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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, 2005



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 an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes ̈No  x



Total number of units outstanding as of August 15, 2005: 68,072



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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, 2005 and December 31, 2004                              |  | 3   
|           |  |                                                                                       | 
|           |  |                                                                                       |  | Consolidated Statements of Operations for the three and six months ended June 30, 2005 and 2004 |  | 4   
|           |  |                                                                                       | 
|           |  |                                                                                       |  | Consolidated Statement of Partners Equity for the six months ended June 30, 2005               |  | 5   
|           |  |                                                                                       | 
|           |  |                                                                                       |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004           |  | 6   
|           |  |                                                                                       | 
|           |  |                                                                                       |  | Notes to Consolidated Financial Statements                                                      |  | 7-13
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 14-22                                                                                          
|           |  |                                                                                      
|Item 3.    |  | Qualitative and Quantitative Information About Market Risk                            |  | 22                                                                                             
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 22                                                                                             
|           |  |                                                                                      
|PART II    |  | OTHER INFORMATION                                                                     |  |                                                                                                
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  | 23                                                                                             
|           |  |                                                                                      
|Item 2.    |  | Unregistered Sales of Equity Securities and use of Proceeds                           |  | 23                                                                                             
|           |  |                                                                                      
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 23                                                                                             
|           |  |                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 23                                                                                             
|           |  |                                                                                      
|Item 5.    |  | Other Information                                                                     |  | 23                                                                                             
|           |  |                                                                                      
|Item 6.    |  | Exhibits                                                                              |  | 23                                                                                             
|           |  |                                                                                       | 
|SIGNATURES |  |                                                                                       |  |                                                                                                 |  | 24  



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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 30,2005 |         |   | December 31, 2004 |  
|Assets                                                                                                                         |  |              |         |   |                   |   |         |  
|Investments in real estate:                                                                                                    |  |              |         |   |                   |   |         |  
|Rental properties                                                                                                              |  | $            | 48,226  |   |                   | $ | 37,660  |  
|Accumulated depreciation                                                                                                       |  |              | (11,285 | ) |                   |   | (10,922 | )
|                                                                                                                               |  |              |         |   |                   |   |         |  
|Rental properties, net                                                                                                         |  |              | 36,941  |   |                   |   | 26,738  |  
|                                                                                                                               |  |             
|Construction in progress                                                                                                       |  |              |        |   |                   |   | 10,774  |  
|Land held for development                                                                                                      |  |              | 277     |   |                   |   | 272     |  
|                                                                                                                               |  |              |         |   |                   |   |         |  
|Total investments in real estate                                                                                               |  |              | 37,218  |   |                   |   | 37,784  |  
|                                                                                                                               |  |             
|Cash and cash equivalents                                                                                                      |  |              | 4,036   |   |                   |   | 701     |  
|Accounts receivable                                                                                                            |  |              | 100     |   |                   |   | 78      |  
|Deferred costs, net of accumulated amortization of $1,224 and $1,137 at June 30, 2005 and December 31, 2004, respectively      |  |              | 1,520   |   |                   |   | 1,026   |  
|Prepaid expenses and other assets                                                                                              |  |              | 1,735   |   |                   |   | 971     |  
|                                                                                                                               |  |              |         |   |                   |   |         |  
|Total assets                                                                                                                   |  | $            | 44,609  |   |                   | $ | 40,560  |  
|                                                                                                                               |  |              |         |   |                   |   |         |  
|Liabilities and Partners Equity                                                                                               |  |              |         |   |                   |   |         |  
|Liabilities:                                                                                                                   |  |              |         |   |                   |   |         |  
|Note payable and line of credit                                                                                                |  | $            | 15,521  |   |                   | $ | 13,236  |  
|Accounts payable and other liabilities                                                                                         |  |              | 394     |   |                   |   | 484     |  
|Construction costs payable                                                                                                     |  |              |        |   |                   |   | 12      |  
|Prepaid rent                                                                                                                   |  |              | 242     |   |                   |   | 35      |  
|                                                                                                                               |  |              |         |   |                   |   |         |  
|Total liabilities                                                                                                              |  |              | 16,157  |   |                   |   | 13,767  |  
|                                                                                                                               |  |              |         |   |                   |   |         |  
|Commitments and contingent liabilities (Note 6)                                                                                |  |              |         |   |                   |   |         |  
|                                                                                                                               |  |             
|Partners Equity:                                                                                                              |  |              |         |   |                   |   |         |  
|General Partners                                                                                                               |  |              | (414    | ) |                   |   | (583    | )
|Limited partners, 68,267 and 68,954 limited partnership units outstanding at June 30, 2005 and December 31, 2004, respectively |  |              | 28,866  |   |                   |   | 27,376  |  
|                                                                                                                               |  |              |         |   |                   |   |         |  
|Total partners equity                                                                                                         |  |              | 28,452  |   |                   |   | 26,793  |  
|                                                                                                                               |  |              |         |   |                   |   |         |  
|Total liabilities and partners equity                                                                                         |  | $            | 44,609  |   |                   | $ | 40,560  |  
|                                                                                                                               |  |              |         |   |                   |   |         |  



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, |  
|                                                                                              |  | 2005                       |        |   | 2004                     |   |        | 2005 |  |   | 2004   |  
|Operating Revenue - Rental income                                                             |  | $                          | 1,761  |   |                          | $ | 1,600  |      |  | $ | 3,392  |   |  | $ | 3,221  |  
|                                                                                              |  |                            |        |  
|Operating Expenses                                                                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                                              |  |                            |        |  
|Property operating                                                                            |  |                            | 604    |   |                          |   | 553    |      |  |   | 1,263  |   |  |   | 1,118  |  
|Depreciation and amortization                                                                 |  |                            | 433    |   |                          |   | 358    |      |  |   | 871    |   |  |   | 721    |  
|Expenses associated with undeveloped land                                                     |  |                            | 34     |   |                          |   | 74     |      |  |   | 68     |   |  |   | 137    |  
|General and administrative                                                                    |  |                            | 261    |   |                          |   | 318    |      |  |   | 478    |   |  |   | 614    |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                                      |  |                            | 1,332  |   |                          |   | 1,303  |      |  |   | 2,680  |   |  |   | 2,590  |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Operating income                                                                              |  |                            | 429    |   |                          |   | 297    |      |  |   | 712    |   |  |   | 631    |  
|                                                                                              |  |                            |        |  
|Gain on sale of land held for development                                                     |  |                            |       |   |                          |   | 1,347  |      |  |   |       |   |  |   | 1,347  |  
|Interest and other income                                                                     |  |                            | 2      |   |                          |   |       |      |  |   | 2      |   |  |   | 9      |  
|Interest expense                                                                              |  |                            | (108   | ) |                          |   | (120   | )    |  |   | (143   | ) |  |   | (257   | )
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income before discontinued operations                                                         |  |                            | 323    |   |                          |   | 1,524  |      |  |   | 571    |   |  |   | 1,730  |  
|                                                                                              |  |                            |        |  
|Income from discontinued operations (including gain on sale of real estate of $2,075 in 2005) |  |                            | 2,125  |   |                          |   | 53     |      |  |   | 2,161  |   |  |   | 88     |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                                                    |  | $                          | 2,448  |   |                          | $ | 1,577  |      |  | $ | 2,732  |   |  | $ | 1,818  |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic and diluted net income per limited partnership unit                                     |  | $                          | 33.74  |   |                          | $ | 21.49  |      |  | $ | 37.38  |   |  | $ | 24.72  |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted average number of limited partnership units outstanding during each period           |  |                            | 68,378 |   |                          |   | 69,710 |      |  |   | 68,546 |   |  |   | 69,854 |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  



