be allocated as follows: (i) first, 1% to the General Partner; (ii) second, to the partners who have a deficit balance in their capital account in proportion to and to the extent of such deficit balances, provided, that in no event shall the General Partner be allocated more than 10% of the net income other than net income from operations until the earlier of sale or disposition of substantially all of the assets or the distribution of cash (other than cash from operations) equal to the original invested capital of the General Partner and the limited partner; (iii) the balance, if any, shall be allocated (a) first, to the General Partner in an amount equal to the lesser of (1) the amount of cash from sale or financing anticipated to be distributed to the General Partner or (2) an amount sufficient to increase the General Partner’s account balance to an amount equal to such distribution from sale or financing; (b) the balance, to the limited partners. In no event shall the General Partner be allocated less than 1% of the net income other than net income from operations for any period.

Distributions

Distributions of cash from operations are generally allocated as follows: (i) first, to the limited partners until they receive a non-cumulative 6% return per annum on their unreturned capital contributions and (ii) the remainder, if any in a given year, shall be divided in the ratio of 90% to the limited partners and 10% to the General Partner.

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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Financial Statements

(Unaudited)

Distributions of cash from sales or financing are generally allocated as follows: (i) first, 2% to the General Partner and 98% to the limited partners until the limited partners have received an amount equal to their capital contributions; (ii) second, 2% to the General Partner and 98% to the limited partners until the limited partners have received a cumulative non-compounded return of 6% per annum on their unreturned capital contributions (less prior distributions of cash from operations); (iii) third, to the General Partner for the amount of subordinated real estate commissions payable per the Partnership Agreement; (iv) fourth, 2% to the General Partner and 98% to the limited partners until the limited partners have received an additional 4% return on their unreturned capital contributions (less prior distributions of cash from operations); (v) fifth, 2% to the General Partner and 98% to the limited partners until the limited partners who purchased their partnership units (“Units”) prior to June 1, 1988, receive an additional return (depending on the date on which they purchased the Units) on their unreturned capital of either 8%, 5% or 2% (calculated through the first anniversary date of the purchase of the Units); (vi) sixth, 98% to the General Partner and 2% to the limited partners until the General Partner has received an amount equal to 15% of all prior distributions made to the limited partners and the General Partner pursuant to subparagraph (iv) and (v), reduced by the aggregate of all prior distributions to the General Partner under subparagraph (iv) and (v); and (vii) seventh, the balance, 85% to the limited partners and 15% to the General Partner.

The terms of the Partnership agreement call for the General Partner to restore any deficits that may exist in its capital account after allocation of gains and losses from the sale of the final property owned by the Partnership, but prior to any liquidating distributions being made to the partners.

Management Agreement

Effective January 1, 1995, Glenborough Corporation (“GC”) entered into an agreement with the Partnership and other related Partnerships (collectively, the “Rancon Partnerships”) to perform or contract on the Partnership’s behalf for financial, accounting, data processing, marketing, legal, investor relations, asset and development management and consulting services for a period of ten years or until the liquidation of the Partnership, whichever comes first. Effective January 1, 1998, the agreement was amended to eliminate GC’s responsibility for providing investor relation services and Preferred Partnership Services, Inc., a California corporation unaffiliated with the Partnership, contracted to assume the investor relations services. In October 2000, GC merged into Glenborough.

Effective July 1, 1999, the agreement was further amended to: (i) reduce the asset administration fee to $100,000 plus CPI annually ($26,800 for the quarter ended March 31, 2004); (ii) increase the sales fee for improved properties from 2% to 3% and (iii) reduce the management fee applicable to Wakefield Industrial Center from 5% to 3% of the gross rental receipts. The Partnership will also pay Glenborough: (i) a sales fees of 4% for land; (ii) a refinancing fee of 1% and (iii) a management fee of 5% of gross rental receipts from Bristol Medical Center. As part of the agreement, Glenborough will perform certain duties for the General Partner of the Rancon Partnerships. RFC agreed to cooperate with Glenborough, should Glenborough attempt to obtain a majority vote of the limited partners to substitute itself as the General Partner for the Rancon Partnerships. Glenborough is not an affiliate of the Partnership or RFC.

