Form 10-QSB

[X]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 
     For the Quarterly period ended September 30, 1998

[ ]  TRANSITION  REPORT UNDER  SECTION 13 OR 15(d) OF THE EXCHANGE ACT 
     For the transition period from __________ to __________

                         Commission file number 0-28710

                     (Exact name of small business issuer as
                            specified in its charter)
  Performance Asset Management Fund IV, Ltd., A California Limited Partnership

(State or other jurisdiction                                 (IRS Employer
of incorporation or organization)                            Identification No.)
       California                                            33-0548134

                    (Address of principal executive offices)
            4100 Newport Place, Suite 400, Newport Beach, California

                           (Issuer's telephone number)
                                 (714) 261-2400

(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the registrant was required to file such report(s),  and (2)
has been subject to such filing requirements for the past 90 days. Yes _X_ No __

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

     PROCEEDINGS  DURING THE PRECEDING  FIVE YEARS Check whether the  registrant
filed all documents and reports  required to be filed by Section 12, 13 or 15(d)
of the Exchange Act after the  distribution of securities under a plan confirmed
by court. Yes ___ No ___.

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date: N/A

     Transitional Small Business Disclosure Format (check one):

                           Yes ___           No _X_


                                       1

<PAGE>


                   PERFORMANCE ASSET MANAGEMENT FUND IV, LTD.,
                        A CALIFORNIA LIMITED PARTNERSHIP

                              INDEX TO FORM 10-QSB



                                     PART I


Item 1. Financial Statements

Item 2. Management's Discussion and Analysis of Plan of Operation



                                     PART II


Item 1. Legal Proceedings

Item 2. Exhibits and Reports

               Signatures


                                       2

<PAGE>


                   PERFORMANCE ASSET MANAGEMENT FUND IV, LTD.,
                        A CALIFORNIA LIMITED PARTNERSHIP


                                     PART I


ITEM 1. FINANCIAL STATEMENTS


Index to the Financial Statements for the Partnership:

          Balance Sheets as of September 30, 1998 and December 31, 1997 .......4

          Statements of Operations for the Three and Nine months Ended
                  September 30, 1998 and September 30, 1997 ...................5

          Statements of Partners' Capital (Deficit) for the Nine months Ended
                  September 30, 1998 and the year ended December 31, 1997 .... 6

          Statements of Cash Flows for the Nine Months Ended September 30,
                  1998 and September 30, 1997 .................................7

          Notes to Financial Statements ...................................... 8

          The  financial  statements  have been  prepared by  Performance  Asset
          Management   Fund  IV,   Ltd.,  A   California   Limited   Partnership
          ("Partnership"),  without audit, pursuant to the rules and regulations
          of the Securities and Exchange  Commission.  Certain  information  and
          footnote   disclosures   normally  included  in  financial  statements
          prepared in accordance with generally accepted  accounting  principles
          have been condensed or omitted pursuant to such rules and regulations.
          The Partnership believes that the disclosures are adequate to make the
          information presented not misleading when read in conjunction with the
          Partnership's  financial  statements  for the year ended  December 31,
          1997. The financial  information  presented  reflects all adjustments,
          consisting  only of normal  recurring  adjustments,  which are, in the
          opinion of  management,  necessary for a fair statement of the results
          for the interim periods presented.


                                       3

<PAGE>


                   PERFORMANCE ASSET MANAGEMENT FUND IV, LTD.,
                        A CALIFORNIA LIMITED PARTNERSHIP

                                 BALANCE SHEETS
                    September 30, 1998 and December 31, 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                     ASSETS
                                                                               1998                1997
                                                                          ------------        ------------
<S>                                                                       <C>                 <C>
Cash and equivalents                                                      $  1,497,640        $  1,995,810
Cash held in trust                                                           2,949,656           2,849,998
Investments in distressed loan portfolios, net                               9,906,274           7,255,916
Deposit on distressed loan portfolio acquisition                                  --             2,858,076
Due from affiliate                                                                --               231,443
Other assets                                                                   104,977             104,977
                                                                          ============        ============
          Total assets                                                    $ 14,458,547        $ 15,296,220
                                                                          ============        ============

                        LIABILITIES AND PARTNERS' CAPITAL

Accounts  payable                                                         $      5,350        $     61,713
Due to affiliates, net                                                         314,115           1,225,572
                                                                          ------------        ------------
          Total liabilities                                                    319,465           1,287,285
                                                                          ------------        ------------

Commitments and contingencies

General partner's deficit (no units outstanding)                            (1,024,556)         (1,039,077)
Limited partners' capital (12,000 units authorized;
  11,454 and 11,462 units issued and outstanding at
  at September 30, 1998 and December 31, 1997 respectively)                 15,163,638          15,048,012
                                                                          ------------        ------------
          Total partners' capital                                           14,139,082          14,008,935
                                                                          ============        ============
          Total liabilities and partners' capital                         $ 14,458,547        $ 15,296,220
                                                                          ============        ============
</TABLE>


