##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number: 0-14207



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RANCON REALTY FUND IV,

A CALIFORNIA
LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|California                                                     |  | 33-0016355                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|400 South El Camino Real, Suite 1100 San Mateo, California     |  | 94402-1708                          
|(Address of principal executive offices)                       |  | (Zip Code)                          

(650) 343-9300

(Registrants telephone number, including area code)



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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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer
and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated
Filer ̈Accelerated Filer ̈Non-accelerated filer  x

Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

No market for the Limited Partnership
units exists and therefore a market value for such units cannot be determined.

Total number of units outstanding as of August 14,
2006: 65,855



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##### Table of Contents

INDEX

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP



|           |  |                                                                                       |  |                                                                                                 |  |         
|---------- |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | --------
|           |  |                                                                                       |  |                                                                                                 |  | Page No.
|PART I     |  | FINANCIAL INFORMATION                                                                 |  |                                                                                                
|           |  |                                                                                      
|Item 1.    |  | Consolidated Financial Statements of Rancon Realty Fund IV (Unaudited):               |  |                                                                                                
|           |  |                                                                                       | 
|           |  |                                                                                       |  | Consolidated Balance Sheets at June 30, 2006 and December 31, 2005                              |  | 3       
|           |  |                                                                                       | 
|           |  |                                                                                       |  | Consolidated Statements of Operations for the three and six months ended June 30, 2006 and 2005 |  | 4       
|           |  |                                                                                       | 
|           |  |                                                                                       |  | Consolidated Statement of Partners Equity for the six months ended June 30, 2006               |  | 5       
|           |  |                                                                                       | 
|           |  |                                                                                       |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005           |  | 6       
|           |  |                                                                                       | 
|           |  |                                                                                       |  | Notes to Consolidated Financial Statements                                                      |  | 7-13    
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 14-18                                                                                          
|           |  |                                                                                      
|Item 3.    |  | Qualitative and Quantitative Information About Market Risk                            |  | 18                                                                                             
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 18-19                                                                                          
|           |  |                                                                                      
|PART II    |  | OTHER INFORMATION                                                                     |  |                                                                                                
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  | 20                                                                                             
|           |  |                                                                                      
|Item 1A.   |  | Risk Factors                                                                          |  | 20                                                                                             
|           |  |                                                                                      
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 20                                                                                             
|           |  |                                                                                      
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 20                                                                                             
|           |  |                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 20                                                                                             
|           |  |                                                                                      
|Item 5.    |  | Other Information                                                                     |  | 20                                                                                             
|           |  |                                                                                      
|Item 6.    |  | Exhibits                                                                              |  | 20                                                                                             
|           | 
|SIGNATURES |  | 21                                                                                   



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##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Balance Sheets

(in thousands,
except units outstanding)

(Unaudited)



|                                                                                                                               |  |              |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                               |  | June 30,2006 |         |   | December 31,2005 |  
|Assets                                                                                                                         |  |              |         |   |                  |   |         |  
|                                                                                                                               |  |             
|Investments in real estate:                                                                                                    |  |              |         |   |                  |   |         |  
|Rental properties                                                                                                              |  | $            | 50,599  |   |                  | $ | 49,556  |  
|Accumulated depreciation                                                                                                       |  |              | (12,467 | ) |                  |   | (11,451 | )
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Rental properties, net                                                                                                         |  |              | 38,132  |   |                  |   | 38,105  |  
|                                                                                                                               |  |             
|Land held for development                                                                                                      |  |              | 767     |   |                  |   | 476     |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total investments in real estate                                                                                               |  |              | 38,899  |   |                  |   | 38,581  |  
|                                                                                                                               |  |             
|Cash and cash equivalents                                                                                                      |  |              | 3,558   |   |                  |   | 10,019  |  
|Short-term investments                                                                                                         |  |              | 5,000   |   |                  |   |        |  
|Accounts receivable                                                                                                            |  |              | 341     |   |                  |   | 253     |  
|Deferred costs, net of accumulated amortization of $1,032 and $807 at June 30, 2006 and December 31, 2005,
respectively        |  |              | 2,335   |   |                  |   | 2,211   |  
|Prepaid expenses and other assets                                                                                              |  |              | 1,205   |   |                  |   | 1,211   |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total assets                                                                                                                   |  | $            | 51,338  |   |                  | $ | 52,275  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Liabilities and Partners Equity                                                                                               |  |              |         |   |                  |   |         |  
|                                                                                                                               |  |             
|Liabilities:                                                                                                                   |  |              |         |   |                  |   |         |  
|Note payable and line of credit                                                                                                |  | $            | 23,939  |   |                  | $ | 24,100  |  
|Accounts payable and other liabilities                                                                                         |  |              | 273     |   |                  |   | 582     |  
|Prepaid rent                                                                                                                   |  |              | 173     |   |                  |   | 71      |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total liabilities                                                                                                              |  |              | 24,385  |   |                  |   | 24,753  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Commitments and contingent liabilities (Note 7)                                                                                |  |              |         |   |                  |   |         |  
|                                                                                                                               |  |             
|Partners Equity:                                                                                                              |  |              |         |   |                  |   |         |  
|General Partner                                                                                                                |  |              | (519    | ) |                  |   | (504    | )
|Limited partners, 65,855 and 66,892 limited partnership units outstanding at June 30, 2006 and December 31, 2005,
respectively |  |              | 27,472  |   |                  |   | 28,026  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total partners equity                                                                                                         |  |              | 26,953  |   |                  |   | 27,522  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total liabilities and partners equity                                                                                         |  | $            | 51,338  |   |                  | $ | 52,275  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  

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



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RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statements of Operations

(in
thousands, except per unit amounts and units outstanding)

(Unaudited)



|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                              |  | Three months endedJune 30, |        |   | Six months endedJune 30, |  
|                                                                                              |  | 2006                       |        |   | 2005                     |   |        | 2006 |  |   | 2005   |  
|Operating Revenue                                                                             |  | $                          | 2,346  |   |                          | $ | 1,761  |      |  | $ | 4,595  |   |  | $ | 3,392  |  
|                                                                                              |  |                            |        |  
|Operating Expenses                                                                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Property operating                                                                            |  |                            | 689    |   |                          |   | 604    |      |  |   | 1,431  |   |  |   | 1,263  |  
|Depreciation and amortization                                                                 |  |                            | 614    |   |                          |   | 433    |      |  |   | 1,197  |   |  |   | 871    |  
|Expenses associated with undeveloped land                                                     |  |                            | 35     |   |                          |   | 34     |      |  |   | 70     |   |  |   | 68     |  
|General and administrative                                                                    |  |                            | 273    |   |                          |   | 261    |      |  |   | 520    |   |  |   | 478    |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                                      |  |                            | 1,611  |   |                          |   | 1,332  |      |  |   | 3,218  |   |  |   | 2,680  |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Operating income                                                                              |  |                            | 735    |   |                          |   | 429    |      |  |   | 1,377  |   |  |   | 712    |  
|                                                                                              |  |                            |        |  
|Interest and other income                                                                     |  |                            | 69     |   |                          |   | 2      |      |  |   | 78     |   |  |   | 2      |  
|Interest expense                                                                              |  |                            | (353   | ) |                          |   | (108   | )    |  |   | (702   | ) |  |   | (143   | )
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income from continuing operations                                                             |  |                            | 451    |   |                          |   | 323    |      |  |   | 753    |   |  |   | 571    |  
|                                                                                              |  |                            |        |  
|Income from discontinued operations (including gain on sale of real estate of $2,075 in 2005) |  |                            |       |   |                          |   | 2,125  |      |  |   |       |   |  |   | 2,161  |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                                                    |  | $                          | 451    |   |                          | $ | 2,448  |      |  | $ | 753    |   |  | $ | 2,732  |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic and diluted net income per limited partnership unit                                     |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Continuing operations                                                                         |  | $                          | 6.16   |   |                          | $ | 4.25   |      |  | $ | 10.24  |   |  | $ | 7.50   |  
|Discontinued operations                                                                       |  |                            |      |   |                          |   | 29.49  |      |  |   |      |   |  |   | 29.88  |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                                              |  | $                          | 6.16   |   |                          | $ | 33.74  |      |  | $ | 10.24  |   |  | $ | 37.38  |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted average number of limited partnership units outstanding during each period           |  |                            | 65,932 |   |                          |   | 68,378 |      |  |   | 66,228 |   |  |   | 68,546 |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  