In July 2004, the Partnership extended its management relationship with Glenborough through December 31, 2006. Commencing on January 1, 2005 and ending December 31, 2006, the Partnership engages Glenborough to perform services for the following fees: (i) a management fee of 3% of gross rental revenue; (ii) a construction services fee per certain schedules; (iii) a specified asset and Partnership services fee of $75,000 per year with reimbursements of certain expenses and consulting service fee ($18,000 for the quarter ended March 31, 2005); (vi) a sales fee of 2% for improved properties ($78,000 for the quarter ended March 31, 2005) and 4% for unimproved properties; (v) a financing services fee of 1% of gross loan amount; (vi) a development fee equals to 5% of the hard costs of the development project, excluding the cost of the land, and the development fee plus the general contractor’s fee shall not exceed 11.5%, in the aggregate, of the hard costs of the development project; and (vii) a dissolution service fee of $60,000. As part of this agreement, Glenborough will perform certain duties for the General Partner of the Rancon Partnerships.

Note 2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with Generally Accepted Accounting Principles in the United States of America (U.S. GAAP).

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 results of operations during the reporting period. Actual results could differ from those estimates.

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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Financial Statements

(Unaudited)

Rental Property

Rental property, including the related land, was stated at cost unless events or circumstances indicated that cost could not be recovered, in which case the carrying value was reduced to the estimated fair value. Estimated fair value: (i) was based upon the Partnership’s plans for the continued operation of each property; and (ii) was computed using estimated sales price, as determined by prevailing market values for comparable properties and/or the use of capitalization rates multiplied by annualized rental income based upon the age, construction and use of the building. The fulfillment of the Partnership’s plans related to each of its properties was dependent upon, among other things, the presence of economic conditions which would enable the Partnership to continue to hold and operate the properties prior to their eventual sale. Due to uncertainties inherent in the valuation process and in the economy, it was reasonably possible that the actual results of operating and disposing of the Partnership’s properties could be materially different than current expectations.

Depreciation was provided using the straight-line method over useful lives ranging from five to forty years for the respective assets.

Cash and Cash Equivalents

The Partnership considers money market funds and certificates of deposit with original maturities of less than ninety days when purchased to be cash equivalents.

Fair Value of Financial Instruments

For certain financial instruments, including cash and cash equivalents, prepaid expenses and other assets, accounts payable and other liabilities, recorded amounts approximate fair value due to the relatively short maturity period.

Deferred Costs

Deferred lease commissions were amortized over the initial fixed term of the related lease agreement on a straight-line basis.

Revenue

The Partnership recognized rental revenue on a straight-line basis at amounts that it believed it would collect on a tenant by tenant basis. The estimation process might result in higher or lower levels from period to period as the Partnership’s collection experience and the credit quality of the Partnership’s tenants changed. Actual amounts collected could be lower or higher than the amounts recognized on a straight-line basis if specific tenants were unable to pay rent that the Partnership has previously recognized as revenue, or if other tenants paid rent whom the Partnership previously estimated would not.

The Partnership’s portfolio of leases turned over continuously, with the number and value of expiring leases varying from year to year. The Partnership’s ability to re-lease the space to existing or new tenants at rates equal to or greater than those realized historically was impacted by, among other things, the economic conditions of the market in which a property was located, the availability of competing space, and the level of improvements which might be required at the property. No assurance could be given that the rental rates that the Partnership would obtain in the future would be equal to or greater than those obtained under existing contractual commitments.

Reimbursements from tenants for real estate taxes and other recoverable operating expenses were recognized as revenue in the period the applicable expenses are incurred. Differences between estimated and actual amounts were recognized in the subsequent year.