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, 2005

(in
thousands)

(Unaudited)



|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  
|--------------------------------------------------- |  | --------------- | ---- | - | --------------- | - | ------ | ----- |  | - | ------ | -
|                                                    |  | General Partner |      |   | LimitedPartners |   |        | Total | 
|Balance (deficit) at December 31, 2004              |  | $               | (583 | ) |                 | $ | 27,376 |       |  | $ | 26,793 |  
|Redemption of limited partnership units             |  |                 |     |   |                 |   | (363   | )     |  |   | (363   | )
|Net income                                          |  |                 | 169  |   |                 |   | 2,563  |       |  |   | 2,732  |  
|Distributions ($10.36 per limited partnership unit) |  |                 |     |   |                 |   | (710   | )     |  |   | (710   | )
|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  
|Balance (deficit) at June 30, 2005                  |  | $               | (414 | ) |                 | $ | 28,866 |       |  | $ | 28,452 |  
|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  



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, |       
|                                                                                                                                       |  | 2005                     |        |   | 2004 |  
|Cash flows from operating activities:                                                                                                  |  |                          |        |   |      |   |        |  
|Net income                                                                                                                             |  | $                        | 2,732  |   |      | $ | 1,818  |  
|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 | ) |      |   | (1,347 | )
|Depreciation and amortization (including discontinued operations)                                                                      |  |                          | 890    |   |      |   | 759    |  
|Amortization of loan fees, included in interest expense                                                                                |  |                          | 54     |   |      |   | 52     |  
|Changes in certain assets and liabilities:                                                                                             |  |                          |        |   |      |   |        |  
|Accounts receivable                                                                                                                    |  |                          | (22    | ) |      |   | 60     |  
|Deferred costs                                                                                                                         |  |                          | (689   | ) |      |   | (6     | )
|Prepaid expenses and other assets                                                                                                      |  |                          | (104   | ) |      |   | 18     |  
|Accounts payable and other liabilities                                                                                                 |  |                          | (90    | ) |      |   | 107    |  
|Prepaid rent                                                                                                                           |  |                          | 207    |   |      |   | 55     |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Net cash provided by operating activities                                                                                              |  |                          | 903    |   |      |   | 1,516  |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Cash flows from investing activities:                                                                                                  |  |                          |        |   |      |   |        |  
|Net proceeds from sales of real estate and land held for development                                                                   |  |                          | 4,097  |   |      |   | 1,778  |  
|Additions to real estate investments                                                                                                   |  |                          | (2,125 | ) |      |   | (6,634 | )
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Net cash provided by (used for) investing activities                                                                                   |  |                          | 1,972  |   |      |   | (4,856 | )
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Cash flows from financing activities:                                                                                                  |  |                          |        |   |      |   |        |  
|Line of credit draws                                                                                                                   |  |                          | 2,363  |   |      |   | 3,525  |  
|Note payable principal payments                                                                                                        |  |                          | (78    | ) |      |   | (100   | )
|Loan fee for line of credit                                                                                                            |  |                          | (29    | ) |      |   | (218   | )
|Application fee for refinance (refundable)                                                                                             |  |                          | (723   | ) |      |   |       |  
|Redemption of limited partnership units                                                                                                |  |                          | (363   | ) |      |   | (250   | )
|Distributions to limited partners                                                                                                      |  |                          | (710   | ) |      |   | (72    | )
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Net cash provided by financing activities                                                                                              |  |                          | 460    |   |      |   | 2,885  |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Net increase (decrease) in cash and cash equivalents                                                                                   |  |                          | 3,335  |   |      |   | (455   | )
|                                                                                                                                       |  |                         
|Cash and cash equivalents at beginning of period                                                                                       |  |                          | 701    |   |      |   | 3,312  |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                                                                             |  | $                        | 4,036  |   |      | $ | 2,857  |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Supplemental disclosure of cash flow information:                                                                                      |  |                          |        |   |      |   |        |  
|Cash paid for interest (excluding the capitalized interest of $403 and $161 for the period ended June 30, 2005 and 2004,
respectively) |  | $                        | 492    |   |      | $ | 366    |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Supplemental disclosure of non-cash-financing activities:                                                                              |  |                          |        |   |      |   |        |  
|Redemption of limited partnership units                                                                                                |  | $                        | 48     |   |      | $ | 12     |  
|Redemption payable                                                                                                                     |  |                          | (48    | ) |      |   | (12    | )
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Total                                                                                                                                  |  | $                        |       |   |      | $ |       |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  



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





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RANCON REALTY FUND IV

A California Limited Partnership



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(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.



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 Partnership considers all assets owned by RRF IV, Inc. and RRF IV Tri-City to be owned by the Partnership.



During the six months ended June 30, 2005, a total of 687 Units of limited partnership interest (the Units) were redeemed at an
average price of $529. As of June 30, 2005, there were 68,267 Units outstanding.



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, 2005 and December 31, 2004, and the related consolidated statements of operations for the three and six months ended June 30, 2005 and 2004, partners equity for the six months ended June 30, 2005, and cash flows for
the six months ended June 30, 2005 and 2004. The results for the six months ended June 30, 2005 are not necessarily indicative of the results which may occur for the year ended December 31, 2005.



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 loss other than net loss from operations shall be allocated 99% to the limited partners and 1% to the General Partner.



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 payments of partnership expenses and maintenance of reasonable reserves for debt service, alterations and improvements, maintenance, replacement of furniture and fixtures, working capital and contingent liabilities.



All excess cash from operations shall be distributed 90 percent to the limited partners and
10 percent to the General Partner. In May 2005, the limited partners received partial distributions from the Partnership.