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



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RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statement of Partners Equity

For the six months ended June 30, 2006

(in thousands)

(Unaudited)



|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  
|--------------------------------------------------- |  | --------------- | ---- | - | --------------- | - | ------ | ----- |  | - | ------ | -
|                                                    |  | General Partner |      |   | LimitedPartners |   |        | Total | 
|Balance (deficit) at December 31, 2005              |  | $               | (504 | ) |                 | $ | 28,026 |       |  | $ | 27,522 |  
|Redemption of limited partnership units             |  |                 |     |   |                 |   | (421   | )     |  |   | (421   | )
|Net income                                          |  |                 | 75   |   |                 |   | 678    |       |  |   | 753    |  
|Distributions ($12.29 per limited partnership unit) |  |                 | (90  | ) |                 |   | (811   | )     |  |   | (901   | )
|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  
|Balance (deficit) at June 30, 2006                  |  | $               | (519 | ) |                 | $ | 27,472 |       |  | $ | 26,953 |  
|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  

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



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RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statements of Cash Flows

(in
thousands)

(Unaudited)



|                                                                                                                     |  |                          |        |   |      |   |        |  
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                                                     |  | Six months endedJune 30, |       
|                                                                                                                     |  | 2006                     |        |   | 2005 |  
|Cash flows from operating activities:                                                                                |  |                          |        |   |      |   |        |  
|Net income                                                                                                           |  | $                        | 753    |   |      | $ | 2,732  |  
|Adjustments to reconcile net income to net cash provided by operating activities:                                    |  |                          |        |   |      |   |        |  
|Gain on sales of real estate and land held for development                                                           |  |                          |       |   |      |   | (2,075 | )
|Depreciation and amortization (including discontinued operations)                                                    |  |                          | 1,197  |   |      |   | 890    |  
|Amortization of loan fees, included in interest expense (including discontinued operations)                          |  |                          | 46     |   |      |   | 54     |  
|Changes in certain assets and liabilities:                                                                           |  |                          |        |   |      |   |        |  
|Accounts receivable                                                                                                  |  |                          | (88    | ) |      |   | (22    | )
|Deferred costs                                                                                                       |  |                          | (315   | ) |      |   | (689   | )
|Prepaid expenses and other assets                                                                                    |  |                          | (90    | ) |      |   | (104   | )
|Accounts payable and other liabilities                                                                               |  |                          | (182   | ) |      |   | (90    | )
|Prepaid rent                                                                                                         |  |                          | 102    |   |      |   | 207    |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Net cash provided by operating activities                                                                            |  |                          | 1,423  |   |      |   | 903    |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Cash flows from investing activities:                                                                                |  |                          |        |   |      |   |        |  
|Purchase of short-term investments                                                                                   |  |                          | (5,000 | ) |      |   |       |  
|Net proceeds from sales of real estate                                                                               |  |                          |       |   |      |   | 4,097  |  
|Additions to real estate investments                                                                                 |  |                          | (1,060 | ) |      |   | (2,125 | )
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Net cash (used for) provided by investing activities                                                                 |  |                          | (6,060 | ) |      |   | 1,972  |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Cash flows from financing activities:                                                                                |  |                          |        |   |      |   |        |  
|Draws on line of credit                                                                                              |  |                          |       |   |      |   | 2,363  |  
|Principal payments on note payable                                                                                   |  |                          | (161   | ) |      |   | (78    | )
|Loan fee for line of credit                                                                                          |  |                          | (28    | ) |      |   | (29    | )
|(Payment of) refund of loan application fee                                                                          |  |                          | 88     |   |      |   | (723   | )
|Redemption of limited partnership units                                                                              |  |                          | (665   | ) |      |   | (363   | )
|Distributions to limited partners                                                                                    |  |                          | (811   | ) |      |   | (710   | )
|Distributions to General Partner                                                                                     |  |                          | (247   | ) |      |   |       |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Net cash (used for) provided by financing activities                                                                 |  |                          | (1,824 | ) |      |   | 460    |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Net (decrease) increase in cash and cash equivalents                                                                 |  |                          | (6,461 | ) |      |   | 3,335  |  
|                                                                                                                     |  |                         
|Cash and cash equivalents at beginning of period                                                                     |  |                          | 10,019 |   |      |   | 701    |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                                                           |  | $                        | 3,558  |   |      | $ | 4,036  |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Supplemental disclosure of cash flow information:                                                                    |  |                          |        |   |      |   |        |  
|Cash paid for interest (net of capitalized interest of $0 and $403 at June 30, 2006 and June 30, 2005, respectively) |  | $                        | 656    |   |      | $ | 89     |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Premium paid on redemption of limited partnership units                                                              |  | $                        | 274    |   |      | $ |       |  
|Premium paid on redemption of limited partnership units                                                              |  |                          | (274   | ) |      |   |       |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|                                                                                                                     |  | $                        |       |   |      | $ |       |  
|                                                                                                                     |  |                          |        |   |      |   |        |  
|Supplemental disclosure of non-cash financing activities:                                                            |  |                          |        |   |      |   |        |  
|Redemption of limited partnership units                                                                              |  | $                        | 52     |   |      | $ | 48     |  
|Redemption payable                                                                                                   |  |                          | (52    | ) |      |   | (48    | )
|                                                                                                                     |  |                          |        |   |      |   |        |  
|                                                                                                                     |  | $                        |       |   |      | $ |       |  
|                                                                                                                     |  |                          |        |   |      |   |        |  

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



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. ORGANIZATION

Rancon
Realty Fund IV, a California Limited Partnership, (the Partnership), was organized in accordance with the provisions of the California Uniform Limited Partnership Act for the purpose of acquiring, developing, operating and selling real
property. The Partnership was organized in 1984 and reached final funding in July 1987. The general partners of the Partnership are Daniel L. Stephenson (DLS) and Rancon Financial Corporation (RFC), hereinafter collectively
referred to as the General Partner. RFC is wholly owned by DLS. The Partnership has no employees.

