##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-Q



---



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

For the quarterly period ended September 30, 2006

OR



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

Commission file number: 0-14207



---

RANCON REALTY FUND IV,

A CALIFORNIA
LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)



---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

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

Large Accelerated Filer ̈Accelerated Filer ̈Non-accelerated filer  x

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

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

Total number of units outstanding as of
November 14, 2006: 65,840



---



---

##### 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 September 30, 2006 and December 31, 2005                               |  | 3       
|                             |  |                                                                                                      
|                             |  | Consolidated Statements of Operations for the three and nine months ended September 30, 2006 and 2005 |  | 4       
|                             |  |                                                                                                      
|                             |  | Consolidated Statement of Partners Equity for the nine months ended September 30, 2006               |  | 5       
|                             |  |                                                                                                      
|                             |  | Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005           |  | 6       
|                             |  |                                                                                                      
|                             |  | Notes to Consolidated Financial Statements                                                            |  | 8-14    
|                             |  |                                                                                                      
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                 |  | 15-19   
|                             |  |                                                                                                      
|Item 3.                      |  | Qualitative and Quantitative Information About Market Risk                                            |  | 19      
|                             |  |                                                                                                      
|Item 4.                      |  | Controls and Procedures                                                                               |  | 19-20   
|                             | 
|PART II OTHER INFORMATION    |  |                                                                                                      
|                             |  |                                                                                                      
|Item 1.                      |  | Legal Proceedings                                                                                     |  | 21      
|                             |  |                                                                                                      
|Item 1A.                     |  | Risk Factors                                                                                          |  | 21      
|                             |  |                                                                                                      
|Item 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                                           |  | 21      
|                             |  |                                                                                                      
|Item 3.                      |  | Defaults Upon Senior Securities                                                                       |  | 21      
|                             |  |                                                                                                      
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders                                                   |  | 21      
|                             |  |                                                                                                      
|Item 5.                      |  | Other Information                                                                                     |  | 21      
|                             |  |                                                                                                      
|Item 6.                      |  | Exhibits                                                                                              |  | 21      
|                             | 
|SIGNATURES                   |  | 22                                                                                                   



2



---

##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Balance Sheets

(in thousands,
except units outstanding)

(Unaudited)



|                                                                                                                                    |  |                   |         |   |                  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                    |  | September 30,2006 |         |   | December 31,2005 |  
|Assets                                                                                                                              |  |                   |         |   |                  |   |         |  
|                                                                                                                                    |  |                  
|Investments in real estate:                                                                                                         |  |                   |         |   |                  |   |         |  
|Rental properties                                                                                                                   |  | $                 | 50,677  |   |                  | $ | 49,556  |  
|Accumulated depreciation                                                                                                            |  |                   | (12,796 | ) |                  |   | (11,451 | )
|                                                                                                                                    |  |                   |         |   |                  |   |         |  
|Rental properties, net                                                                                                              |  |                   | 37,881  |   |                  |   | 38,105  |  
|                                                                                                                                    |  |                  
|Construction in progress                                                                                                            |  |                   | 1,491   |   |                  |   |        |  
|Land held for development                                                                                                           |  |                   | 153     |   |                  |   | 476     |  
|                                                                                                                                    |  |                   |         |   |                  |   |         |  
|Total investments in real estate                                                                                                    |  |                   | 39,525  |   |                  |   | 38,581  |  
|                                                                                                                                    |  |                  
|Cash and cash equivalents                                                                                                           |  |                   | 3,470   |   |                  |   | 10,019  |  
|Short-term investments                                                                                                              |  |                   | 5,000   |   |                  |   |        |  
|Accounts receivable                                                                                                                 |  |                   | 180     |   |                  |   | 253     |  
|Deferred costs, net of accumulated amortization of $1,104 and $807 at September 30, 2006 and December 31, 2005,
respectively        |  |                   | 2,364   |   |                  |   | 2,211   |  
|Prepaid expenses and other assets                                                                                                   |  |                   | 1,692   |   |                  |   | 1,211   |  
|                                                                                                                                    |  |                   |         |   |                  |   |         |  
|Total assets                                                                                                                        |  | $                 | 52,231  |   |                  | $ | 52,275  |  
|                                                                                                                                    |  |                   |         |   |                  |   |         |  
|Liabilities and Partners Equity                                                                                                    |  |                   |         |   |                  |   |         |  
|                                                                                                                                    |  |                  
|Liabilities:                                                                                                                        |  |                   |         |   |                  |   |         |  
|Note payable and line of credit                                                                                                     |  | $                 | 23,856  |   |                  | $ | 24,100  |  
|Accounts payable and other liabilities                                                                                              |  |                   | 484     |   |                  |   | 582     |  
|Construction costs payable                                                                                                          |  |                   | 635     |   |                  |   |        |  
|Prepaid rent                                                                                                                        |  |                   | 107     |   |                  |   | 71      |  
|                                                                                                                                    |  |                   |         |   |                  |   |         |  
|Total liabilities                                                                                                                   |  |                   | 25,082  |   |                  |   | 24,753  |  
|                                                                                                                                    |  |                   |         |   |                  |   |         |  
|Commitments and contingent liabilities (Notes 4 and 7)                                                                              |  |                   |         |   |                  |   |         |  
|                                                                                                                                    |  |                  
|Partners Equity (deficit):                                                                                                         |  |                   |         |   |                  |   |         |  
|General Partner                                                                                                                     |  |                   | (498    | ) |                  |   | (504    | )
|Limited partners, 65,840 and 66,892 limited partnership units outstanding at September 30, 2006 and December 31, 2005,
respectively |  |                   | 27,647  |   |                  |   | 28,026  |  
|                                                                                                                                    |  |                   |         |   |                  |   |         |  
|Total partners equity                                                                                                              |  |                   | 27,149  |   |                  |   | 27,522  |  
|                                                                                                                                    |  |                   |         |   |                  |   |         |  
|Total liabilities and partners equity                                                                                              |  | $                 | 52,231  |   |                  | $ | 52,275  |  
|                                                                                                                                    |  |                   |         |   |                  |   |         |  