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 percent to the General Partner and 99 percent to the limited partners in proportion to the outstanding positive amounts of Adjusted Invested Capital (as defined in the



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



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



Management Agreement



In January 1995, Glenborough Corporation (GC) entered into a ten-year agreement
with the Partnership to manage the Partnerships assets and properties. In October 2000, GC merged into Glenborough Realty Trust Incorporated (Glenborough). During the ten years ended December 31, 2004, the Partnership paid
Glenborough for its services as follows: (i) a specified asset administration fee ($331,000 for the six months ended June 30, 2004); (ii) a sales fees of 2% for improved properties and 4% for land ($77,000 for the six months ended June 30, 2004);
(iii) a refinancing fee of 1% ($113,000 for the six months ended June 30, 2004) and (iv) a management fee of 5% of gross rental receipts. Glenborough is not an affiliate of RFC or the Partnership.



In July 2004, the Partnership extended its management relationship with Glenborough through
December 31, 2006. Commencing on January 1, 2005 and ending December 31, 2006, the Partnership engages Glenborough to perform services for the following fees: (i) a property management fee of 3% of gross rental revenue; (ii) a construction services
fee per certain schedules ($56,000 for the six months ended June 30, 2005); (iii) a specified asset and Partnership management fee of $300,000 per year with reimbursements of certain expenses and consulting service fee ($148,000 for the six months
ended June 30, 2005); (iv) a leasing services fee ($254,000 for the six months ended June 30, 2005); (v) a sales fee of 2% for improved properties ($87,000 for the six months ended June 30, 2005) and 4% for unimproved properties; (vi) a financing
services fee of 1% of gross loan amount; and (vii) a development fee equal to 5% of the hard costs of the development project ($51,000 for the six months ended June 30, 2005). The hard costs exclude the cost of the land. 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.



The new management agreement represents an annual reduction of $363,000 for the asset and Partnership services fee in 2005 and 2006, compared to the asset and Partnership
management fee paid in 2004; as well as a reduction of 2% in the property management fee from 5% in 2004 to 3% in 2005 and 2006, 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.



Note 2. SIGNIFICANT ACCOUNTING POLICIES



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 certain wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.



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.





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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)

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. All intercompany balances and transactions have been eliminated in the consolidation.



Rental Properties



Rental properties, including the related land, are stated at depreciated cost unless events
or circumstances indicate that such amount 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, orthe estimated useful life of the
asset
|Furniture and equipment   |  | 5 to 7 years                                                                             



Construction in Progress and
Land Held for Development



Construction in progress and land held for
development are 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. Construction in progress and land held for development are reviewed for impairment whenever there is a triggering event and at least annually.



The pre-development costs for a new project include survey fees and consulting fees. Interest, property taxes and insurance related to the new project are capitalized
during periods that activities that are necessary to get the project ready for its intended use are in progress. The capitalization ends when the construction is substantially completed and the project is ready for its intended use.



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. As of June 30, 2005, the Partnership does not own any certificates of deposit.



Fair Value of Financial Instruments



For certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, other liabilities, construction costs payable, 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 secured note payable as of June 30, 2005 and December 31, 2004 was approximately $5,615,000 and $6,010,000, respectively.



Deferred Costs



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



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(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. However, where actual expenses are significantly different from estimates, the Partnership will accrue the differences in the same period.



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



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/Loss Per Limited Partnership Unit



Net income or loss per limited partnership unit is calculated using the weighted average
number of limited partnership units outstanding during the period and the Limited Partners allocable share of the net income or loss.



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 (loss) 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



One tenant represented 21% and 22% of rental income for the six months ended June 30, 2005 and 2004, respectively.



Reference to 2004 audited consolidated financial statements



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





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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



Note 3.
RENTAL PROPERTIES



Rental properties consisted of the following at
June 30, 2005 and December 31, 2004 (in thousands):



|                                  |  |      |         |   |      |   |         |  
|--------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                  |  | 2005 |         |   | 2004 |  
|Land                              |  | $    | 4,471   |   |      | $ | 4,236   |  
|Buildings                         |  |      | 36,698  |   |      |   | 28,375  |  
|Buildings and tenant improvements |  |      | 7,057   |   |      |   | 5,049   |  
|                                  |  |      |         |   |      |   |         |  
|                                  |  |      | 48,226  |   |      |   | 37,660  |  
|Less: accumulated depreciation    |  |      | (11,285 | ) |      |   | (10,922 | )
|                                  |  |      |         |   |      |   |         |  
|Total rental properties, net      |  | $    | 36,941  |   |      | $ | 26,738  |  
|                                  |  |      |         |   |      |   |         |  



As of June 30, 2005, the
Partnerships rental properties included four office/industrial buildings and seven retail buildings.



The core and shell of the Vanderbilt Plaza was substantially completed and the first tenant moved in during February 2005.



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.



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 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):



|                                          |  |                             |       |                           |   |         |  |      |       |  |   |    
|----------------------------------------- |  | --------------------------- | ----- | ------------------------- | - | ------- |  | ---- | ----- |  | - | ---
|                                          |  | Three months ended June 30, |       | Six months ended June 30,
|                                          |  | 2005(1)                     |       | 2004                      |   | 2005(1) |  | 2004
|Operating Revenue  rental income         |  | $                           | 82    |                           | $ | 106     |  | $    | 169   |  | $ | 192
|                                          |  |                             |       |                           |   |         |  |      |       |  |   |    
|Property operating                        |  |                             | 32    |                           |   | 34      |  |      | 64    |  |   | 66 
|Depreciation and amortization             |  |                             |      |                           |   | 19      |  |      | 19    |  |   | 38 
|                                          |  |                             |       |                           |   |         |  |      |       |  |   |    
|Total operating expenses                  |  |                             | 32    |                           |   | 53      |  |      | 83    |  |   | 104
|                                          |  |                             |       |                           |   |         |  |      |       |  |   |    
|Income before gain on sale of real estate |  |                             | 50    |                           |   | 53      |  |      | 86    |  |   | 88 
|Gain on sale of real estate               |  |                             | 2,075 |                           |   |        |  |      | 2,075 |  |   |   
|                                          |  |                             |       |                           |   |         |  |      |       |  |   |    
|Income from discontinued operations       |  | $                           | 2,125 |                           | $ | 53      |  | $    | 2,161 |  | $ | 88 
|                                          |  |                             |       |                           |   |         |  |      |       |  |   |    

---

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



Note 4. CONSTRUCTION IN PROGRESS AND LAND HELD FOR DEVELOPMENT



Construction in progress consisted of the following at June 30, 2005 and December 31,
2004 (in thousands):



|                                                                                                              |  |      |   |      |   |       
|------------------------------------------------------------------------------------------------------------- |  | ---- | - | ---- | - | ------
|                                                                                                              |  | 2005 |   | 2004
|Tri-City, San Bernardino, CA (approximately 1 acre of land with a cost basis of $511,000 atDecember 31, 2004) |  | $    |  |      | $ | 10,774
|                                                                                                              |  |      |   |      |   |       



Vanderbilt Plaza was transferred to
land and building from construction in progress when the core and shell of the building was substantially completed and the first tenant moved in during February 2005.