During the six months ended June 30,
2006, a total of 1,037 units of limited partnership interest (Units) were redeemed at an average price of $670. As of June 30, 2006, there were 65,855 Units outstanding.

The partnership commenced on April 3, 1984 and shall continue until December 31, 2015, unless previously terminated in accordance with the provisions of the Partnership Agreement.

Allocation of Net Income and Net Loss

Allocations of net
income and net losses are made pursuant to the terms of the Partnership Agreement. Generally, net income from operations is allocated 90% to the limited partners and 10% to the General Partner. Net losses from operations are allocated 99% to the
limited partners and 1% to the General Partner until such time as a partners capital account is reduced to zero. Additional losses will be allocated entirely to those partners with positive capital account balances until such balances are
reduced to zero.

Net income other than net income from operations shall be allocated as follows: (i) first, to the partners who have a deficit
balance in their capital account, provided that, in no event, shall the General Partner be allocated more than 5% 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 Unitholders original invested capital; (ii) second, to the limited partners in proportion to and to the extent of the amounts to increase their capital accounts to an
amount equal to the sum of the adjusted invested capital of their units plus an additional cumulative non-compounded 6% return per annum (plus additional amounts depending on the date Units were purchased); (iii) third, to the partners in the
minimum amount required to first equalize their capital account in proportion to the number of units owned, and then, to bring the sum of the balances of the capital accounts of the limited partners and the General Partner into the ratio of 4 to 1;
and (iv) the balance, if any, 80% to the limited partners and 20% to the General Partner. 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.

Net losses other than net losses from operations are allocated 99% to the limited partners and 1% to the General Partner. Such net losses will be allocated among limited
partners as necessary to equalize their capital accounts in proportion to their Units, and thereafter will be allocated in proportion to their Units.

The
terms of the Partnership agreement call for the General Partner to restore any deficit 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.

Distribution of Cash

The Partnership shall make annual or more frequent distributions of substantially all cash available to be distributed to partners as determined by the General Partner, subject to the following: (i) distributions
may be restricted or suspended for limited periods when the General Partner determines in its absolute discretion that it is in the best interest of the Partnership; and (ii) all distributions are subject to the payment of partnership expenses
and maintenance of reasonable reserves for debt service, alterations, improvements, maintenance, replacement of furniture and fixtures, working capital and contingent liabilities.

All excess cash from operations shall be distributed 90% to the limited partners and 10% to the General Partner.

All cash from sales or refinancing and any other cash determined by the General Partner to be available for distribution other than cash from operations shall be
distributed in the following order of priority: (i) first, 1% to the General Partner and 99% to the limited partners in proportion to the outstanding positive amounts of Adjusted Invested Capital (as defined in the Partnership Agreement) for
each of their Units until Adjusted Invested Capital (as defined in the Partnership Agreement) for each Unit is reduced to zero; (ii) second, 1% to the General Partner and 99% to the limited partners until each of the limited partners has
received an amount which, including cash from operations previously distributed to the limited partners, equals a 12% annual cumulative non-compounded return on the Adjusted Invested Capital (as defined in the Partnership Agreement) of their Units
plus such limited partners Limited Incremental Preferential Return (as defined in the Partnership Agreement), if any, with respect to each such Unit, on the Adjusted Investment Capital (as defined in the Partnership Agreement) of such Units
for the twelve month period following the date upon which such Unit was purchased from the Partnership and following the admission



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

of such limited partners; (for limited partners
admitted to the Partnership before March 31, 1985, there are additional cumulative non-compounded returns of 9%, 6%, or 3% depending on purchase date, through October 31, 1985); (iii) third, 99% to the General Partner and 1% to the
limited partners, until the General Partner has received an amount equal to 20% of all distributions of cash from sales or refinancing; and (iv) the balance, 80% to the limited partners, pro rata in proportion to the number of Units held by
each, and 20% to the General Partner.

Management Agreement

In July 2004, the Partnership extended its management relationship with Glenborough Properties L.P. (Glenborough) through December 31, 2006. In May 2006, the Partnership further extended the Property
Management and Services Agreement with Glenborough through December 31, 2008. All other terms and conditions remained unchanged. The Partnership engaged Glenborough to perform services for the following fees: (i) a property management fee
of 3% of gross rental revenue; (ii) a construction services fee per certain schedules ($0 and $56,000 for the six months ended 2006 and 2005, respectively); (iii) a specified asset and Partnership management fee of $300,000 per year with
reimbursements of certain expenses and consulting service fees ($150,000 and $148,000 for the six months ended 2006 and 2005, respectively); (iv) a leasing services fee ($177,000 and $254,000 for the six months ended 2006 and 2005,
respectively); (v) a sales fee of 2% for improved properties ($0 and $87,000 for the six months ended 2006 and 2005, respectively) and 4% for unimproved properties; (vi) a financing services fee of 1% of the gross loan amount; and
(vii) a development fee equal to 5% of the hard costs of the development project, excluding the cost of the land, and the development fee and the general contractors fee shall not exceed 11.5%, in the aggregate, of the hard costs of the
development project ($69,000 and $51,000 for the six months ended June 30, 2006 and 2005, respectively). The fees for the above services (excluding property management fees) totaled $396,000 and $596,000 for the six months ended June 30,
2006 and 2005, respectively.

Risks and Uncertainties

The Partnerships ability to (i) achieve positive cash flow from operations, (ii) meet its debt obligations, (iii) provide distributions either from operations or the ultimate disposition of the Partnerships
properties or (iv) continue as a going concern, may be impacted by changes in interest rates, property values, local and regional economic conditions, or the entry of other competitors into the market. The accompanying consolidated financial
statements do not provide for adjustments with regard to these uncertainties. See Item 1A Risk Factors in our annual report on Form 10-K for the year ended December 31, 2005 and in this quarterly report on Form 10-Q for the
quarter ended June 30, 2006 for a discussion of the risks that may effect the Partnerships results of operations and ability to meet financial obligations

Note 2. SIGNIFICANT ACCOUNTING POLICES

Basis of Accounting

The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (U.S.
GAAP). They include the accounts of wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

In the opinion of the General Partner, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal accruals) necessary to present fairly the consolidated financial position of the
Partnership as of June 30, 2006 and December 31, 2005, the related consolidated statements of operations for the three and six months ended June 30, 2006 and 2005, partners equity for the six months ended June 30, 2006, and
cash flows for the six months ended June 30, 2006 and 2005.

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 results of operations during the reporting period. Actual results could differ from those estimates.