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

                                        4

<PAGE>


                   PERFORMANCE ASSET MANAGEMENT FUND IV, LTD.,
                        A CALIFORNIA LIMITED PARTNERSHIP

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            For the Three                     For the Nine
                                                      Months Ended September 30         Months Ended September 30
                                                    ----------------------------      ----------------------------
                                                        1998               1997          1998              1997
                                                    -----------      -----------      -----------      -----------
<S>                                                   <C>                <C>           <C>              <C>
Portfolio collections                                $1,259,482         $630,035       $3,746,787       $2,047,261
Less: portfolio basis recovery                        1,197,479          606,690        3,569,596        1,998,422
                                                    -----------      -----------      -----------      -----------
            Net investment income                        62,003           23,345          177,191           48,839
                                                    -----------      -----------      -----------      -----------
Cost of operations:
       Collection expense                                16,858           47,988          121,061          215,877
       Management fee expense                            60,113           52,010          191,271          160,734
       Professional fees                                 92,195            2,359          156,675          168,152
       Amortization                                        --                917             --              2,842
       General and administrative expense                   125            1,176            1,546           64,976
                                                    -----------      -----------      -----------      -----------
            Total operating expenses                    169,291          104,450          470,553          612,581
                                                    -----------      -----------      -----------      -----------
Income (loss) from operations                          (107,288)         (81,105)        (293,362)        (563,742)
Other income:
       Interest                                          62,076          (21,303)         175,091          167,337
       Other income                                       7,362             --            263,468            9,993
                                                    -----------      -----------      -----------      -----------
Net income (loss)                                      ($37,850)       ($102,408)        $145,197        ($386,412)
                                                    ===========      ===========      ===========      ===========

Net income (loss) allocable to general partner          ($3,785)        ($10,241)         $14,521         ($38,641)
                                                    ===========      ===========      ===========      ===========
Net income (loss) allocable to limited partners        ($34,065)        ($92,167)        $130,676        ($347,771)
                                                    ===========      ===========      ===========      ===========
Net income (loss) per limited partnership unit           ($2.97)          ($8.04)          $11.41          ($30.36)
                                                    ===========      ===========      ===========      ===========
</TABLE>


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

                                        5

<PAGE>


                   PERFORMANCE ASSET MANAGEMENT FUND IV, LTD.,
                        A CALIFORNIA LIMITED PARTNERSHIP

                         STATEMENTS OF PARTNERS' CAPITAL
             (DEFICIT) For the Nine Months Ended September 30, 1998
                        and Year Ended December 31, 1997

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                              General           Limited
                                              Partner           Partners            Total
                                            ------------      ------------      ------------
<S>                                          <C>                <C>               <C>
Balance, December 31, 1996                      (748,842)       17,683,367        16,934,525
     Redemption of 10 partnership units             --             (25,000)          (25,000)
     Distributions                              (222,907)       (2,004,399)       (2,227,306)
     Net income (loss)                           (67,328)         (605,956)         (673,284)
                                            ------------      ------------      ------------
Balance, December 31, 1997                   ($1,039,077)      $15,048,012       $14,008,935
     Redemption of 8 partnership units                            ($15,050)         ($15,050)
     Net income                                   14,521           130,676           145,197
                                            ------------      ------------      ------------
Balance, September 30, 1998                  ($1,024,556)      $15,163,638       $14,139,082
                                            ============      ============      ============
</TABLE>


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

                                        6

<PAGE>


                   PERFORMANCE ASSET MANAGEMENT FUND IV, LTD.,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          STATEMENTS OF CASH FLOWS For
                the Nine Months Ended September 30, 1998 and 1997

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               Sept. 30, 1998    Dec. 31, 1997
                                                               --------------    --------------
<S>                                                              <C>              <C>       
Cash flows from operating activities:
     Net income (loss)                                             $145,197        ($386,412)
     Adjustments to reconcile net income (loss) to net cash
          provided by operating activities:
            Amortization                                               --              2,842
            Decrease (increase) in assets:
                   Due from affiliates                              231,443          136,022
                 Increase (decrease) in liabilities:
                   Accounts payable                                 (56,363)          (1,001)
                   Due to affiliates                               (911,458)         158,946
                                                                -----------      -----------
                 Net cash provided by (used in)
                  operating activities                             (591,181)         (89,603)
                                                                -----------      -----------
Cash flows provided by (used in) investing activities:
     Recovery of portfolio basis                                  3,569,596        1,998,422
     Cash held in trust                                             (99,658)       3,018,477
     Purchase of investments in distressed loan portfolios       (6,219,953)        (764,586)
     Deposit on distressed loan portfolio acquisition             2,858,076             --
                                                                -----------      -----------
                 Net cash provided by investing activities          108,061        4,252,313
                                                                -----------      -----------
Cash flows provided by (used in) financing activities:
     Redemption of limited partnership units                       ($15,050)         (25,000)
     Distributions to partners                                         --         (2,227,303)
                                                                -----------      -----------
                 Net cash used in financing activities              (15,050)      (2,252,303)
                                                                -----------      -----------
Net (decrease) increase in cash                                    (498,170)       1,910,407
Cash at beginning of period                                       1,995,810        2,121,545
                                                                ===========      ===========
Cash at end of period                                            $1,497,640       $4,031,952
                                                                ===========      ===========
</TABLE>


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

                                        7

<PAGE>


                   PERFORMANCE ASSET MANAGEMENT FUND IV, LTD.,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

     Organization and Description of Business

     Performance   Asset   Management  Fund  IV,  Ltd.,  A  California   Limited
     Partnership ("Partnership"), was formed in October 1992, for the purpose of
     acquiring  investments in or direct ownership of distressed loan portfolios
     from financial institutions and other sources. Interests in the Partnership
     were sold in an intrastate  offering to residents of California pursuant to
     the provisions of Section 3(A) (11) of the Securities Act of 1933; however,
     the Partnership did not begin its primary  operations until March 1993. The
     General Partner is Performance Development,  Inc., a California corporation
     ("General Partner").