Land held for development consisted of the following at June 30, 2005 and December 31, 2004 (in thousands):



|                                                                                                           |  |      |     |      |   |    
|---------------------------------------------------------------------------------------------------------- |  | ---- | --- | ---- | - | ---
|                                                                                                           |  | 2005 |     | 2004
|Tri-City, San Bernardino, CA (approximately 16 acres at June 30, 2005 and December 31, 2004, respectively) |  | $    | 277 |      | $ | 272
|                                                                                                           |  |      |     |      |   |    



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



As of June
30, 2005, the Partnership owned approximately 16 acres of undeveloped land. A conceptual plan for a specification building is currently being designed on an approximately one acre site. The plan includes a three-story multi-tenant building with an
estimate of 75,000 gross square feet of office space.



The remaining 15 acres
are part of a landfill monitoring program managed by the City of San Bernardino (as discussed in Note 6 below). At this time, the Partnership believes that development of this land is not practical.



Note 5. NOTE PAYABLE AND LINE OF CREDIT



Note payable and line of credit as of June 30, 2005 and December 31, 2004 were as
follows (in thousands):



|                                                                                                                                                                                                                                                                                                                                                                                           |  |      |        |      |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------ | ---- | - | ------
|                                                                                                                                                                                                                                                                                                                                                                                           |  | 2005 |        | 2004
|Note payable collateralized by first deeds of trust on Service Retail Center, Promotional Retail Center and Carnegie Business Center I
buildings. The note, which matures May 1, 2006, is a 10-year, 8.74% fixed rate loan with a 25-year amortization requiring monthly payments of principal and interest totaling $53.                                                                  |  | $    | 5,498  |      | $ | 5,576 
|Line of credit with a total availability of $11.4 million as of June 30, 2005 and December 31, 2004, collateralized by first deeds of trust on
IRC, Circuit City and TGI Fridays buildings, with a variable interest rate of Prime Rate (6% and 5.25% as of June 30, 2005 and December 31, 2004, respectively), monthly, interest-only payments, and a maturity date of April 15,
2007. |  |      | 10,023 |      |   | 7,660 
|                                                                                                                                                                                                                                                                                                                                                                                           |  |      |        |      |   |       
|Total                                                                                                                                                                                                                                                                                                                                                                                      |  | $    | 15,521 |      | $ | 13,236
|                                                                                                                                                                                                                                                                                                                                                                                           |  |      |        |      |   |       



The note payable may be prepaid with a
penalty based on a yield maintenance formula. There are no prepayment penalties if the note is repaid within six months of the maturity date. The Partnership intends to pay off this note when the prepayment penalty period ends on November 1, 2005
(as discussed below). No assurance can be made that circumstances will not arise which could impact the close of the refinance to repay this note at maturity.



The Partnership intends to refinance the above fixed-rate loan and the line of credit. A new loan is assumable and expected to total $24.1 million, bears interest at a
fixed rate of 5.64% with a 10-year term, collateralized by a total of eight properties, of which five properties are from the existing fixed-rate loan and line of credit. The new loan would consist of two release parcels. The first release parcel
would be collateralized by six properties with a loan amount of $16,448,000 and is estimated to close in the third quarter of 2005. The second release parcel would be collateralized by two properties with a loan amount of $7,652,000 and is estimated
to close in November 2005, after the above note payable is paid off.



The
annual maturities on the Partnerships note payable and line of credit subsequent to June 30, 2005, are as follows (in thousands):



|      |  |   |       
|----- |  | - | ------
|2005  |  | $ | 81    
|2006  |  |   | 5,417 
|2007  |  |   | 10,023
|      |  |   |       
|Total |  | $ | 15,521
|      |  |   |       



Note 6. 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 financial position, results of operations or cash flows. 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 results of operations and cash flows.



Approximately 15 acres of the Tri-City land owned by the Partnership was part of a landfill
operated by the City of San Bernardino (the City) from approximately 1950 to 1960. The City is responsible for the landfill and the gas-monitoring program as prescribed by the Santa Ana Regional Water Quality Control Board
(RWQCB). Under a Limited Access Agreement with the Partnership, methane monitoring is handled directly by the City. Although there is no requirement by the RWQCB or the County of San Bernardino (the County) for Clean Closure
which would include removal of all landfill, the City is required to place both a Cover Improvement System and a Gas Extraction System at the site. The City started the



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##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



installation
of the Cover Improvement System in October 2004. The completion of the Cover Improvement System has been delayed and is now scheduled to be completed in the third quarter of 2005. A plan for the Gas Extraction System was submitted by the City to the
County for review and approval. Under the Notice and Order of Compliance, the City, directed by the County, will install the Gas Extraction System after the plan is approved. No assurance can be made that circumstances will not arise which could
impact the Partnerships responsibility related to the land. At this time, the Partnership believes that development of this land is not practical.



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 2002; however, our insurance policies 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.



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, 2005, for sales that transpired 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 conditions under which these commissions would be payable have not
been achieved, 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



Background



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.



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 gartner 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
Partnership considers all assets owned by RRF IV, Inc. and RRF IV Tri-City to be owned by the Partnership.



Overview



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 (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. Since the acquisition of the land, the Partnership constructed thirteen projects at Tri-City consisting of four office buildings, one industrial building, and
eight retail buildings. One office building and one retail building were sold in 2002 and 2004, respectively. The Partnerships properties are more fully described below.



As of June 30, 2005, the Partnership owned eleven rental properties, and approximately 16 acres of unimproved land in the Tri-City
master-planned development in San Bernardino, California.



Tri-City



Between 1984 and 1985, the Partnership acquired a total of 76.56
acres of partially developed land in Tri-City for an aggregate purchase price of $9,917,000. During that time, Fund V acquired the remaining 76.21 acres within Tri-City.



Tri-City is located at the northeastern quadrant of the intersection of Interstate 10 (San Bernardino Freeway) and Waterman Avenue in the
southernmost part of the City of San Bernardino, and is in the heart of the Inland Empire, the most densely populated area of San Bernardino and Riverside Counties.