Consolidation

In April 1996, the Partnership formed RRF IV
Tri-City Limited Partnership, a Delaware limited partnership (RRF IV Tri-City). The limited partner of RRF IV Tri-City is the Partnership and the general partner is RRF IV, Inc. (RRF IV, Inc.), a corporation wholly-owned by
the Partnership. Since the Partnership owns 100% of RRF IV, Inc. and indirectly owns 100% of RRF IV Tri-City, the financial statements of RRF IV, Inc. and RRF IV Tri-City have been consolidated with those of the Partnership. In November 2005, the
Partnership formed Rancon Realty Fund IV Subsidiary LLC, a Delaware limited liability company (RRF IV SUB) which is wholly owned by the Partnership. Since RRF IV SUB is wholly owned by the Partnership, the financial statements of RRF IV
SUB have been consolidated with those of the Partnership. All intercompany balances and transactions have been eliminated in the consolidation.



8



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Rental Properties

Rental properties, including the related land, are stated at depreciated cost unless events or circumstances indicate that such amounts cannot be recovered, in which
case, the carrying value of the property is reduced to its estimated fair value. Estimated fair value: (i) is based upon the Partnerships plans for the continued operations of each property; and (ii) is computed using estimated sales
price, as determined by prevailing market values for comparable properties and/or the use of capitalization rates applied to annualized net operating income based upon the age, construction and use of the building. The fulfillment of the
Partnerships plans related to each of its properties is dependent upon, among other things, the presence of economic conditions which will 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 is reasonably possible that the actual results of operating and disposing of the Partnerships properties could be materially different than current expectations. Rental
properties are reviewed for impairment whenever there is a triggering event and at least annually.

Depreciation is provided using the straight-line method
over the useful lives of the respective assets. The useful lives are as follows:



|                          |  |                                                                                           
|------------------------- |  | ------------------------------------------------------------------------------------------
|Building and improvements |  | 5 to 40 years                                                                             
|Tenant improvements       |  | Lesser of the initial term of the related lease, or the estimated useful life of the asset
|Furniture and equipment   |  | 5 to 7 years                                                                              

Land Held for Development

Land held for development is stated at cost unless events or circumstances indicate that cost cannot be recovered, in which case, the carrying value is reduced to
estimated fair value. Estimated fair value: (i) is based on the Partnerships plans for the development of each property; (ii) is computed using estimated sales price, based upon market values for comparable properties; and
(iii) considers the cost to complete and the estimated fair value of the completed project. The fulfillment of the Partnerships plans related to each of its properties is dependent upon, among other things, the presence of economic
conditions which will enable the Partnership to either hold the properties for eventual sale or obtain financing for further development. Land held for development is reviewed for impairment whenever there is a triggering event and at least
annually. Pre-development costs, including design, architectural and entitlements are capitalized as land held for development prior to construction.

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.

Short-term Investments

The Partnership considers certificates of deposit with original maturities of more than three months and less than one year when purchased to be short-term investments. The short-term investments are held to maturity
and recorded at cost on the consolidated balance sheets.

Fair Value of Financial Instruments

For certain financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and other liabilities and line of
credit payable, recorded amounts approximate fair value due to the relatively short maturity period. Based on interest rates available to the Partnership for debt with comparable maturities and other terms, the estimated fair value of the
Partnerships collateralized fixed rate note payable as of June 30, 2006 and December 31, 2005 was approximately $22,918,000 and $24,272,000, respectively.

Deferred Costs

Deferred loan fees are capitalized and amortized on a straight-line basis, which approximates
the effective interest method, over the life of the related loan and deferred lease commissions are capitalized and amortized on a straight-line basis over the initial fixed term of the related lease agreements.



9



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Revenues

The Partnership recognizes rental revenue on a straight-line basis over the term of the leases. Actual amounts collected could be lower or higher than the amounts
recognized on a straight-line basis if specific tenants are unable to pay rent that the Partnership has previously recognized as revenue. The reimbursements from tenants for real estate taxes are recognized as revenue in the period the expenses are
incurred. Other recoverable operating expenses are recognized as revenue on an estimated basis, and the differences between estimated and actual amounts are recognized as revenue in the subsequent year when the amounts are collected.

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.

Net Income Per Limited Partnership Unit

Net income 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.

Income Taxes

No provision for income taxes is included in the
accompanying consolidated financial statements as the Partnerships results of operations are allocated to the partners for inclusion in their respective income tax returns. Net income and partners equity (deficit) for financial reporting
purposes will differ from the Partnerships income tax return because of different accounting methods used for certain items, including depreciation expense, provisions for impairment of investments in real estate, capitalization of development
period interest and rental income and loss recognition.

Concentration Risk

Two tenants (Inland Regional Center and University of Phoenix) represented 31% and one tenant (Inland Regional Center) represented 21% of rental income for the six months ended June 30, 2006 and 2005,
respectively.

Reference to 2005 audited consolidated financial statements

These unaudited consolidated financial statements should be read in conjunction with the notes to consolidated financial statements included in the December 31, 2005 consolidated financial statements on Form
10-K.

Note 3. INVESTMENTS IN REAL ESTATE

Rental
properties consisted of the following at June 30, 2006 and December 31, 2005 (in thousands):



|                                 |  |              |         |   |                  |   |         |  
|-------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                 |  | June 30,2006 |         |   | December 31,2005 |  
|Land                             |  | $            | 4,471   |   |                  | $ | 4,471   |  
|Buildings                        |  |              | 37,311  |   |                  |   | 36,995  |  
|Building and tenant improvements |  |              | 8,817   |   |                  |   | 8,090   |  
|                                 |  |              |         |   |                  |   |         |  
|                                 |  |              | 50,599  |   |                  |   | 49,556  |  
|Less: accumulated depreciation   |  |              | (12,467 | ) |                  |   | (11,451 | )
|                                 |  |              |         |   |                  |   |         |  
|Total rental properties, net     |  | $            | 38,132  |   |                  | $ | 38,105  |  
|                                 |  |              |         |   |                  |   |         |  

As of June 30, 2006, the Partnerships rental properties included four
office buildings and seven retail buildings.

The Partnership entered into a contract to sell the property leased to Office Max for a price of $4,350,000
in April 2005. On June 3, 2005, the sale closed and generated net proceeds of approximately $4,097,000 and a gain on sale of approximately $2,075,000. The proceeds were added to the Partnerships cash reserves.



10



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

In accordance with SFAS 144 Accounting for
the Impairment or Disposal of Long Lived Assets, net income and gain or loss on sales of real estate for properties sold or classified as held for sale are reflected in the consolidated statements of operations as Income from
discontinued operations for all periods presented.