     The  Partnership  terminates  at  December  31,  2005.  At that  time,  the
     Partnership will distribute any remaining cash after payment of Partnership
     obligations following the sale or collection of all assets.

     Profits,  losses,  and cash  distributions are allocated 90% to the limited
     partners  and 10% to the  General  Partner  until such time as the  limited
     partners  have received  cash equal to 100% of their  contributions  to the
     capital  of the  Partnership  plus an  amount  equal to 6% per annum of the
     limited partners contributions to the capital of the partnership, yet to be
     returned.  Thereafter,  Partnership profits, losses, and cash distributions
     will be  allocated  70% to the  limited  partners  and  30% to the  General
     Partner.

     Cash and Equivalents

     The Partnership  defines cash equivalents as all highly liquid  investments
     with an  original  maturity  of  three  months  or  less.  The  Partnership
     maintains cash balances at one bank in accounts which, at times, may exceed
     federally  insured limits.  The Partnership  uses a cash management  system
     whereby idle cash balances are transferred  daily into a master account and
     invested  in high  quality,  short-term  securities  that do not  enjoy the
     benefit of the federal  insurance.  The General Partner believes that these
     cash balances are not subject to any  significant  credit risk,  due to the
     nature  of the  investments  and  the  strength  of the  bank  and  has not
     experienced any losses with cash and equivalent investments.

     The Partnership received interest income from these investments of $175,091
     and $167,337 for the nine months ended September 30, 1998 and September 30,
     1997, respectively.


                                       8

<PAGE>


     Cash Held in Trust

     The General  Partner was planning to reorganize  and merge the  Partnership
     and  Performance   Asset  Management  Fund,  Ltd.,  A  California   Limited
     Partnership;  Performance  Asset  Management  Fund II,  Ltd.,  A California
     Limited  Partnership;  Performance  Asset Management IV, Ltd., A California
     Limited   Partnership;   Performance  Asset  Management  Fund  V,  Ltd.,  A
     California  Limited  Partnership,  all affiliates of the partnership  ("PAM
     Funds"), and Performance Capital Management, Inc., a California corporation
     of another affiliate of the Partnership ("PCM"),  with and into Performance
     Asset Management Company, a Delaware Corporation ("PAMCO")  ("Rollup").  In
     an effort to accomplish the Rollup,  the General Partner,  on behalf of the
     Partnership  and the PAM Funds,  entered  into an agreement on December 12,
     1995,   with  the   State  of   California   Department   of   Corporations
     ("Department"),  pursuant to the provisions of which the Performance  Asset
     Management  Fund  Trust  ("Trust")  was  created.   Certain  funds  of  the
     Partnership are held by the Trust and these funds held in trust are subject
     to the terms of the Trust  agreement.  The Trust was the recipient of those
     funds  resulting  from a  settlement  of certain  then  pending  litigation
     between the  Partnership  and its  affiliates  and West  Capital  Financial
     Services Corp. and its affiliates.  The funds held by the Trust must not be
     less than $5,000,000,  which is comprised of funds from the Partnership and
     the PAM Funds. The Trust agreement  specifies that the Trust will terminate
     and the trustee  will  distribute  all of the  remaining  funds held by the
     trustee on August 16, 1998 if the Rollup is not completed by such date. The
     Department  opposed the  termination  of the Trust on August 16, 1998. As a
     result,  the term of the Trust was extended to November  18, 1998;  and the
     General  Partner  anticipates  that the term of the trust will be  extended
     again.  The  Partnership  is  attempting  to  reach an  agreement  with the
     Department  regarding the  termination of the Trust and the  disposition of
     the Partnership's  funds held by the Trust. The Partnership's  share of the
     Trust's funds at September 30, 1998 and December 31, 1997,  was  $2,216,480
     and $2,141,584, respectively.

     Litigations

     On or about  November  12,  1998,  attorneys  for the General  Partner were
     informed  by  the  State  of  California   Commissioner   of   Corporations
     ("Commissioner")  that the Commissioner  then intended to file an action in
     Los Angeles  Superior  Court  seeking to have  appointed a receiver to take
     over  the  affairs  of  the  Partnership   and  its  affiliated   entities.
     Additionally,  a hearing in Los Angeles County  Superior Court is scheduled
     to occur at 8:30 A.M. on November 16, 1998,  for the purpose of the Court's
     determination  whether or not such a receiver is necessary or  appropriate.
     The  General  Partner  intends,  for and on behalf of the  Partnership,  to
     oppose the appointment of such a receiver.