The Inland Empire is generally broken down into two major markets, Inland Empire East and Inland Empire West. Tri-City is located within the
Inland Empire East market, which consists of approximately 12.6 million square feet of office space and an overall vacancy rate of approximately 11% as of June 30, 2005, according to a study conducted by an independent broker.



As of June 30, 2005, the Partnership has approximately 269,000 square feet of office space
with an average vacancy rate of 34%, approximately 155,000 square feet of retail space with an average vacancy rate of 0.7%, and approximately 62,000 square feet of industrial space with an average vacancy rate of 60% (vacancy rate should be 0% in
the third quarter of 2005-see below for further discussion).



Tri-City
Properties



The Partnerships rental properties are as follows:



|                           |  |                                    |  |            
|-------------------------- |  | ---------------------------------- |  | -----------
|Property                   |  | Type                               |  | Square Feet
|One Vanderbilt             |  | Four story office building         |  | 73,729     
|Carnegie Business Center I |  | Two industrial buildings           |  | 62,540     
|Service Retail Center      |  | Two retail buildings               |  | 20,780     
|Promotional Retail Center  |  | Four strip center 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    



These eleven operating properties
total approximately 486,000 square feet and offer a wide range of office, retail and industrial products to the market.



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##### Table of Contents

Occupancy rates at the Partnerships rental properties as of June 30, 2005 and 2004 were as follows:



|                                            |  |      |  |     
|------------------------------------------- |  | ---- |  | ----
|                                            |  | 2005 |  | 2004
|One Vanderbilt                              |  | 97%  |  | 95% 
|Service Retail Center                       |  | 94%  |  | 93% 
|Carnegie Business Center I                  |  | 40%  |  | 100%
|Promotional Retail Center                   |  | 100% |  | 100%
|Inland Regional Center                      |  | 100% |  | 100%
|TGI Fridays                                |  | 100% |  | 100%
|Circuit City                                |  | 100% |  | 100%
|Mimis Café                                 |  | 100% |  | 100%
|Palm Court Retail #1                        |  | 100% |  | 100%
|Palm Court Retail #2                        |  | 100% |  | 100%
|Vanderbilt Plaza (commencing February 2005) |  | 20%  |  | N/A 
|                                            |  |     
|Weighted average occupancy                  |  | 73%  |  | 99% 



Weighted average occupancy decreased
primarily as a result of the increase in vacancy at Carnegie Business Center I and at a newly constructed property, Vanderbilt Plaza (as discussed below).



On April 18, 2005, the Partnership entered into a contract to sell the property leased to Office Max for a price of $4,350,000. 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.



As of June 30, 2005, tenants at Tri-City occupying substantial portions of leased rental space included: (i) Countrywide Home Loan with a
lease through August 2008; (ii) CompUSA with a lease through August 2008; (iii) Fidelity National Title with a lease through August 2008; (iv) PetsMart with a lease through January 2009; (v) Inland Regional Center with a lease through July 2009;
(vi) The University of Phoenix, Inc. with a lease through August 2009; (vii) New York Life with a lease through March 2015; and (viii) Circuit City with a lease through January 2018. These eight tenants, in the aggregate, occupied approximately
253,000 square feet of the 486,000 total leasable square feet at Tri-City and accounted for approximately 68% of the rental income of the Partnership during the six months ended June 30, 2005.



Occupancy decreased 60% from June 30, 2004 to June 30, 2005 at Carnegie Business Center I,
primarily due to the lease expiration of ITT Education Center (ITT). ITT purchased two unimproved lots known as Brier Business Center I and Brier Plaza from the Partnership in 2004. After the expiration of their lease at the end of
December 2004, ITT moved to their new building constructed on the land purchased from the Partnership.



A new lease with a ten-year term for the office space previously occupied by ITT, at Carnegie Business Center I was signed in the second quarter of 2005. The new tenant should occupy the office space in October 2005.
This new lease will bring up the occupancy rate for Carnegie Business Center I to 100% in the third quarter of 2005.



Vanderbilt Plaza started construction in September 2003, and the core and shell of the property was substantially completed in September 2004. The property is a
four-story office building, and is approximately 114,000 square feet. A tenant relocated from One Parkside (owned and managed by Rancon Realty Fund V  a partnership sponsored by the General Partner of the Partnership) to Vanderbilt Plaza in
February 2005, and occupies approximately 23,000 square feet of office space in the building. In addition, an existing tenant at One Vanderbilt expanded and leased approximately 32,000 square feet of additional office space at Vanderbilt Plaza. This
tenant should occupy their space in August 2005. Two new leases with a total of approximately 20,000 square feet and five-year lease terms were signed during the second quarter of 2005. These two tenants should also occupy their spaces in the third
quarter of 2005. These three leases will bring up the occupancy rate for Vanderbilt Plaza to 66% in the third quarter of 2005. Management is actively marketing the remaining vacancy spaces at this new building.





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##### Table of Contents

The Partnerships Tri-City Properties are owned by the Partnership, subject to the following note and line of credit
as of June 30, 2005:



|                    |  |                                                                            |              |   |                                 |   |                
|------------------- |  | -------------------------------------------------------------------------- | ------------ | - | ------------------------------- | - | ---------------
|Security            |  | Service Retail Center,Carnegie Business Center I,Promotional Retail Center |              |   | IRC, Circuit City, TGI Fridays
|Form of debt        |  |                                                                            | Note payable |   |                                 |   | Line of credit 
|Outstanding balance |  | $                                                                          | 5,498,000    |   |                                 | $ | 10,023,000     
|Interest Rate       |  |                                                                            | 8.74         | % |                                 |   | Prime rate (6%)
|Monthly payment     |  | $                                                                          | 53,413       |   |                                 |   | Interest only  
|Maturity date       |  |                                                                            | 5/1/06       |   |                                 |   | 4/15/07        



The note payable may be prepaid with a
penalty based on a yield maintenance formula. There are no prepayment penalties if this note is repaid within six months of the maturity date. The Partnership intends to pay off this note with the proceeds from the pending refinance (as discussed
below) after the prepayment penalty period ends on November 1, 2005. No assurance can be made that circumstances will not arise which could impact the close of the loan to repay this note at maturity.



The Partnership intends to refinance the above fixed-rate loan and the line of credit. A new
loan is assumable and expected to total $24.1 million, bears interest at a fixed rate of 5.64% with a 10-year term, collateralized by a total of eight properties, of which five properties are from the existing fixed-rate loan and line of credit. The
new loan would consist of two release parcels. The first release parcel would be collateralized by six properties with a loan amount of $16,448,000 and is estimated to close in the third quarter of 2005. The second release parcel would be
collateralized by two properties with a loan amount of $7,652,000 and is estimated to close in November 2005, after the above note payable is paid off.