Below is a summary of the results of operations of the property leased to Office Max through its
disposition date (dollars in thousands):



|                                          |  |                            |       |                           |   |      
|----------------------------------------- |  | -------------------------- | ----- | ------------------------- | - | -----
|                                          |  | 2005 (1)                  
|                                          |  | Three monthsended June 30, |       | Six months ended June 30,
|Operating Revenue                         |  | $                          | 82    |                           | $ | 169  
|                                          |  |                            |       |                           |   |      
|Property operating                        |  |                            | 32    |                           |   | 64   
|Depreciation and amortization             |  |                            |      |                           |   | 19   
|                                          |  |                            |       |                           |   |      
|Total operating expenses                  |  |                            | 32    |                           |   | 83   
|                                          |  |                            |       |                           |   |      
|Income before gain on sale of real estate |  |                            | 50    |                           |   | 86   
|Gain on sale of real estate               |  |                            | 2,075 |                           |   | 2,075
|                                          |  |                            |       |                           |   |      
|Income from discontinued operations       |  | $                          | 2,125 |                           | $ | 2,161
|                                          |  |                            |       |                           |   |      

---

|(1) | Reflects 2005 operations through date of sale.
|--- | ----------------------------------------------

Note
4. LAND HELD FOR DEVELOPMENT

Land held for development consisted of the following at June 30, 2006 and December 31, 2005 (in thousands):



|                                                                                                  |  |              |     |                  |   |    
|------------------------------------------------------------------------------------------------- |  | ------------ | --- | ---------------- | - | ---
|                                                                                                  |  | June 30,2006 |     | December 31,2005
|Tri-City (approximately 16 acres of land as of June 30, 2006 and December 31, 2005, respectively) |  | $            | 767 |                  | $ | 476
|                                                                                                  |  |              |     |                  |   |    

As of June 30, 2006, the Partnership owned approximately 16 acres of undeveloped land. 15 acres of land are
part of a landfill-monitoring program managed by the City of San Bernardino (as discussed in Note 6). A conceptual plan for a building is currently being designed for the remaining approximate one-acre of land. The plan includes a three-story
multi-tenant building with an estimate of 75,000 gross square feet of office space. The plan also includes the utilization of approximately 2 acres of land from the landfill adjacent to the development site as a parking lot for this new project.

Note 5. NOTE PAYABLE AND LINE OF CREDIT

Note
payable and line of credit as of June 30, 2006 and December 31, 2005 were as follows (in thousands):



|                                                                                                                                                                                                                                                                                               |  |              |        |                  |   |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ---------------- | - | ------
|                                                                                                                                                                                                                                                                                               |  | June 30,2006 |        | December 31,2005
|Note payable collateralized by first deeds of trust on eight properties (discussed below). The note has a fixed interest rate of 5.46%, a
maturity date of January 1, 2016, and a 10-year term with a 30-year amortization requiring monthly payments of principal and interest totaling $136. |  | $            | 23,939 |                  | $ | 24,100
|                                                                                                                                                                                                                                                                                               |  |              |        |                  |   |       

The note payable is collateralized by Circuit City, Mimis Cafe, Palm Court Retail #1 and #2, Promotional
Retail Center, Service Retail Center, TGI Fridays and One Vanderbilt with an aggregate net carrying value of approximately $16,129,000 and 16,419,000 at June 30, 2006 and December 31, 2005, respectively. This note provides a one-time
loan assumption and a release provision for an individual asset.

The Partnership has a line of credit that was unused as of June 30, 2006 and
December 31, 2005, respectively. The line of credit which is collateralized by Inland Regional Center, has a total availability of $5 million, monthly interest-only payments, a maturity date of April 15, 2007, and bears interest at the
Prime Rate (8.25% and 7.25% as of June 30, 2006 and December 31, 2005, respectively).



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

The annual maturities of the
Partnerships note payable as of June 30, 2006 are as follows (in thousands):



|           |  |   |       
|---------- |  | - | ------
|2006       |  | $ | 166   
|2007       |  |   | 345   
|2008       |  |   | 365   
|2009       |  |   | 385   
|2010       |  |   | 407   
|Thereafter |  |   | 22,271
|           |  |   |       
|Total      |  | $ | 23,939
|           |  |   |       

Note 6. RELATED PARTY TRANSACTIONS

As of June 30, 2006, Glenborough held 3,308 or 5% of the units of limited partnership interest purchased from an unaffiliated third party.

On June 30, 2006, the Partnership had an account receivable of approximately $60,000 from Rancon Realty Fund V (Fund V), a separate partnership sponsored by the General Partner of the Partnership. The
receivable was paid by Fund V to the Partnership on July 7, 2006.

Note 7. COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Matters

The Partnership follows a policy of
monitoring its properties for the presence of hazardous or toxic substances. The Partnership is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Partnerships business,
assets or results of operations. There can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Partnerships consolidated
results of operations and cash flows.

Approximately 15 acres of the Tri-City land owned by the Partnership was part of a 27-acre landfill operated by the
City of San Bernardino (the City) from approximately 1950 to 1960. This landfill incorporates two land parcels and part of a third parcel. In 1996, the Santa Ana Regional Water Quality Control Board SARWQCB, with regulatory
jurisdiction over the closure and monitoring of landfills, determined that the City was primarily responsible for the landfill. Therefore, the City and the Partnership entered into a Limited Access Easement Agreement, giving the City access to the
site for development, implementation and financial responsibility for a plan for the remediation of the landfill. It was determined that the City was to improve the landfill cover systemThe Waterman Landfill Cover Improvement Plans, April
2002, perform groundwater monitoring and install a permanent gas extraction system (Landfill Gas Collection System). Under the Limited Access Easement Agreement with the Partnership, methane monitoring is handled directly by the City. The
Citys installation of the cover improvement system began in October 2004 and the system was completed in the third quarter of 2005. A plan was submitted by the City to the County of San Bernardino (the County) for review and
approval for the gas extraction system. In the last quarter of 2005, the plan was approved and a pilot system to test the viability of the gas extraction system was installed. A permanent carbon system is in the process of being reviewed by the
City, the County and the SARWQCB. It is expected that the installation of the system and the final approval of its operation will be completed at the end of 2006. Future development of this site remains uncertain except for the plan that
approximately 2 acres of this landfill may be used to build the parking lot for the new development building that is currently in the design stage and adjacent to the landfill. No assurance can be made that circumstances will not arise which could
impact the Partnerships responsibility related to the land.

General Uninsured Losses

The Partnership carries property and liability insurance with respect to the properties. This coverage has policy specification and insured limits customarily carried for
similar properties. However, certain types of losses (such as from earthquakes and floods) may be either uninsurable or not economically insurable. Should the properties sustain damage as a result of an earthquake or flood, the Partnership may incur
losses due to insurance deductibles, co-payments on insured losses or uninsured losses. Additionally, the Partnership has elected to obtain insurance coverage for certified acts of terrorism as defined in the Terrorism Risk Insurance Act
of 2003; however, our policies of insurance may not provide coverage for other acts of terrorism. Any losses from such other acts of terrorism might be uninsured. Should an uninsured loss occur, the Partnership could lose some or all of its capital
investment, cash flow and anticipated profits related to the properties.



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Other Matters

The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the aggregate amount of $643,000 at June 30, 2006,
for sales that were completed in previous years. The subordinated real estate commissions are payable only after the limited partners have received distributions equal to their original invested capital plus a cumulative non-compounded return of
12% per annum on their adjusted invested capital. Since the circumstances under which these commissions would be payable are not currently met, the liability has not been recognized in the accompanying consolidated financial statements.
However, the amount will be recorded when and if it becomes payable.



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##### Table of Contents

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

The following
discussion should be read in conjunction with the Partnerships December 31, 2005 audited consolidated financial statements and the notes thereto.