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



3



---

##### Table of Contents

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statements of Operations

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

(Unaudited)



|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                              |  | Three months endedSeptember 30, |        |   | Nine months endedSeptember 30, |  
|                                                                                              |  | 2006                            |        |   | 2005                           |   |        | 2006 |  |   | 2005   |  
|Operating Revenue                                                                             |  | $                               | 2,352  |   |                                | $ | 1,895  |      |  | $ | 6,947  |   |  | $ | 5,284  |  
|                                                                                              |  |                                 |        |  
|Operating Expenses                                                                            |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Property operating                                                                            |  |                                 | 944    |   |                                |   | 771    |      |  |   | 2,375  |   |  |   | 2,034  |  
|Depreciation and amortization                                                                 |  |                                 | 654    |   |                                |   | 456    |      |  |   | 1,851  |   |  |   | 1,327  |  
|Expenses associated with undeveloped land                                                     |  |                                 | 34     |   |                                |   | 34     |      |  |   | 104    |   |  |   | 102    |  
|General and administrative                                                                    |  |                                 | 201    |   |                                |   | 286    |      |  |   | 721    |   |  |   | 764    |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                                      |  |                                 | 1,833  |   |                                |   | 1,547  |      |  |   | 5,051  |   |  |   | 4,227  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Operating income                                                                              |  |                                 | 519    |   |                                |   | 348    |      |  |   | 1,896  |   |  |   | 1,057  |  
|                                                                                              |  |                                 |        |  
|Interest and other income                                                                     |  |                                 | 44     |   |                                |   | 6      |      |  |   | 122    |   |  |   | 8      |  
|Interest expense                                                                              |  |                                 | (357   | ) |                                |   | (178   | )    |  |   | (1,059 | ) |  |   | (321   | )
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Income from continuing operations                                                             |  |                                 | 206    |   |                                |   | 176    |      |  |   | 959    |   |  |   | 744    |  
|                                                                                              |  |                                 |        |  
|Income from discontinued operations (including gain on sale of real estate of $2,075 in 2005) |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   | 2,164  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                                                    |  | $                               | 206    |   |                                | $ | 176    |      |  | $ | 959    |   |  | $ | 2,908  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Basic and diluted net income per limited partnership unit                                     |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Continuing operations                                                                         |  | $                               | 2.81   |   |                                | $ | 2.33   |      |  | $ | 13.06  |   |  | $ | 10.97  |  
|Discontinued operations                                                                       |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   | 28.84  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|                                                                                              |  | $                               | 2.81   |   |                                | $ | 2.33   |      |  | $ | 13.06  |   |  | $ | 39.81  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Weighted average number of limited partnership units outstanding during each period           |  |                                 | 65,845 |   |                                |   | 67,946 |      |  |   | 66,101 |   |  |   | 68,346 |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  