     The  Commissioner  has informed  attorneys for the General Partner that the
     Commissioner  has determined  that certain  affiliates of the  Partnership,
     i.e., Vincent E. Galewick; Income Network Company, the Placement Manager of
     the  offer  and sale of the  Units in the  Partnership;  Performance  Asset
     Management  Company,  a Delaware  corporation  ("PAMCO");  and  Performance
     Telecom  Services,  LLC, a California  limited  liability  company ("PTS"),
     filed documents with the Commissioner which contained misrepresentations of
     material  fact;  and,  additionally,  those  documents  omitted  to specify
     certain  material facts which, in the opinion of the  Commissioner,  should
     have been included therein.  Those affiliates  disagree  significantly with
     the  determination  of the Commissioner and intend to oppose any litigation
     or other  enforcement  action commenced by the  Commissioner  against those
     affiliates.


                                       9

<PAGE>

     Additionally,  on or about  November 6, 1998,  the  Commissioner  issued to
     Vincent E.  Galewick and Income  Network  Company two (2) cease and refrain
     orders.  One such order orders Mr.  Galewick and Income Network  Company to
     desist  and  refrain  from  the  further  offer  and  sale in the  State of
     California  of  securities  by means of  misrepresentation  or omissions of
     material  facts in violation of Section 25401 of the  California  Corporate
     Securities Law of 1968 ("Law").  Mr.  Galewick and Income  Network  Company
     deny that either of them have  offered or sold  securities  in the State of
     California by means of  misrepresentation  or omissions of material  facts.
     Neither Mr.  Galewick nor Income Network Company believe that either Income
     Network  Company or Mr. Galewick is  participating  in the offer or sale in
     the State of  California of  securities  by means of  misrepresentation  or
     omissions of material  facts in violation of Section  25401 of the Law. The
     second order issued to Mr.  Galewick only orders Mr. Galewick to desist and
     refrain  from the  further  offer  and sale in the State of  California  of
     securities unless and until qualification of those securities has been made
     pursuant to the provisions of the Law.

     The  Commissioner  believes that Mr. Galewick and certain of his affiliates
     have made certain  misrepresentations  and  omissions of material  facts in
     certain   applications   to   qualify   (register)   securities   with  the
     Commissioner.  Those  misrepresentations  and  omissions  relate to (i) the
     affairs of Desert Hot Springs Resort Limited  Partners,  Series A, Ltd. and
     Desert Hot Springs Resort Limited Partners,  Series B, Ltd., two California
     limited partnerships for which Performance Development,  Inc. (wholly owned
     by Mr. Galewick and which serves as the General Partner of the Partnership)
     serves  as the  General  Partner  (collectively,  "DHSRLP");  (ii)  certain
     litigation  filed  by  SunAmerica,  Inc.  and  certain  of  its  affiliates
     (collectively, "SunAmerica")  against  Mr.  Galewick  and  certain  of his
     affiliates  alleging fraud and deceit,  gross  negligence and violations of
     Section 10(b) of the  Securities  Exchange act of 1934 and Rule 10b-5;  and
     (iii)  compensation  paid by the Partnership  and other similar  California
     limited  partnerships  to various  affiliates  of the  General  Partner and
     Income Network Company.  Mr. Galewick and those affiliates believe that (i)
     no such  misrepresentations  or omissions of material  facts were, in fact,
     made relating  either to (a) DHSRLP or (b) the  SunAmerica  litigation  and
     (ii)  SunAmerica  has no basis for its litigation  against Mr.  Galewick or
     those affiliates.  The General Partner believes that appropriate disclosure
     regarding compensation paid by the Partnership and those other partnerships
     to those affiliates was made.

                                       10
<PAGE>


     On November  12, 1998,  the  Commissioner  issued an order  pursuant to the
     provisions of Section 25531 of the California  Corporations Code appointing
     Barry  A.  Fisher  as  a  Keeper  for  Income  Network  Company  ("Keeper")
     ("Order").  Pursuant to the provisions of the Order,  the Keeper shall take
     possessions  of all books,  records,  accounts  and other  papers of Income
     Network  Company.  Additionally,  the Keeper is  authorized,  empowered and
     directed to employ  attorneys and such other persons as the Keeper may deem
     to be  necessary  to assist  the  Keeper in the  performance  of his duties
     contemplated by the provisions of the Order.  The Keeper is to undertake an
     independent  review into the books,  records,  accounts and other papers of
     Income  Network  Company and file with the  Department  an inventory of all
     books,  records,  accounts  and other papers of Income  Network  Company of
     which he shall then have reviewed,  observed and/or discovered  pursuant to
     the  provisions  of the Order.  The Order does not allow the Keeper to take
     possession  of or  interfere in the  business of the  affiliates  of Income
     Network Company.  Income Network Company has notified the Commissioner that
     Income Network Company  intends to take any and all legal action  necessary
     or  appropriate,  including a hearing in Los Angeles County Superior court,
     to cause the Keeper to be  removed  from  Income  Network  Company  and his
     powers, granted pursuant to the provisions of the Order, terminated.