Background

The Partnerships initial acquisition of property between December 1984 and August 1985 consisted of approximately
76.56 acres of partially developed and unimproved land located in San Bernardino, California. The property is part of a master-planned development of 153 acres known as Tri-City Corporate Centre (Tri-City) and is zoned for mixed
commercial, office, hotel, transportation-related, and light industrial uses and all of the parcels thereof are separately owned by the Partnership and Rancon Realty Fund V (Fund V), a partnership sponsored by the General Partner of the
Partnership.

Overview

Tri-City Properties

As of June 30, 2006, the Partnerships rental properties include four office and seven retail buildings, aggregating approximately 486,000
rentable square feet. The Partnership has approximately 331,000 square feet of office space with an average occupancy rate of 90% and approximately 155,000 square feet of retail space which is fully occupied. Carnegie Business Center I, formerly an
industrial flex building, was repositioned to an office building.



|                           |  |                            |  |            
|-------------------------- |  | -------------------------- |  | -----------
|Property                   |  | Type                       |  | Square Feet
|One Vanderbilt             |  | Four-story office building |  | 73,729     
|Carnegie Business Center I |  | Two office buildings       |  | 62,540     
|Service Retail Center      |  | Two retail buildings       |  | 20,780     
|Promotional Retail Center  |  | Four retail buildings      |  | 66,244     
|Inland Regional Center     |  | Two-story office building  |  | 81,079     
|TGI Fridays               |  | Restaurant                 |  | 9,386      
|Circuit City               |  | Retail building            |  | 39,123     
|Mimis Café                |  | Restaurant                 |  | 6,455      
|Palm Court Retail #1       |  | Retail building            |  | 5,022      
|Palm Court Retail #2       |  | Retail building            |  | 7,433      
|Vanderbilt Plaza           |  | Four-story office building |  | 114,170    

As of June 30, 2006, the occupancy rate of the eleven rental properties was
93%.

As of June 30, 2006, there were nine tenants at Tri-City occupying substantial portions of leased rental space. These nine tenants, in the
aggregate, occupied approximately 331,000 square feet of the 486,000 total rentable square feet at Tri-City and accounted for approximately 66% of the rental income of the Partnership during the six months ended June 30, 2006.

Tri-City Land

As of June 30, 2006, the Partnership owned
approximately 16 acres of undeveloped land. A conceptual plan for a building is currently being designed for an approximate one-acre parcel of land. The plan includes a three-story multi-tenant building with an estimated 75,000 gross square feet of
office space. The plan also includes the utilization of approximately 2 acres of land from the landfill adjacent to the development site to build a parking lot for the new building. The Partnership intends to develop this one-acre site to generate
more operating income for the Partnership.

The remaining approximate 15 acres of the Tri-City land owned by the Partnership was part of a 27-acre landfill
operated by the City of San Bernardino (the City) from approximately 1950 to 1960. This landfill incorporates two land parcels and part of a third parcel. In 1996, the Santa Ana Regional Water Quality Control Board SARWQCB,
with regulatory jurisdiction over the closure and monitoring of landfills, determined that the City was primarily responsible for the landfill. Therefore, the City and the Partnership entered into a Limited Access Easement Agreement, giving the City
access to the site for development, implementation and financial responsibility for a plan for the remediation of the landfill. It was determined that the City was to improve the landfill cover systemThe Waterman Landfill Cover Improvement
Plans, April 2002, perform groundwater monitoring and install a permanent gas extraction system (Landfill Gas Collection System). Under the Limited Access Easement Agreement with the Partnership, methane monitoring is handled directly by the City.
The Citys installation of the cover improvement system began in October 2004 and the system was completed in the third quarter of 2005. A plan was submitted by the City to the County of San Bernardino (the County) for review and
approval for the gas extraction system. In the last quarter of 2005, the plan was approved and a pilot system to test the viability of the gas extraction system was installed. A permanent carbon system is in the process of being reviewed by the
City, the County and the SARWQCB. It is expected that the installation of the system and the final approval of its operation will be completed at the end of 2006. Future development of this site remains uncertain except for the plan that
approximately 2 acres of this landfill may be used to build the parking lot for the new development building that is currently in the design stage and adjacent to the landfill (as discussed above). No assurance can be made that circumstances will
not arise which could impact the Partnerships responsibility related to the land.



14



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##### Table of Contents

Financing

The
Partnerships Tri-City Properties are owned by the Partnership, in fee, subject to the following first deeds of trust as of June 30, 2006:



|                    |  |                                  |  |                       
|------------------- |  | -------------------------------- |  | ----------------------
|Collateral          |  | Eight properties (details below) |  | Inland Regional Center
|Form of debt        |  | Note payable                     |  | Line of credit        
|Availability        |  |                                 |  | $5,000,000            
|Outstanding balance |  | $23,939 ,000                     |  | $0                    
|Interest Rate       |  | 5.46%                            |  | Prime rate (8.25%)    
|Monthly payment     |  | $136,000                         |  | Interest only         
|Maturity date       |  | 1/1/16                           |  | 4/15/07               

The note payable is collateralized by Circuit City, Mimis Cafe, Palm Court Retail #1 and #2, Promotional
Retail Center, Service Retail Center, TGI Fridays and One Vanderbilt.

Results of Operations

Comparison of the three and six months ended June 30, 2006 to the three and six months ended June 30, 2005.

Revenue

Rental income increased $585,000, or 33%, and $1,203,000 or
35%, for the three and six months ended June 30, 2006, compared to the three and six months ended June 30, 2005, respectively, primarily due to increases in occupancy at Vanderbilt Plaza, Carnegie Business Center I and Service Retail
Center. Vanderbilt Plaza commenced operations in February 2005.

Expenses

Operating expenses increased $85,000, or 14%, and $168,000, or 13%, for the three and six months ended June 30, 2006, compared to the three and six months ended June 30, 2005, respectively, primarily due to
increases in occupancy at Vanderbilt Plaza, Carnegie Business Center I and Service Retail Center, partially offset by a decrease in property taxes. Vanderbilt Plaza commenced operations in February 2005.

Depreciation and amortization increased $181,000, or 42%, and $326,000, or 37%, for the three and six months ended June 30, 2006, compared to the three and six
months ended June 30, 2005, respectively, primarily due to depreciation commencing at Vanderbilt Plaza, depreciation on additional tenant improvements, and amortization of additional lease commissions.

General and administrative expenses increased $12,000, or 5%, and $42,000, or 9%, for the three and six months ended June 30, 2006, compared to the three and six
months ended June 30, 2005, respectively, primarily due to increases in audit and tax fees and state taxes.

Non-operating income / expenses

Interest and other income increased $67,000 and $76,000 for the three and six months ended June 30, 2006, compared to the three and six months
ended June 30, 2005, respectively, primarily due to an increase in the average invested cash balance resulting from the proceeds of the refinancing completed in the fourth quarter of 2005.

Interest expense increased $245,000 and $559,000 for the three and six months ended June 30, 2006, compared to the three and six months ended June 30, 2005,
respectively, primarily due to an increase in borrowings and stopping the capitalization of interest at Vanderbilt Plaza which commenced operations in February 2005.

Income from discontinued operations of $2,125,000 and $2,161,000 for the three and six months ended June 30, 2005 reflected the net operating income and gain from sale of the sold property leased to Office Max in
June 2005.