Sales of Real Estate

The Partnership recognizes sales of real estate when a contract is in place, a closing has taken place, the buyer’s investment is adequate to demonstrate a commitment to pay for the property and the Partnership does not have a substantial continuing involvement in the property. Each property is considered a separately identifiable component of the Partnership and is reported in discontinued operations when the operations and cash flows of the Property have been (or will be) eliminated from the ongoing operations of the Partnership as a result of the disposal transaction and the Property will not have any significant continuing involvement in the operations of the Partnership after the disposal transaction.

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RANCON INCOME FUND I,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Financial Statements

(Unaudited)

Net Income (Loss) Per Limited Partnership Unit

Net income (loss) per limited partnership unit is calculated using the weighted average number of limited partnership units outstanding during the period and the limited partners’ allocable share of the net income (loss).

Income Taxes

No provision for income taxes is included in the accompanying financial statements as the Partnership’s results of operations are passed through to the partners for inclusion in their respective income tax returns. Net income (loss) and partners’ equity for financial reporting purposes will differ from the Partnership income tax return because of different accounting methods used for certain items, principally depreciation expense and the provision for impairment of investments in real estate.

Reference to 2004 audited consolidated financial statements

These unaudited financial statements should be read in conjunction with the Notes to Financial Statements included in the December 31, 2004 audited financial statements on Form 10-K.

Note 3. INVESTMENTS IN REAL ESTATE

Rental property consisted of the following at March 31, 2005 and December 31, 2004:

In accordance with SFAS 144 “Accounting for the Impairment or Disposal of Long Lived Assets”, effective for financial statements issued for fiscal years beginning after December 15, 2002, net income and gain or loss on sales of real estate for properties sold or classified as held for sale subsequent to December 31, 2002 are reflected in the consolidated statements of operations as “Discontinued operations” for all periods presented.

Below is a summary of the results of operations of Wakefield through its disposition date (dollars in thousands):

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Background

Rancon Income Fund I, a California Limited Partnership, (“Partnership”) was organized in accordance with the provisions of the California Revised Limited Partnership Act for the purpose of acquiring, operating and disposing of existing income producing commercial, industrial and residential real estate properties. The Partnership reached final funding in April 1989. The Partnership was formed with initial capital contributions from Rancon Income Partners I, L.P. (“General Partner”) and Daniel L. Stephenson and Rancon Financial Corporation (RFC), the initial limited partner, who indirectly owns and controls the General Partner. RFC is wholly-owned by Daniel L. Stephenson. The General Partner and its affiliates are hereinafter referred to as the General Partner. The Partnership has no employees.

As of March 31, 2005, there were 12,600 Units outstanding.

Overview

Wakefield Industrial Center

In April 1987, the Partnership acquired the Wakefield facility, at a cost of approximately $1,899,000 plus acquisition fees of $87,000. The Wakefield property consists of three parcels totaling approximately 3.99 acres of land. Two buildings are constructed on two of the parcels with the remaining parcel served as a parking lot between the buildings. The property is located in Temecula, California, on the west side of Jefferson Avenue, approximately 500 feet west of the Interstate 15 highway in an area that is zoned for “medium manufacturing”.

Both buildings are composed of concrete tilt-up construction and have central heating and air conditioning systems in the office areas. One building contains approximately 25,000 square feet of leasable space, of which approximately 5,900 square feet is office space, with the balance used for manufacturing and related purposes. The other building contains approximately 19,200 square feet of leasable space of which approximately 4,800 square feet is office space, with the balance used for warehousing and related purposes. The Wakefield facility provides uncovered parking for approximately 54 cars and includes partially improved land which is used for car parking and truck access.

One tenant occupied 100% of the net rentable square footage of the two buildings. The principal terms of the lease and the nature of the tenant’s business are as follows:

On January 18, 2005, the Partnership entered into a contract to sell the remaining property of the Partnership - Wakefield for a price of $3,900,000. On March 15, 2005, the sale closed and generated net proceeds of approximately $3,663,000 and a gain on sale of approximately $2,442,000.