     Investments in Distressed Loan Portfolios and Revenue Recognition

     Investments in distressed  loan portfolios are carried at the lower of cost
     or estimated  net  realizable  value.  Amounts  collected  are treated as a
     reduction to the carrying basis of the related investments on an individual
     portfolio  basis  and  are  reported  in the  Statement  of  Operations  as
     portfolio   collections.   Under  the  cost  recovery   method  of  revenue
     recognition  used  by  the  Partnership,   net  investment  income  is  not
     recognized  until 100% recovery of the carrying  value of the investment in
     each  portfolio  occurs.  Estimated net  realizable  value  represents  the
     management's estimates,  based on its present plans and intentions,  of the
     present value of future collections.  Due to the distressed nature of these
     investments, no interest is earned on outstanding balances, and there is no
     assurance  that the unpaid  principal  balances of these  investments  will
     ultimately be collected. Any adjustments reducing the carrying value of the
     individual  portfolios  are  recorded  in the  results of  operations  as a
     general and administrative expense.


                                       11
<PAGE>


     Organization Costs, Net

     Organization  costs  include  legal and other  professional  fees  incurred
     related to the

     organization of the Partnership.  These costs are capitalized and amortized
     using the  straight-line  method over five years.  Organization  costs were
     fully amortized at December 31, 1997.

     Professional Fees

     Professional fees are incurred in relation to ongoing  accounting and legal
     assistance.

     Income Taxes

     No provision  for income taxes has been made in the  financial  statements,
     except for the Partnership's minimum state franchise tax liability of $800.
     All  partners  report  individually  on their  share  of the  Partnership's
     operating results.

     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 revenue  and  expenses
     during the reported period. Actual results could differ from the estimates.

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

     Disclosure regarding: Forward Looking Statements

     The  information  contained  in this  report  on Form  10-QSB,  other  than
     historical facts,  contains  "forward-looking  statements" (as such term is
     defined within the meaning of the Private Securities  Litigation Reform Act
     of 1995) including, without limitation,  statements as to the Partnership's
     objective to grow through future portfolio acquisitions,  portfolio account
     sales, the Partnership's  ability to realize operating  efficiencies in the
     integration  of  its  acquisitions,  trends  in  the  Partnership's  future
     operating  performance,  and  statements  as to  the  Partnership's  or the
     General  Partner's  beliefs,  expectations  and opinions.  Forward  looking
     statements  may be  identified by the use of forward  looking  terminology,
     such as "may",  "will",  "expect",  "estimate",  "anticipate",  "probable",
     "possible",  "should",  "continue",  or similar terms,  variations of those
     terms  or the  negative  of those  terms.  Forward-looking  statements  are
     subject to risks and  uncertainties  and may be affected by various factors
     which may cause  actual  results  to differ  materially  from  those in the
     forward-looking  statements.  In addition to the factors  discussed in this
     Report, certain risks, uncertainties and other factors, including,  without
     limitation,  the risk  that  the  Partnership  will not be able to  realize
     operating  efficiencies  in  the  integration  of its  acquisitions,  risks
     associated with growth and future  acquisitions,  fluctuations in quarterly
     operating  results,  and the other risks  detailed from time to time in the
     Partnership's   filings  with  the  Securities  and  Exchange   Commission,
     including the  Partnership's  Annual Report on Form 10-KSB,  dated on March
     31,  1998,  can cause  actual  results and  developments  to be  materially
     different  from  those   expressed  or  implied  by  such   forward-looking
     statements.


                                       12
<PAGE>


     Results of Operations

     The  Partnership  recorded net  investment  income of $177,191 for the nine
     months  ended  September  30, 1998,  a 263%  increase  from $48,839 for the
     comparable  period in 1997.  This  increase was generated  from  additional
     portfolios  that collected in excess of the carrying value of its basis and
     accordingly  is reflected as net  investment  income.  Approximately  5% of
     portfolio collections received for the nine months ended September 30, 1998
     are reflected as income, compared to 2% for the similar period in 1997.

     Net investment  income of $177,191 for the nine months ending September 30,
     1998 is the direct result of portfolio collection proceeds from nine of the
     Partnership's  portfolios.  These nine portfolios  owned by the Partnership
     contain two portfolios which  contributed 48% of the net investment  income
     and seven other portfolios  which  contributed the remaining net investment
     income during the nine months ended September 30, 1998. Collections for the
     months  ended July 31,  1998,  August 31,  1998,  and  September  30, 1998,
     totaled $510,250, $364,611, and $384,621, respectively.

     The Partnership received proceeds from portfolio sales of $664,759 of which
     100% were  recorded as  recoveries  of  investment  basis and  reflected in
     portfolio  collections  for the  nine  months  ended  September  30,  1998.
     Proceeds  totaling  $40,691 were received for the  comparable  period ended
     September 30, 1997. The General Partner  continues to believe that proceeds
     from  both  collection  and  portfolio   account  sales  will  continue  in
     subsequent periods.