Liquidity and Capital Resources

As of June 30, 2006, the Partnership had cash and cash equivalents of $3,558,000.

The Partnerships primary
liability at June 30, 2006 is a note payable of approximately $23,939,000, collateralized by properties with an aggregate net carrying value of approximately $16,129,000. The note has a 10-year term with a 30-year amortization requiring monthly
principal and interest payments of approximately $136,000, bears a fixed interest rate of 5.46%, and has a maturity date of January 1, 2016. The note is collateralized by Circuit City, Mimis Cafe, Palm Court Retail #1 and #2, Promotional
Retail Center, Service Retail Center, TGI Fridays and One Vanderbilt. This note also provides a one-time loan assumption and a release provision for an individual asset.

The Partnership has a line of credit which is collateralized by Inland Regional Center and was unused as of June 30, 2006 and December 31, 2005, respectively. The line of credit has a total availability of
$5 million, monthly interest-only payments, a maturity date of April 15, 2007, and bears interest at the Prime Rate (8.25% and 7.25% as June 30, 2006 and December 31, 2005, respectively).



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##### Table of Contents

The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the
aggregate amount of $643,000 at June 30, 2006, for sales that were completed in previous years. The subordinated real estate commissions are payable only after the limited partners have received distributions equal to their original invested
capital plus a cumulative non-compounded return of 12% per annum on their adjusted invested capital. Since the circumstances under which these commissions would be payable are not currently met, the liability has not been recognized in the
accompanying consolidated financial statements. However, the amount will be recorded when and if it becomes payable.

Operationally, the Partnerships
primary source of funds consists of cash provided by its rental activities. Other sources of funds may include permanent financing, draws on the line of credit, proceeds from property sales and interest income on money market funds and short-term
investments. Cash generated from property sales is generally added to the Partnerships cash reserves, pending use in the development of properties or distribution to the partners.

Contractual Obligations

As of June 30, 2006, the Partnership had contractual
obligations as follows (in thousands):



|                         |  |                 |     |              |   |              |  |                  |       |       |   |        |  |   |       
|------------------------ |  | --------------- | --- | ------------ | - | ------------ |  | ---------------- | ----- | ----- | - | ------ |  | - | ------
|                         |  | Less than 1year |     | 1 to 3 years |   | 3 to 5 years |  | More than 5years |       | Total
|Secured mortgage loans   |  | $               | 166 |              | $ | 710          |  | $                | 792   |       | $ | 22,271 |  | $ | 23,939
|Interest on indebtedness |  |                 | 656 |              |   | 2,559        |  |                  | 2,478 |       |   | 6,539  |  |   | 12,232
|                         |  |                 |     |              |   |              |  |                  |       |       |   |        |  |   |       
|Total                    |  | $               | 822 |              | $ | 3,269        |  | $                | 3,270 |       | $ | 28,810 |  | $ | 36,171
|                         |  |                 |     |              |   |              |  |                  |       |       |   |        |  |   |       

Management expects that the Partnerships cash and cash equivalents as of June 30, 2006, together with
cash from operations, sales and financing, will be sufficient to finance the Partnerships and the properties continued operations and development plans on a short-term basis and for the reasonably foreseeable future. There can be no
assurance that the Partnerships results of operations will not fluctuate in the future and at times affect its ability to meet its operating requirements.

The Partnership knows of no demands, commitments, events or uncertainties, which might affect its capital resources in any material respect. In addition, the Partnership is not subject to any covenants pursuant to its secured debt that
would constrain its ability to obtain additional capital.

Operating Activities

During the six months ended June 30, 2006, the Partnerships cash provided by operating activities totaled $1,423,000.

The $88,000 increase in accounts receivable at June 30, 2006, compared to December 31, 2005, was primarily due to an increase in receivables
related to tenant improvements and interest income accruals related to the short-term investment, partially offset by collection of tenant rents receivable, which were outstanding at December 31, 2005.

The $315,000 increase in deferred costs at June 30, 2006, compared to December 31, 2005, was primarily due to increases in lease commissions paid for new
leases at Vanderbilt Plaza and renewal leases at Carnegie Business Center I, Palm Court Retail 2 and TGI Fridays.

The $90,000 increase in prepaid
expenses and other assets at June 30, 2006, compared to December 31, 2005, was primarily due to an increase in straight line rent receivable and insurance premiums paid, partially offset by amortization of prepaid insurance.

The $182,000 decrease in accounts payable and other liabilities at June 30, 2006, compared to December 31, 2005, was primarily due to payments of property
taxes paid in April 2006.

The $102,000 increase in prepaid rents at June 30, 2006, compared to December 31, 2005, was due to the receipt of July
2006 rents in June 2006, partially offset by January 2006 rents received in December 2005.

Investing Activities

During the six months ended June 30, 2006, the Partnerships cash used for investing activities totaled $6,060,000, which consisted of $5,000,000 used for the
purchase of short-term investments, as well as $1,060,000 in additions to real estate investments primarily due to building and tenant improvements at Vanderbilt Plaza, Carnegie Business Center I, TGI Fridays and Service Retail Center.

Financing Activities

During the six months ended
June 30, 2006, the Partnerships cash used for financing activities totaled $1,824,000, which consisted of $161,000 for principal payments of a note payable, $28,000 annual loan fee for the line of credit, $665,000 for redemption of the
limited partnership Units, $811,000 for payment of distributions to the Limited Partner, and $247,000 for payment of distributions to the General Partner, of which $157,000 was accrued in 2005, partially offset by a refund of $88,000 from loan
application fees, net of payment of loan related expenses.



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Cash Flows

During
the six months ended June 30, 2006, cash provided by operating activities was $1,423,000, as compared to cash provided by operating activities of $903,000 for the same period in 2005. The change was primarily due to an increase in rental income
resulting from increases in occupancy at Vanderbilt Plaza and a decrease in deferred costs, partially offset by an increase in accounts payable and other liabilities and a decrease in prepaid rent. During the six months ended June 30, 2006,
cash used for investing activities was $6,060,000, as compared to cash provided by investing activities of $1,972,000 for the same period in 2005. The change was primarily due to cash used for the purchase of the short-term investments and a
decrease in sales proceeds of real estate, partially offset by a decrease in construction costs at Vanderbilt Plaza, which was completed in February 2005. During the six months ended June 30, 2006, cash used for financing activities was
$1,824,000, as compared to cash provided by financing activities of $460,000 for the same period in 2005. The change was primarily due to decreases in borrowings from the line of credit and increases in redemptions of limited partnership units and
distributions to limited partners and the General Partner, partially offset by a decrease in the loan application fee.

Inflation

Leases at the office properties typically provide for rent adjustments and pass-through of certain operating expenses during the term of the lease. We anticipate that
these provisions may permit us to increase rental rates or other charges to tenants in response to rising prices, and therefore serve to reduce our exposure to the adverse effects of inflation.