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



4



---

##### Table of Contents

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statement of Partners Equity

For the nine months ended September 30, 2006

(in thousands)

(Unaudited)



|                                                    |  |                |      |   |                 |   |        |       |  |   |        |  
|--------------------------------------------------- |  | -------------- | ---- | - | --------------- | - | ------ | ----- |  | - | ------ | -
|                                                    |  | GeneralPartner |      |   | LimitedPartners |   |        | Total | 
|Balance (deficit) at December 31, 2005              |  | $              | (504 | ) |                 | $ | 28,026 |       |  | $ | 27,522 |  
|Redemption of limited partnership units             |  |                |     |   |                 |   | (431   | )     |  |   | (431   | )
|Net income                                          |  |                | 96   |   |                 |   | 863    |       |  |   | 959    |  
|Distributions ($12.29 per limited partnership unit) |  |                | (90  | ) |                 |   | (811   | )     |  |   | (901   | )
|                                                    |  |                |      |   |                 |   |        |       |  |   |        |  
|Balance (deficit) at September 30, 2006             |  | $              | (498 | ) |                 | $ | 27,647 |       |  | $ | 27,149 |  
|                                                    |  |                |      |   |                 |   |        |       |  |   |        |  

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



5



---

##### Table of Contents

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statements of Cash Flows

(in
thousands)

(Unaudited)



|                                                                                                      |  |                                |        |   |      |   |        |  
|----------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                                      |  | Nine months endedSeptember 30, |       
|                                                                                                      |  | 2006                           |        |   | 2005 |  
|Cash flows from operating activities:                                                                 |  |                                |        |   |      |   |        |  
|                                                                                                      |  |                               
|Net income                                                                                            |  | $                              | 959    |   |      | $ | 2,908  |  
|Adjustments to reconcile net income to net cash provided by operating activities:                     |  |                                |        |   |      |   |        |  
|Gain on sales of real estate and land held for development                                            |  |                                |       |   |      |   | (2,075 | )
|Depreciation and amortization (including discontinued operations)                                     |  |                                | 1,851  |   |      |   | 1,346  |  
|Amortization of loan fees, included in interest expense (including discontinued operations)           |  |                                | 76     |   |      |   | 81     |  
|Changes in certain assets and liabilities:                                                            |  |                                |        |   |      |   |        |  
|Accounts receivable                                                                                   |  |                                | 73     |   |      |   | 57     |  
|Deferred costs                                                                                        |  |                                | (486   | ) |      |   | (924   | )
|Prepaid expenses and other assets                                                                     |  |                                | (577   | ) |      |   | (426   | )
|Accounts payable and other liabilities                                                                |  |                                | 81     |   |      |   | 196    |  
|Prepaid rent                                                                                          |  |                                | 36     |   |      |   | 177    |  
|                                                                                                      |  |                                |        |   |      |   |        |  
|Net cash provided by operating activities                                                             |  |                                | 2,013  |   |      |   | 1,340  |  
|                                                                                                      |  |                                |        |   |      |   |        |  
|Cash flows from investing activities:                                                                 |  |                                |        |   |      |   |        |  
|                                                                                                      |  |                               
|Purchase of short-term investments                                                                    |  |                                | (5,000 | ) |      |   |       |  
|Net proceeds from sales of real estate                                                                |  |                                |       |   |      |   | 4,097  |  
|Additions to real estate investments                                                                  |  |                                | (1,593 | ) |      |   | (3,660 | )
|                                                                                                      |  |                                |        |   |      |   |        |  
|Net cash (used for) provided by investing activities                                                  |  |                                | (6,593 | ) |      |   | 437    |  
|                                                                                                      |  |                                |        |   |      |   |        |  
|Cash flows from financing activities:                                                                 |  |                                |        |   |      |   |        |  
|                                                                                                      |  |                               
|Draws on line of credit                                                                               |  |                                |       |   |      |   | 2,363  |  
|Principal payments on note payable                                                                    |  |                                | (244   | ) |      |   | (118   | )
|Loan fee for line of credit                                                                           |  |                                | (28    | ) |      |   | (29    | )
|Refund of loan application fee                                                                        |  |                                | 88     |   |      |   |       |  
|Redemption of limited partnership units                                                               |  |                                | (727   | ) |      |   | (585   | )
|Distributions to limited partners                                                                     |  |                                | (811   | ) |      |   | (710   | )
|Distributions to General Partner                                                                      |  |                                | (247   | ) |      |   |       |  
|                                                                                                      |  |                                |        |   |      |   |        |  
|Net cash (used for) provided by financing activities                                                  |  |                                | (1,969 | ) |      |   | 921    |  
|                                                                                                      |  |                                |        |   |      |   |        |  
|Net (decrease) increase in cash and cash equivalents                                                  |  |                                | (6,549 | ) |      |   | 2,698  |  
|                                                                                                      |  |                               
|Cash and cash equivalents at beginning of period                                                      |  |                                | 10,019 |   |      |   | 701    |  
|                                                                                                      |  |                                |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                                            |  | $                              | 3,470  |   |      | $ | 3,399  |  
|                                                                                                      |  |                                |        |   |      |   |        |  
|Supplemental disclosure of cash flow information:                                                     |  |                                |        |   |      |   |        |  
|Cash paid for interest (net of capitalized interest of $475 at September 30, 2005, and none for 2006) |  | $                              | 983    |   |      | $ | 300    |  
|                                                                                                      |  |                                |        |   |      |   |        |  
|Supplemental disclosure of non-cash investing activities:                                             |  |                                |        |   |      |   |        |  
|Completed real estate investment transferred out of construction in progress to rental property       |  | $                              |       |   |      | $ | 11,532 |  
|                                                                                                      |  |                                |        |   |      |   |        |  
|Premium paid on redemption of limited partnership units                                               |  | $                              | 274    |   |      | $ |       |  
|                                                                                                      |  |                                |        |   |      |   |        |  