     Total operating  expenses of the Partnership  decreased 23% to $470,553 for
     the nine months ended  September 30, 1998, from $612,581 for the comparable
     period  in 1997.  The  decrease  is due  primarily  to a 98%  reduction  in
     collection  expenses  and  general  and  administrative  fees.  General and
     administrative  fees was $1,546 for the nine  months  ended  September  30,
     1998,  from  $64,976 for the similar  period in 1997.  Collection  expenses
     decreased  44%, to $121,061  for the nine months ended  September  30, 1998
     from $215,877 for the same period in 1997. The skip tracing process used by
     the  Partnership to locate and identify debtor  accounts  decreased  during
     this period, reducing collection expenses. Management fees increased by 16%
     to $191,271 for the nine months ended  September 30, 1998,  from  $160,734,
     which was directly  related to the increase of  investments  in  distressed
     loan portfolios and net assets under management.

     Total  operating  expenses of the  Partnership as a percentage of portfolio
     collections  decreased 17%, to 13% for the nine months ended  September 30,
     1998 from 30% in the comparable  period in 1997. This decrease is primarily
     attributed to a decrease in general and administrative  expenses associated
     with the Partnership.

     Total operating  expenses of the Partnership  increased 61% to $169,291 for
     the three months ended  September 30, 1998 from $104,450 for the comparable
     period of 1997.  The  increase in total  operating  expenses  is  primarily
     attributed  to an increase in  professional  fees by 97%.  Management  fees
     increased  14% for the quarter  ended  September  30, 1998 to $60,113  from
     $52,010 for the similar period ended 1997, due to


                                       13
<PAGE>


     the  acquisition  of  new  portfolios   increasing  the  net  assets  under
     management.  Collection fees decreased 65% to $16,858,  from $47,988.  This
     decrease in collection  expenses is due  essentially to a reduction in skip
     tracing used to locate and identify Partnership debtor accounts.

     Operating expenses as a percentage of portfolio collections decreased 4% to
     13% for the three months ended September 30, 1998,  compared to 17% for the
     similar period ended September 30, 1997. The decrease in operating  expense
     as a percent of portfolio  collections is primarily attributed to decreased
     collection expenses.

     Financial Condition, Liquidity and Capital Resources.

     The Partnership's total assets decreased approximately 6% to $14,458,547 as
     of September 30, 1998, from  $15,296,220 at December 31, 1997. The decrease
     was primarily attributed to portfolio collection proceeds of $3,746,787, of
     which 95% or $3,569,596 was recorded as a reduction of investment portfolio
     assets.  The purchase  related to the deposit on distressed  loan portfolio
     acquisition of $2,858,076 was consummated at the beginning of the year, and
     is reflected in the increase in investments in distressed loan  portfolios.
     The decrease of $231,443 in due from  affiliates is primarily the result of
     the  receipt  of  payments  due  the  Partnership  for the  prior  period's
     collections.

     The decrease of $911,458 in due to affiliates  during the nine months ended
     September  30, 1998,  was due  primarily  to the payments of accrued  legal
     expenses and management fees to the General Partner.

     The Partnership  acquired five new distressed portfolio assets in the first
     nine  months  of  1998  from a third  party  financial  institutions  which
     specializes in credit card  origination.  The General  Partner  anticipates
     that the  Partnership  will acquire  additional  portfolios  in the future.
     Future  acquisitions  will depend on the asset market,  which  continues to
     grow  in  size  and  diversity.  The  General  Partner  believes  that  the
     Partnership  will  continue to acquire  low-priced  distressed  portfolios;
     however,  the  General  Partner  will  continue  to  evaluate  assets  with
     different  pricing and debtor account  structure to determine  whether such
     portfolios  can  generate  significant  immediate  cash  flows and  provide
     additional liquidity to the Partnership.

     The Partnership has made no future commitments with credit card originators
     and other financial  institutions to acquire portfolio assets.  The General
     Partner and Performance Capital Management,  Inc., a California corporation
     and an affiliate of the General Partner ("PCM"),  plan to use their present
     contacts and  relationships  to identify and acquire  additional  assets at
     optimal  prices,   and  believe  that  they  will  have  no  difficulty  in
     identifying and acquiring such assets.  The General  Partner  believes that
     current cash  reserves and future  portfolio  collection  proceeds  will be
     sufficient to acquire portfolio assets in the next twelve months.

     At this time the General  Partner has  withdrawn  the  application  for the
     Rollup of the Partnership with the PAM Funds into PAMCO. This is due to the
     continuing  regulatory  delays and complexity of the  reorganization of the
     Rollup.  The General Partner has resumed  distributions to its investors in
     the fourth quarter of 1998.


                                       14
<PAGE>


     Impact of Additional Partnership Acquisitions and Resources on Operations.

     The  General  Partner   anticipates   that  additional   future   portfolio
     acquisitions  and  continued   expansion  will  improve  the  Partnership's
     liquidity,  profitability and financial condition, as a result of increased
     portfolio collections and sales. The General Partner believes that PCM must
     continue to increase the amount of its collection representatives and human
     resources in order to  supplement  such growth.  PCM has signed a lease for
     over 18,000  square feet of office  space into which,  it plans to move and
     expand  its  facilities  during the fourth  quarter  of 1998.  The  General
     Partner believes that this move provides the adequate operating  facilities
     for the future growth of PCM, which will  subsequently  increase  portfolio
     collections for the Partnership.