After the close of escrow for the sale of Wakefield, the Partnership commenced with the final distributions of the available funds, net of expenses for audit, tax return preparation, tax consulting service, investor service, filing of all required SEC reports, legal service, dissolution service and others, and commenced with the dissolution of the Partnership per the Partnership agreement. The process will be done under the direction of our attorney and tax accountant in a timely manner.

In April 2005, the Partnership distributed from sales proceeds of Wakefield $3,175,000 to the Limited Partners and $65,000 to the General Partner.

Liquidity and Capital Resources

The following discussion should be read in conjunction with the Partnership’s December 31, 2004 audited financial statements and the notes thereto.

On April 21, 1989, the Partnership was funded from the sale of 14,559 limited partnership units (“Units”) in the amount of $14,559,000. Four Units were retired in 1990. Prior to 2005, a total of 1,955 Units were redeemed. During the three months ended March 31, 2005, there were no Units redeemed, and 12,600 Units remain outstanding at March 31, 2005.

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As of March 31, 2005, the Partnership had cash and cash equivalents of $4,105,000.

Operating Activities

During the three months ended March 31, 2005, the Partnership’s cash provided by operating activities totaled $5,000.

Gain on sale of $2,442,000 was generated from the sale of Wakefield, which was sold on March 15, 2005.

The $14,000 decrease in prepaid expenses and other assets at March 31, 2005, compared to December 31, 2004, was primarily due to $34,000 from collection of rents receivable for Wakefield and insurance refund for Bristol Medical Center, offset by $20,000 for the write-off of tenant rents receivable recognized on a straight line basis as a result of the sale of the Wakefield.

The $18,000 decrease in accounts payable and other liabilities at March 31, 2005, compared to December 31, 2004, was primarily due to payments for audit and tax preparation fees, which were accrued in 2004.

The $15,000 decrease in security deposits at March 31, 2005, compared to December 31, 2004, was primarily due to the transfer of tenant security deposits from the Wakefield to the buyer after the sale.

Investing Activities

During the three months ended March 31, 2005, the Partnership’s cash provided by investing activities totaled $3,663,000 which was the net proceeds from the sale of the Wakefield.

Financing Activities

During the three months ended March 31, 2005, the Partnership’s cash used for financing activities totaled $128,000 which was the payment to the General Partner for the 2004 distribution.

Critical Accounting Policies

Revenue recognized on a straight-line basis

The Partnership recognized rental revenue on a straight-line basis at amounts that it believed it would collect on a tenant by tenant basis. The estimation process might result in higher or lower levels from period to period as the Partnership’s collection experience and the credit quality of the Partnership’s tenants changed. Actual amounts collected could be lower or higher than the amounts recognized on a straight-line basis if specific tenants were unable to pay rent that the Partnership had previously recognized as revenue.

Carrying value of rental properties

The Partnership’s rental property, including the related land, was stated at cost unless events or circumstances indicated that cost could not be recovered, in which case, the carrying value of the property was reduced to its estimated fair value. Estimated fair value was based upon (i) the Partnership’s plans for the continued operations of each property, and (ii) was computed using estimated sales price, as determined by prevailing market values for comparable properties and/or the use of capitalization rates multiplied by annualized rental income based upon the age, construction and use of the building. The fulfillment of the Partnership’s plans related to each of its properties was dependent upon, among other things, the presence of economic conditions which would enable the Partnership to continue to hold and operate the properties prior to their eventual sale. Due to uncertainties inherent in the valuation process and in the economy, it was reasonably possible that the actual results of operating and disposing of the Partnership’s properties could be materially different than current expectations.

Item 3. Qualitative and Quantitative Information About Market Risk

The Partnership does not own any derivative instruments, and does not have any debt obligations.

Item 4. Controls and procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision of the General Partner’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the General Partner’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in alerting him on a timely basis to material information required to be included in this report. There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION

None.

None.

None.

None.

None.

(a) Exhibits:

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SIGNATURES

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

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