Tri-City Land



As of June 30, 2005, the Partnership owned approximately 16 acres of undeveloped land. A conceptual plan for a specification building is currently being designed on approximately 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 Partnership intends to develop this one acre site to generate more operating income for the Partnership in this fast-growing market.



The remaining 15 acres of land was part of a landfill operated by the City of San Bernardino
(the City) from approximately 1950 to 1960. The City is responsible for the landfill and the gas-monitoring program as prescribed by the Santa Ana Regional Water Quality Control Board (RWQCB). Under a Limited Access Agreement
with the Partnership, methane monitoring is handled directly by the City. Although there is no requirement by the RWQCB or the County of San Bernardino (the County) for Clean Closure which would include removal of all landfill, the City
is required to place both a Cover Improvement System and a Gas Extraction System at the site. The City started the installation of the Cover Improvement System in October 2004, The completion of the Cover Improvement System
has been delayed and is now scheduled to be completed in the third quarter of 2005. Currently, the City has submitted the plan for the Gas Extraction System to the County for review and approval. Under the Notice and Order of Compliance, the City,
directed by the County, will install the Gas Extraction System after the plan is approved. No assurance can be made that circumstances will not arise which could impact the Partnerships responsibility related to the land. At this time, the
Partnership believes that development of this land is not practical.



Results of Operations



Comparison of the three
months ended June 30, 2005 to the three months ended June 30, 2004.



Revenue



Rental income for the three months ended June 30,
2005 increased $161,000, or 10%, compared to the three months ended June 30, 2004, primarily due to an increase in occupancy at Vanderbilt Plaza, which commenced operations in February 2005, offset by a decrease in occupancy at Carnegie Business
Center I, as a result of a tenant, ITT Education Center, vacating their space at the end of 2004 (as discussed above).



Expenses



Operating expenses increased $51,000, or 9%, for the three months ended June 30, 2005, compared to the three months ended June 30, 2004, primarily due to the commencement of operations at Vanderbilt Plaza in February
2005, offset by a reduction in property management fee from 5% to 3%.



Depreciation and amortization increased $75,000, or 21% , for the three months ended June 30, 2005, compared to the three months ended June 30, 2004, primarily due to additions to a new building and lease commissions.



16



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##### Table of Contents

Expenses associated with undeveloped land decreased $40,000, or 54%, for the three months ended June 30, 2005, compared
to the three months ended June 30, 2004, primarily due to a decrease in expenses related to Vanderbilt Plaza. The expenses were classified under the property operating expenses after construction was completed.



General and administrative expenses decreased $57,000, or 18%, for the three months ended
June 30, 2005, compared to the three months ended June 30, 2004, primarily due to a reduction in asset and Partnership management fee in 2005, offset by a slight increase in investor service expenses.



Non-operating income / expenses



The gain on sale of land held for development of $1,347,000 during the three months ended
June 30, 2004, resulted from the sale of two lots known as Brier Business Center I and Brier Plaza in April 2004.



Interest expense decreased $12,000, or 10%, for the three months ended June 30, 2005, compared to the three months ended June 30, 2004, primarily due to increase in
interest and loan expenses capitalized to the Vanderbilt Plaza during the lease up period.



Income from discontinued operations for the three months ended June 30, 2005 and 2004, resulted from the sale of the property leased to Office Max (See Note 3 for further discussion).



Comparison of the six months ended June 30, 2005 to the six months ended June 30, 2004



Revenue



Rental income for the six months ended June 30, 2005 increased $171,000, compared to the six
months ended June 30, 2004, primarily due to an increase in occupancy at Vanderbilt Plaza, which commenced operation in February 2005, offset by a decrease in occupancy at Carnegie Business Center I, as a result of a tenant, ITT Education Center,
vacating their space at end of 2004 (as discussed above).



Expenses



Operating expenses increased $145,000, or 13%, for the six months ended
June 30, 2005, compared to the six months ended June 30, 2004, primarily due to the commencement of operations at Vanderbilt Plaza in February 2005, offset by reduction in the property management fee from 5% to 3%.



Depreciation and amortization increased $150,000, or 21%, for the six months ended June 30,
2005, compared to the six months ended June 30, 2004, primarily due to depreciation of Vanderbilt Plaza and additions lease commissions.



Expenses associated with undeveloped land decreased $69,000, or 50%, for the six months ended June 30, 2005, compared to the six months ended June 30, 2004, primarily due
to a decrease in expenses related to Vanderbilt Plaza. The expenses were classified under the property operating expenses after construction was completed.



General and administrative expenses decreased $136,000, or 22%, for the six months ended June 30, 2005, compared to the six months ended June 30, 2004, primarily due to a
reduction in asset and Partnership management fees in 2005, offset by a slight increase in investor service fees.



Non-operating income / expenses



The gain on sale of land held for development of $1,347,000 during the six months ended June 30, 2004, resulted from the sale of two lots known as Brier Business Center I
and Brier Plaza in April 2004.



Interest expense decreased $114,000, or 44%,
for the six months ended June 30, 2005, compared to the six months ended June 30, 2004, primarily due to increase in interest and loan expenses capitalized to the Vanderbilt Plaza during the lease up period.



Income from discontinued operations during the six months ended June 30, 2005 and 2004,
resulted from the sale of the property leased to Office Max.



Liquidity
and Capital Resources



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



As of June 30, 2005, the Partnership had cash and cash equivalents of $4,036,000.



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.



17



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##### Table of Contents

The Partnerships primary liabilities at June 30, 2005 included a note payable and a line of credit, totaling
approximately $15,521,000 secured by properties with an aggregate net book value of approximately $17,779,000 and with maturity dates of May 1, 2006 and April 15, 2007. The note requires monthly principal and interest payments of $53,000, and bears
a fixed interest rate of 8.74%. The line of credit requires monthly interest-only payments, bears interest at Prime Rate (6% and 5.25% as of June 30, 2005 and December 31, 2004, respectively), and had an outstanding balance of $10,023,000 and
$7,660,000 at June 30, 2005 and December 31, 2004, respectively. In October 2004, the Partnership used its existing cash reserves primarily from sales of land held for development in 2004 to repay the note secured by One Vanderbilt in full. The note
was paid off at the end of the loan term and the balance of the note was $2,600,000. There was no prepayment penalty incurred at the time of payoff.