     The  proposal by the General  Partner,  pursuant to which the PAM Funds and
     the Partnership  would merge with and into PAMCO,  has been withdrawn.  The
     General Partner has  re-evaluated  its objectives due to the lengthy delays
     that have been experienced in accomplishing  the Rollup.  Due to the change
     of  plans  for  the  Rollup,  the  General  Partner  has  resumed  investor
     distributions during the fourth quarter of 1998.

     Year 2000 Compliance.

     The General  Partner  recognizes  that the arrival of the Year 2000 poses a
     unique  challenge  to the  ability of the  computer  systems of PCM used to
     service,  manage and collect the portfolios in which the Partnership has an
     interest,  to recognize  properly and process  date  sensitive  information
     related to the date change from  December  31, 1999 to January 1, 2000.  As
     the century date change  occurs,  date-sensitive  systems may recognize the
     Year 2000 as 1900,  or not at all.  This  inability  to  recognize or treat
     properly  the  Year  2000 may  cause  PCM's  computer  systems  to  process
     financial  and  operational  information  incorrectly,  which  could have a
     material adverse effect on the Partnership's results of operations. PCM has
     assessed  and begun  remedial  work  relating  to PCM's  computer  software
     programs and business processes to provide for PCM's ability to continue to
     function effectively.

     In 1997, PCM began the process of identifying,  evaluating and implementing
     changes to PCM's  computer  programs  necessary  to  address  the Year 2000
     issue.  The  General  Partner is  currently  addressing  the  Partnership's
     internal Year 2000 issue by coordinating  with PCM in connection with PCM's
     modification  of existing  programs and  conversions  to new programs.  The
     General Partner is also in  communication  with financial  institutions and
     other entities with which the  Partnership  conducts  business to help them
     identify and resolve the Year 2000 issue as it relates to the Partnership's
     business  operations.  An  assessment of the readiness of those third party
     institutions  and  entities  with which the  Partnership  does  business is
     ongoing.  While PCM and the  General  Partner are  confident  that PCM will
     complete the assessment and remediation of PCM's computer  software,  there
     can be no assurance  that the necessary  modifications  and  conversions by
     those third party  institutions  and  entities  with which the  Partnership
     conducts business will be completed in a timely manner,  which could have a
     material  adverse effect on the  Partnership's  results of operations.  The
     total cost to the Partnership  associated  with the required  modifications
     and conversions is not


                                       15
<PAGE>


     expected to be  material to the  Partnership's  results of  operations  and
     financial position and is being expensed as incurred.


                                     PART II

     Item 1. Legal Proceedings.

     On or about  November  12,  1998,  attorneys  for the General  Partner were
     informed  by  the  State  of  California   Commissioner   of   Corporations
     ("Commissioner")  that the Commissioner  then intended to file an action in
     Los Angeles  Superior  Court  seeking to have  appointed a receiver to take
     over  the  affairs  of  the  Partnership   and  its  affiliated   entities.
     Additionally,  a hearing in Los Angeles County  Superior Court is scheduled
     to occur at 8:30 A.M. on November 16, 1998,  for the purpose of the Court's
     determination  whether or not such a receiver is necessary or  appropriate.
     The  General  Partner  intends,  for and on behalf of the  Partnership,  to
     oppose the appointment of such a receiver.

     The  Commissioner  has informed  attorneys for the General Partner that the
     Commissioner  has determined  that certain  affiliates of the  Partnership,
     i.e., Vincent E. Galewick; Income Network Company, the Placement Manager of
     the  offer  and sale of the  Units in the  Partnership;  Performance  Asset
     Management  Company,  a Delaware  corporation  ("PAMCO");  and  Performance
     Telecom  Services,  LLC, a California  limited  liability  company ("PTS"),
     filed documents with the Commissioner which contained misrepresentations of
     material  fact;  and,  additionally,  those  documents  omitted  to specify
     certain  material facts which, in the opinion of the  Commissioner,  should
     have been included therein.  Those affiliates  disagree  significantly with
     the  determination  of the Commissioner and intend to oppose any litigation
     or other  enforcement  action commenced by the  Commissioner  against those
     affiliates.

     Additionally,  on or about  November 6, 1998,  the  Commissioner  issued to
     Vincent E.  Galewick and Income  Network  Company two (2) cease and refrain
     orders.  One such order orders Mr.  Galewick and Income Network  Company to
     desist  and  refrain  from  the  further  offer  and  sale in the  State of
     California  of  securities  by means of  misrepresentation  or omissions of
     material  facts in violation of Section 25401 of the  California  Corporate
     Securities Law of 1968 ("Law").  Mr.  Galewick and Income  Network  Company
     deny that either of them have  offered or sold  securities  in the State of
     California by means of  misrepresentation  or omissions of material  facts.
     Neither Mr.  Galewick nor Income Network Company believe that either Income
     Network  Company or Mr. Galewick is  participating  in the offer or sale in
     the State of  California of  securities  by means of  misrepresentation  or
     omissions of material  facts in violation of Section  25401 of the Law. The
     second order issued to Mr.  Galewick only orders Mr. Galewick to desist and
     refrain  from the  further  offer  and sale in the State of  California  of
     securities unless and until qualification of those securities has been made
     pursuant to the provisions of the Law.