Forward Looking Statements; Factors That May Affect Operating Results

This Report on Form 10-Q contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the
Partnerships expectations, hopes, intentions, beliefs and strategies regarding the future. These forward looking statements include statements relating to:



| |  | The Partnerships expectation to make annual or more frequent cash distributions to partners;
|- |  | ---------------------------------------------------------------------------------------------



| |  | The Partnerships intent to develop one or more properties to generate more operating income;
|- |  | ---------------------------------------------------------------------------------------------



| |  | The Partnerships belief that its cash and cash generated by its operations, sales and financing will be sufficient to meet its operating requirements in both the short and the
long-term;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Partnerships expectation that changes in market interest rates will not have a material impact on the performance or the fair value of its portfolio;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Partnerships belief that certain claims and lawsuits which have arisen against it in the normal course of business will not have a material adverse effect on its financial
position, cash flow or results of operations;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Partnerships knowledge of any material environmental matters or issues relating to the landfill property; and
|- |  | ------------------------------------------------------------------------------------------------------------------



| |  | The Partnerships expectation that lease provisions may permit the Partnership to increase rental rates or other charges to tenants in response to rising prices, and therefore
serve to reduce exposure to the adverse effects of inflation.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All forward-looking statements included in this document are based on
information available to the Partnership on the date hereof. Because these forward looking statements involve risk and uncertainty, there are important factors that could cause our actual results to differ materially from those stated or implied in
the forward-looking statements. Those important factors include:



| |  | market fluctuations in rental rates and occupancy;
|- |  | --------------------------------------------------



| |  | reduced demand for rental space;
|- |  | --------------------------------



| |  | availability and credit worthiness of prospective tenants;
|- |  | ----------------------------------------------------------



| |  | defaults or non-renewal of leases by customers;
|- |  | -----------------------------------------------



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| |  | differing interpretations of lease provisions regarding recovery of expenses;
|- |  | -----------------------------------------------------------------------------



| |  | increased operating costs;
|- |  | --------------------------



| |  | changes in interest rates and availability of financing that may render the sale or financing of a property difficult or unattractive;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  | the Partnerships failure to obtain necessary outside financing;
|- |  | ----------------------------------------------------------------



| |  | risks and uncertainties affecting property development and construction (including construction delays, cost overruns, our inability to obtain necessary permits and public
opposition to these activities);
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the unpredictability of both the frequency and final outcome of litigation; and
|- |  | -------------------------------------------------------------------------------



| |  | the inability of the Partnership to develop all or any portion of the former landfill site, due to environmental, legal or economic impediments.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

The forward-looking statements in this Quarterly Report on Form 10-Q are subject to additional risks and uncertainties further discussed under Item 1A. Risk
Factors of the Partnerships Annual Report on Form 10-K for the year ended December 31, 2005. The Partnership assumes no obligation to update or supplement any forward-looking statement or statements.

Risks of Litigation

Certain claims and lawsuits have arisen against
us in our normal course of business. We believe that such claims and lawsuits will not have a material adverse effect on our financial position, cash flow or results of operations.

Item 3. Qualitative and Quantitative Information About Market Risk

Interest Rates

The Partnerships primary market risk exposure is to changes in interest rates obtainable on its secured borrowings. The Partnership expects that changes in market
interest rates will not have a material impact on the performance or fair value of its portfolio.

For debt obligations, the table below presents required
principal payments and related weighted average interest rates by expected maturity dates.



|                               |  |                        |      |   |      |   |      |      |  |   |      |   |  |      |      |   |            |   |      |       |  |   |            |   |  |   |        |   |  |   |       
|------------------------------ |  | ---------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | - |  | ---- | ---- | - | ---------- | - | ---- | ----- |  | - | ---------- | - |  | - | ------ | - |  | - | ------
|                               |  | Expected Maturity Date |      |   |      |   |      |     
|                               |  | 2006                   |      |   | 2007 |   |      | 2008 |  |   | 2009 |   |  | 2010 |      |   | Thereafter |   |      | Total |  |   | Fair Value
|                               |  | (in thousands)        
|Collateralized Fixed Rate Debt |  | $                      | 166  |   |      | $ | 345  |      |  | $ | 365  |   |  | $    | 385  |   |            | $ | 407  |       |  | $ | 22,271     |   |  | $ | 23,939 |   |  | $ | 22,918
|Average interest rate          |  |                        | 5.46 | % |      |   | 5.46 | %    |  |   | 5.46 | % |  |      | 5.46 | % |            |   | 5.46 | %     |  |   | 5.46       | % |  |   | 5.46   | % |  |   |       

As of June 30, 2006, the Partnership had cash equivalents of $3,558,000 in an interest-bearing money market
account, and $5,000,000 in short-term investments. Declines in interest rates over time would reduce Partnership interest income. The Partnership does not own any derivative instruments.

Item 4. Controls and Procedures

The principal executive and principal financial officer of the General Partner have
evaluated the disclosure controls and procedures of the Partnership as of the end of the period covered by this quarterly report. As used herein, the term disclosure controls and procedures has the meaning given to the term by Rule
13a-15 under the Securities Exchange Act of 1934, as amended (Exchange Act), and includes the controls and other procedures of the Partnership that are designed to ensure that information required to be disclosed by the Partnership in
the reports that it files with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Based upon their evaluation, the principal executive and principal
financial officer of the General Partner have concluded that the Partnerships disclosure controls and procedures were effective such that the information required to be disclosed by the Partnership in this quarterly report is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms applicable to the preparation of this report and is accumulated and communicated to the General Partners management, including the General
Partners principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.



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There has been no change in the Partnerships internal control over financial reporting (as defined in Rule
13a-15(f)) that occurred during the fiscal quarter ended June 30, 2006, that has materially affected, or is reasonably likely to materially affect, the Partnerships internal control over financial reporting.



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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Certain claims and lawsuits have arisen against the Partnership in its normal
course of business. The Partnership believes that such claims and lawsuits will not have a material adverse effect on the Partnerships financial position, cash flow or results of operations.

Item 1A. Risk Factors

There have been no material changes in the Partnerships risk factors from
those disclosed in the Partnerships annual report on Form 10-K for the year ended December 31, 2005.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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. Exhibits

(a) Exhibits:



|   |  |                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------
|31 |  | Section 302 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.
|   | 
|32 |  | Section 906 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.



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SIGNATURES

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



|                      |  |                                                         |  |     |  |                                                                            |  |                                
|--------------------- |  | ------------------------------------------------------- |  | --- |  | -------------------------------------------------------------------------- |  | -------------------------------
|                      |  | RANCON REALTY FUND IV, a California
limited partnership
|                      |  |                                                         | 
|                      |  | By                                                      |  |     |  | Rancon Financial Corporation a California
corporation, its General Partner
|                      |  |                                                         |  |    
|Date: August 14, 2006 |  |                                                         |  |     |  | By:                                                                        |  | /s/ Daniel L. Stephenson       
|                      |  |                                                         |  |     |  |                                                                            |  | Daniel L. Stephenson, President
|                      |  |                                                         | 
|Date: August 14, 2006 |  |                                                         |  | By: |  | /s/ Daniel L. Stephenson                                                  
|                      |  |                                                         |  |     |  | Daniel L. Stephenson, General Partner                                     



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