The Partnership intends to refinance the above fixed-rate loan and the line of credit. A new loan is assumable and expected to total $24.1 million, bears interest at a
fixed rate of 5.64% with a 10-year term, collateralized by a total of eight properties, of which five properties are from the existing fixed-rate loan and line of credit. The new loan would consist of two release parcels. The first release parcel
would be collateralized by six properties with a loan amount of $16,448,000 and is estimated to close in the third quarter of 2005. The second release parcel would be collateralized by two properties with a loan amount of $7,652,000 and is estimated
to close in November 2005, after the above note payable is paid off. No assurance can be made that circumstances will not arise which could impact the close of the loan to repay the above note at maturity.



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, 2005, for sales that transpired 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 conditions under which these commissions would be payable have not been achieved, 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, property sales and interest income on money market funds. 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, 2005, 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      |  | $               | 81  |              | $ | 5,417        |  | $                |  |       | $ |  |  | $ | 5,498 
|Secured bank line of credit |  |                 |    |              |   | 10,023       |  |                  |  |       |   |  |  |   | 10,023
|Interest on indebtedness(1) |  |                 | 546 |              |   | 981          |  |                  |  |       |   |  |  |   | 1,528 
|                            |  |                 |     |              |   |              |  |                  |   |       |   |   |  |   |       
|Total                       |  | $               | 627 |              | $ | 16,421       |  | $                |  |       | $ |  |  | $ | 17,049
|                            |  |                 |     |              |   |              |  |                  |   |       |   |   |  |   |       

---

|(1) | For variable rate loans, this represents estimated interest expense based on outstanding balances and interest rates at June 30, 2005.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



Management expects that the Partnerships cash and cash equivalents as of June 30, 2005,
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, 2005, the Partnerships cash provided by operating activities totaled $903,000.



The $22,000 increase in accounts receivable at June 30, 2005, compared to December 31, 2004, was primarily due to tenant rents receivable.



The $689,000 increase in deferred costs at June 30, 2005, compared to December 31, 2004, was
primarily due to increase in lease commission paid for new leases at Vanderbilt Plaza and Carnegie Business Center I (as discussed above).



The $104,000 increase in prepaid expenses and other assets at June 30, 2005, compared to December 31, 2004, was primarily due to increase in straight line rent
receivables, offset by a decrease in impound accounts related to the note payable and prepaid insurance.



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##### Table of Contents

The $90,000 decrease in accounts payable and other liabilities at June 30, 2005, compared to December 31, 2004, was
primarily due to payment of distribution to the General Partner, which was accrued in 2004, offset by an increase in accruals for audit and tax return preparation fees.



The $207,000 increase in prepaid rents at June 30, 2005, compared to December 31, 2004, was due to the receipt of July 2005 rents in June
2005.



Investing Activities



During the six months ended June 30, 2005, the Partnerships cash provided by investing
activities totaled $1,972,000 which consisted of $2,125,000 primarily used for building and tenant improvements at Vanderbilt Plaza, offset by $4,097,000 from proceeds from the sale of the property leased to Office Max.



Financing Activities



During the six months ended June 30, 2005, the Partnerships cash generated from financing activities totaled $460,000, which consisted
of $2,363,000 in line of credit draws, offset by $78,000 in principal payments on the note payable, $29,000 for payment of annual loan fee for the line of credit, $723,000 for payment of a refundable application fee for the pending refinance,
$363,000 for the redemption of 687 limited partnership Units, and $710,000 distributions to the limited partners.



Critical Accounting Policies



Revenue recognized on a straight-line basis



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. However, where
actual expenses are significantly different from estimates, the Partnership will accrue the differences in the same period.



Carrying value of rental properties and land held for development



The Partnerships rental properties, including the related land, are stated at depreciated cost unless events or circumstances indicate that such amount cannot be
recovered, in which case, the carrying value of the property is reduced to its estimated fair value. Estimated fair value is based upon (i) 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 multiplied by annualized rental income based upon the age, construction and use of the building. The fulfillment of the
Partnerships plans related to each of its properties 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.



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 to further develop the properties.



The pre-development costs for a new project include survey fees and consulting fees.
Interest, property taxes and insurance related to the new project are capitalized during periods that activities that are necessary to get the project ready for its intended use are in progress. The capitalization ends when the construction is
substantially completed and the project is ready for its intended use.



The
actual value of the Partnerships portfolio of properties and land held for development could be different from their carrying amounts.



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 plan to develop one or more properties to generate more operating income;
|- |  | -------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | The Partnerships intent to refinance existing debt and pay off a note on November 1, 2005 when the prepayment penalty period expires;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  | 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 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; and
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



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;
|- |  | -----------------------------------------------



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



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



| |  | 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;
|- |  | ---------------------------------------------------------------------------



| |  | unanticipated inability to close financing that currently is in process in the amount expected on or before the date expected;
|- |  | ------------------------------------------------------------------------------------------------------------------------------



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



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



The forward-looking statements in this Quarterly Report on Form 10-Q are subject to additional risks and uncertainties further discussed below under Risk Factors. The
Partnership assumes no obligation to update or supplement any forward looking-statement.



Risk Factors



Market
Fluctuations in Rental Rates and Occupancy Could Adversely Affect Our Operations



As leases turn over, our ability to re-lease the space to existing or new tenants at rates equal to or greater than those realized historically is impacted by, among other things, the economic conditions of the market in which a property is
located, the availability of competing space (including sublease space offered by tenants who have vacated space in competing buildings prior to the expiration of their lease term), and the level of improvements which may be required at the
property. We cannot assure you that the rental rates we obtain in the future will be equal to or greater than those obtained under existing contractual commitments. If we cannot lease all or substantially all of the expiring space at our properties
promptly, or if the rental rates are significantly lower than expected, then our results of operations and financial condition could be negatively impacted.



Tenants Defaults Could Adversely Affect Our Operations



Our ability to manage our assets is subject to federal bankruptcy laws and state laws that limit creditors rights and remedies available to real property owners to
collect delinquent rents. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in any bankruptcy proceeding relating to that tenant. We
also cannot be sure that we would receive rent in the proceeding sufficient to cover our expenses with respect to the premises. If a tenant becomes bankrupt, the federal bankruptcy code will apply, which in some instances may restrict the amount and
recoverability of our claims against the tenant. A tenants default on its obligations to us could adversely affect our results of operations and financial condition.