                                       16
<PAGE>


     The  Commissioner  believes that Mr. Galewick and certain of his affiliates
     have made certain  misrepresentations  and  omissions of material  facts in
     certain   applications   to   qualify   (register)   securities   with  the
     Commissioner.  Those  misrepresentations  and  omissions  relate to (i) the
     affairs of Desert Hot Springs Resort Limited  Partners,  Series A, Ltd. and
     Desert Hot Springs Resort Limited Partners,  Series B, Ltd., two California
     limited partnerships for which Performance Development,  Inc. (wholly owned
     by Mr. Galewick and which serves as the General Partner of the Partnership)
     serves  as the  General  Partner  (collectively,  "DHSRLP");  (ii)  certain
     litigation  filed  by  SunAmerica,  Inc.  and  certain  of  its  affiliates
     (collectively,  "SunAmerica")  against  Mr.  Galewick  and  certain  of his
     affiliates  alleging fraud and deceit,  gross  negligence and violations of
     Section 10(b) of the  Securities  Exchange act of 1934 and Rule 10b-5;  and
     (iii)  compensation  paid by the Partnership  and other similar  California
     limited  partnerships  to various  affiliates  of the  General  Partner and
     Income Network Company.  Mr. Galewick and those affiliates believe that (i)
     no such  misrepresentations  or omissions of material  facts were, in fact,
     made relating  either to (a) DHSRLP or (b) the  SunAmerica  litigation  and
     (ii)  SunAmerica  has no basis for its litigation  against Mr.  Galewick or
     those affiliates.  The General Partner believes that appropriate disclosure
     regarding compensation paid by the Partnership and those other partnerships
     to those affiliates was made.

     On November  12, 1998,  the  Commissioner  issued an order  pursuant to the
     provisions of Section 25531 of the California  Corporations Code appointing
     Barry  A.  Fisher  as  a  Keeper  for  Income  Network  Company  ("Keeper")
     ("Order").  Pursuant to the provisions of the Order,  the Keeper shall take
     possessions  of all books,  records,  accounts  and other  papers of Income
     Network  Company.  Additionally,  the Keeper is  authorized,  empowered and
     directed to employ  attorneys and such other persons as the Keeper may deem
     to be  necessary  to assist  the  Keeper in the  performance  of his duties
     contemplated by the provisions of the Order.  The Keeper is to undertake an
     independent  review into the books,  records,  accounts and other papers of
     Income  Network  Company and file with the  Department  an inventory of all
     books,  records,  accounts  and other papers of Income  Network  Company of
     which he shall then have reviewed,  observed and/or discovered  pursuant to
     the  provisions  of the Order.  The Order does not allow the Keeper to take
     possession  of or  interfere in the  business of the  affiliates  of Income
     Network Company.  Income Network Company has notified the Commissioner that
     Income Network Company  intends to take any and all legal action  necessary
     or  appropriate,  including a hearing in Los Angeles County Superior court,
     to cause the Keeper to be  removed  from  Income  Network  Company  and his
     powers, granted pursuant to the provisions of the Order, terminated.

     Other than as specified  above,  no  additional  proceedings  have occurred
     since August 12, 1998, the date of the latest report provided. In addition,
     no material  developments are noted with respect to those matters described
     in the latest  report  dated  August  12,  1998.  Reference  is made to the
     Partnership's  Form  10-KSB  dated  March 31,  1998,  in which  such  legal
     proceedings  were  reported  in Part I, Item 3,  "Legal  Proceedings".  The
     registrant,  by this  reference,  makes that disclosure a part of this Form
     10-QSB.

     Item 2. Exhibits and Reports.


     (a)  Exhibits

     Exhibit Number                      Exhibit

           1        Certificate  of  Limited   Partnership  Form  LP-1  (Charter
                    Document) *

           2        Agreement of Limited  Partnership  (Instrument  defining the
                    rights of Security Holders) **

*    Reference is made to the Partnership's  Form 10-KSB,  dated March 31, 1997,
     in which  that  Certificate  of  Limited  Partnership  was  included  as an
     exhibit.  The  Partnership,  by this reference,  makes that  Certificate of
     Limited Partnership a part of this Form 10-QSB.

**   Reference is made to the Partnership's  Form 10-KSB,  dated March 31, 1997,
     in which that Agreement of Limited  Partnership was included as an exhibit.
     The  Partnership,  by this  reference,  makes  that  Agreement  of  Limited
     Partnership a part of this Form 10-QSB.


                                       17
<PAGE>


                                   SIGNATURES


In  accordance  with  Section 13 or 15(d) of the Exchange  Act, the  Partnership
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

    Dated: November 10, 1998      Performance  Asset  Management  Fund IV, Ltd.,
                                        A California Limited Partnership
                                        --------------------------------
                                                (Registrant)



By:
         ----------------------------------
         Vincent E. Galewick
         President of the General Partner,
         Performance Development, Inc.


                                       18