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



6



---

##### Table of Contents

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



|                                                          |  |                                |     |      |   |     |  
|--------------------------------------------------------- |  | ------------------------------ | --- | ---- | - | --- | -
|                                                          |  | Nine months endedSeptember 30, |    
|                                                          |  | 2006                           |     | 2005 |  
|Supplemental disclosure of non-cash financing activities: |  |                                |     |      |   |     |  
|Redemption of limited partnership units                   |  | $                              |    |      | $ | 82  |  
|Redemption payable                                        |  | $                              |    |      |   | (82 | )
|                                                          |  |                                |     |      |   |     |  
|                                                          |  | $                              |    |      | $ |    |  
|                                                          |  |                                |     |      |   |     |  
|Supplemental disclosure of non-cash operating activities: |  |                                |     |      |   |     |  
|Write-off of fully depreciated rental property assets     |  | $                              | 213 |      | $ | 605 |  
|                                                          |  |                                |     |      |   |     |  
|Write-off of fully amortized deferred costs               |  | $                              | 68  |      | $ | 308 |  
|                                                          |  |                                |     |      |   |     |  

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



7



---

##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. ORGANIZATION

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

During the nine months ended
September 30, 2006, a total of 1,052 units of limited partnership interest (Units) were redeemed at an average price of $670. As of September 30, 2006, there were 65,840 Units outstanding.

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

Allocation of Net Income and Net Loss

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

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

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

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

Distribution of
Cash

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

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

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



8



---

##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

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

Risks and Uncertainties

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

Note 2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements present the consolidated financial position of the Partnership and its wholly-owned subsidiaries
as of September 30, 2006 and December 31, 2005, and the consolidated Statements of Operations of the Partnership and its wholly-owned subsidiaries for the three and nine months ended September 30, 2006 and 2005, and the consolidated
Statements of cash flows of the Partnership and its wholly-owned subsidiaries for the nine months ended September 30, 2006 and 2005. All significant intercompany transactions and balances have been eliminated in consolidation.

In the opinion of the General Partner, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal accruals)
necessary to present fairly the consolidated financial position of the Partnership as of September 30, 2006 and December 31, 2005, the related consolidated statements of operations for the three and nine months ended September 30,
2006 and 2005, partners equity for the nine months ended September 30, 2006 and cash flows for the nine months ended September 30, 2006 and 2005. These consolidated financial statements should be read in conjunction with the
Partnerships Annual Report on Form 10-K for the year ended December 31, 2005

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the results of operations during the reporting period. Actual results could differ from those estimates.