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Potential Liability Due to Environmental Matters



Under federal, state and local laws relating to protection of the environment, or Environmental Laws, a current or previous owner or
operator of real estate may be liable for contamination resulting from the presence or discharge of petroleum products or other hazardous or toxic substances on the property. These owners may be required to investigate and clean-up the contamination
on the property as well as the contamination which has migrated from the property. Environmental Laws typically impose liability and clean-up responsibility without regard to whether the owner or operator knew of, or was responsible for, the
presence of the contamination. This liability may be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. In addition, the owner or operator of a property may be subject to claims by third
parties based on personal injury, property damage and/or other costs, including investigation and clean-up costs, resulting from environmental contamination. Environmental Laws may also impose restrictions on the manner in which a property may be
used or transferred or in which businesses may be operated. These restrictions may require expenditures. Under the Environmental Laws, any person who arranges for the transportation, disposal or treatment of hazardous or toxic substances may also be
liable for the costs of investigation or clean-up of those substances at the disposal or treatment facility, whether or not the facility is or ever was owned or operated by that person.



Our tenants generally are required by their leases to operate in compliance with all applicable Environmental Laws, and to indemnify us
against any environmental liability arising from their activities on the properties. However, we could be subject to strict liability by virtue of our ownership interest in the properties. Also, tenants may not satisfy their indemnification
obligations under the leases. We are also subject to the risk that:



| |  |  | any environmental assessments of our properties may not have revealed all potential environmental liabilities,
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | any prior owner or prior or current operator of these properties may have created an environmental condition not known to us, or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | an environmental condition may otherwise exist as to any one or more of these properties.
| | - |  | -----------------------------------------------------------------------------------------



Any one of these conditions could have an adverse effect on our results of operations and financial condition. Moreover, future
environmental laws, ordinances or regulations may have an adverse effect on our results of operations and financial condition. Also, the current environmental condition of those properties may be affected by tenants and occupants of the properties,
by the condition of land or operations in the vicinity of the properties (such as the presence of underground storage tanks), or by third parties unrelated to us.



Environmental Liabilities May Adversely Affect Operating Costs and Ability to Borrow



The obligation to pay for the cost of complying with existing Environmental Laws as well as
the cost of complying with future legislation may affect our operating costs. In addition, the presence of petroleum products or other hazardous or toxic substances at any of our properties, or the failure to remediate those properties properly, may
adversely affect our ability to borrow by using those properties as collateral. The cost of defending against claims of liability and the cost of complying with Environmental Laws, including investigation or clean-up of contaminated property, could
materially adversely affect our results of operations and financial condition.



General Risks of Ownership of Real Estate



We are subject to
risks generally incidental to the ownership of real estate. These risks include:



| |  |  | changes in general economic or local conditions;
| | - |  | ------------------------------------------------



| |  |  | changes in supply of or demand for similar or competing properties in an area;
| | - |  | ------------------------------------------------------------------------------



| |  |  | the impact of environmental protection laws;
| | - |  | --------------------------------------------



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



| |  |  | changes in tax, real estate and zoning laws; and
| | - |  | ------------------------------------------------



| |  |  | the creation of mechanics liens or similar encumbrances placed on the property by a lessee or other parties without our knowledge and consent.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



Should any of these events occur, our results of operations and financial condition could be
adversely affected.



Uninsured Losses May Adversely Affect Operations



We, or in certain instances, tenants of our properties, carry property
and liability insurance with respect to the properties. This coverage has policy specifications 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. Further, certain of the properties are located in areas that are subject to earthquake activity and floods. Should a property sustain damage as a result of an earthquake or flood, we may incur losses due to
insurance deductibles, co-payments on insured losses or uninsured losses. Additionally, we have elected to obtain insurance coverage for certified acts of terrorism as defined in the Terrorism Risk Insurance Act of 2002; 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, we could lose some or all of our capital investment, cash flow and
anticipated profits related to one or more properties. This could have an adverse effect on our results of operations and financial condition.



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Illiquidity of Real Estate May Limit Our Ability to Vary Our Portfolio



Real estate investments are relatively illiquid and, therefore, will tend to limit our
ability to vary our portfolio quickly in response to changes in economic or other conditions.



Potential Liability Under the Americans With Disabilities Act



All of our properties are required to be in compliance with the Americans With Disabilities Act. The Americans With Disabilities Act generally requires that places of public accommodation be made accessible to people
with disabilities to the extent readily achievable. Compliance with the Americans With Disabilities Act requirements could require removal of access barriers. Non-compliance could result in imposition of fines by the federal government, an award of
damages to private litigants and/or a court order to remove access barriers. Because of the limited history of the Americans With Disabilities Act, the impact of its application to our properties, including the extent and timing of required
renovations, is uncertain. Pursuant to lease agreements with tenants in certain of the single-tenant properties, the tenants are obligated to comply with the Americans With Disabilities Act provisions. If our costs are greater than
anticipated or tenants are unable to meet their obligations, our results of operations and financial condition could be adversely affected.



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. 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 principal cash flows and related weighted
average interest rates by expected maturity dates.



|                           |  |                        |      |   |                |   |       |      |  |   |        |   |  |            |        |   |  |   |       
|-------------------------- |  | ---------------------- | ---- | - | -------------- | - | ----- | ---- |  | - | ------ | - |  | ---------- | ------ | - |  | - | ------
|                           |  | Expected Maturity Date |      |   |                |   |       |     
|                           |  | 2005                   |      |   | 2006           |   |       | 2007 |  |   | Total  |   |  | Fair Value
|                           |  |                        |      |   | (in thousands) |   |       |      |  |   |        |   |  |           
|Secured Fixed Rate Debt    |  | $                      | 81   |   |                | $ | 5,417 |      |  | $ |       |   |  | $          | 5,498  |   |  | $ | 5,615 
|Average interest rate      |  |                        | 8.74 | % |                |   | 8.74  | %    |  |   |       |   |  |            | 8.74   | % |  |   |       
|                           |  |                        |      |   |               
|Secured Variable Rate Debt |  | $                      |     |   |                | $ |      |      |  | $ | 10,023 |   |  | $          | 10,023 |   |  | $ | 10,023
|Average interest rate      |  |                        |     |   |                |   |      |      |  |   | 6      | % |  |            | 6      | % |  |   |       



A change of 1/8% in the index rate to
which the Partnerships variable rate debt is tied would change the annual interest the Partnership incurred by approximately $13,000, based upon the balances outstanding on variable rate instruments at June 30, 2005.



As of June 30, 2005, the Partnership had $3,623,000 in interest-bearing money market funds.
The Partnership does not own any derivative instruments.



Item 4. Controls and Procedures



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





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##### Table of Contents

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 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:



| | 31.1 | Section 302 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------



| | 32.1 | Section 906 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents

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 15, 2005 |  |                                  |  | By:                                   |  | /s/ Daniel L. Stephenson       
|                      |  |                                  |  |                                       |  | Daniel L. Stephenson, President
|                      |  |                                 
|Date: August 15, 2005 |  | By:                              |  | /s/ Daniel L. Stephenson             
|                      |  |                                  |  | Daniel L. Stephenson, General Partner





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