Consolidation

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

Rental
Properties

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



9



---

##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

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



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

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; and (ii) 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. 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 which 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.

Short-term
Investments

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

Fair Value of Financial Instruments

For certain financial
instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and other liabilities and line of credit payable, recorded amounts approximate fair value due to the relatively short maturity period.
Based on interest rates available to the Partnership for debt with comparable maturities and other terms, the estimated fair value of the Partnerships collateralized fixed rate note payable as of September 30, 2006 and December 31,
2005 was approximately $23,351,000 and $24,272,000, respectively.

Deferred Costs

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

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. For tenants with percentage rent, the Partnership recognizes revenue
when the tenants specified sales targets have been met. 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.



10



---

##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Sales of Real Estate

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

Net Income Per Limited Partnership Unit

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

Income Taxes

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

Concentration Risk

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

Recently issued Accounting
Literature

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (SAB 108), which
becomes effective beginning on January 1, 2007. SAB 108 provides guidance on the consideration of the effects of prior period misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 provides
for the quantification of the impact of correcting all misstatements, including both the carryover and reversing effects of prior year misstatements, on the current year financial statements. If a misstatement is material to the current year
financial statements, the prior year financial statements should also be corrected, even though such revision was, and continues to be, immaterial to the prior year financial statements. Correcting prior year financial statements for immaterial
errors would not require previously filed reports to be amended. Such correction should be made in the current period filings.

Note 3. INVESTMENTS IN
REAL ESTATE

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



|                                 |  |                   |         |   |                  |   |         |  
|-------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                 |  | September 30,2006 |         |   | December 31,2005 |  
|Land                             |  | $                 | 4,471   |   |                  | $ | 4,471   |  
|Buildings                        |  |                   | 37,311  |   |                  |   | 36,995  |  
|Building and tenant improvements |  |                   | 8,895   |   |                  |   | 8,090   |  
|                                 |  |                   |         |   |                  |   |         |  
|                                 |  |                   | 50,677  |   |                  |   | 49,556  |  
|Less: accumulated depreciation   |  |                   | (12,796 | ) |                  |   | (11,451 | )
|                                 |  |                   |         |   |                  |   |         |  
|Total rental properties, net     |  | $                 | 37,881  |   |                  | $ | 38,105  |  
|                                 |  |                   |         |   |                  |   |         |  

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

During the nine months ended September 30, 2006, fully depreciated building and tenant improvements
of $213,000 were removed from the balances of such accounts.

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.



11



---

##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

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

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



|                                          |  |                                          |      
|----------------------------------------- |  | ---------------------------------------- | -----
|                                          |  | Nine months ended September 30, 2005 (1)
|Operating Revenue                         |  | $                                        | 172  
|                                          |  |                                          |      
|Property operating                        |  |                                          | 64   
|Depreciation and amortization             |  |                                          | 19   
|                                          |  |                                          |      
|Total operating expenses                  |  |                                          | 83   
|                                          |  |                                          |      
|Income before gain on sale of real estate |  |                                          | 89   
|Gain on sale of real estate               |  |                                          | 2,075
|                                          |  |                                          |      
|Income from discontinued operations       |  | $                                        | 2,164
|                                          |  |                                          |      

|
|

---

|(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 September 30, 2006 and
December 31, 2005 (in thousands):



|                                                                     |  |                    |       |                   |   |   
|-------------------------------------------------------------------- |  | ------------------ | ----- | ----------------- | - | --
|                                                                     |  | September 30, 2006 |       | December 31, 2005
|Tri-City (approximately 1.6 acres of land with a cost basis of $219) |  | $                  | 1,491 |                   | $ | 
|                                                                     |  |                    |       |                   |   |   

During the third quarter of 2006, the land, pre-development costs and construction costs of North River Place were
reclassed from land held for development to construction in progress. During 2006, the Partnership entered into a contract with a construction company for $7,964,000 to build the core and shell of a three-story multi-tenant 72,000-gross-square-foot
office building on an approximately 1.6 acres land parcel known as North River Place. The contract cost and other costs are estimated to be approximately $8,900,000. The project is expected to be substantially completed in the second quarter of 2007
and tenant improvement could start as early as March 2007.

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



|                                                                                                                  |  |                    |     |                   |   |    
|----------------------------------------------------------------------------------------------------------------- |  | ------------------ | --- | ----------------- | - | ---
|                                                                                                                  |  | September 30, 2006 |     | December 31, 2005
|Tri-City (approximately 14.7 and 16.3 acres of land as of September 30, 2006 and December 31, 2005, respectively) |  | $                  | 153 |                   | $ | 476
|                                                                                                                  |  |                    |     |                   |   |    

As of September 30, 2006, the Partnership owned approximately 14.7 acres of undeveloped land which are part
of a landfill-monitoring program managed by the City of San Bernardino (as discussed in Note 7).

Note 5. NOTE PAYABLE AND LINE OF CREDIT

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



|                                                                                                                                                                                                                                                                                               |  |                    |        |                   |   |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- | - | ------
|                                                                                                                                                                                                                                                                                               |  | September 30, 2006 |        | December 31, 2005
|                                                                                                                                                                                                                                                                                               | 
|Note payable collateralized by first deeds of trust on eight properties (discussed below). The note has a fixed interest rate of 5.46%, a
maturity date of January 1, 2016, and a 10-year term with a 30-year amortization requiring monthly payments of principal and interest totaling $136. |  | $                  | 23,856 |                   | $ | 24,100
|                                                                                                                                                                                                                                                                                               |  |                    |        |                   |   |       

The note payable is collateralized by Circuit City, Mimis Cafe, Palm Court Retail #1 and #2, Promotional
Retail Center, Service Retail Center, TGI Fridays and One Vanderbilt with an aggregate net carrying value of approximately $16,016,000 and $16,419,000 at September 30, 2006 and December 31, 2005, respectively. This note provides a
one-time loan assumption and a release provision for an individual asset.



12



---

##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

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

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



|           |  |   |       
|---------- |  | - | ------
|2006       |  | $ | 83    
|2007       |  |   | 345   
|2008       |  |   | 365   
|2009       |  |   | 385   
|2010       |  |   | 407   
|Thereafter |  |   | 22,271
|           |  |   |       
|Total      |  | $ | 23,856
|           |  |   |       

Note 6. RELATED PARTY TRANSACTIONS

In July 2004, the Partnership extended its management relationship with Glenborough Properties L.P. (Glenborough) through December 31, 2006. In May 2006, the Partnership further extended the Property
Management and Services Agreement with Glenborough through December 31, 2008. All other terms and conditions remained unchanged. The Partnership engaged Glenborough to perform services for the following fees: (i) a property management fee
of 3% of gross rental revenue which was included in the property operating in the statements of operations ($195,000 and $161,000 for the nine months ended September 30, 2006 and 2005); (ii) a construction services fee which was included
in the rental properties in the balance sheets ($2,000 and $69,000 for the nine months ended September 30, 2006 and 2005, respectively); (iii) a specified asset and Partnership management fee of $300,000 per year (with reimbursements of
certain expenses and consulting service fees) which was included in general and administrative in the statements of operations ($225,000 and $223,000 for the nine months ended September 30, 2006 and 2005, respectively); (iv) a leasing
services fee which was included in the deferred costs in the balance sheets ($245,000 and $312,000 for the nine months ended September 30, 2006 and 2005, respectively); (v) a sales fee of 2% for improved properties which was included in
the gain on sale of real estate in the consolidated statements of operations ($0 and $87,000 for the nine months ended September 30, 2006 and 2005, respectively) and 4% for unimproved properties ($0 and $0 for the nine months ended
September 30, 2006 and 2005); (vi) a financing services fee of 1% of the gross loan amount ($0 and $0 for the nine months ended September 30, 2006 and 2005); and (vii) a development fee equal to 5% of the hard costs of the
development project which was included in the construction in progress and / or rental properties in the balance sheets, excluding the cost of the land, and the development fee and the general contractors fee shall not exceed 11.5%, in the
aggregate, of the hard costs of the development project ($180,000 and $51,000 for the nine months ended September 30, 2006 and 2005, respectively). The fees for the above services totaled $847,000 and $903,000 for the nine months ended
September 30, 2006 and 2005, respectively.

As of September 30, 2006, Glenborough held 3,722 or 5.7% of the units of limited partnership interest
purchased from unaffiliated third parties.

On September 30, 2006, the Partnership incurred expenses of approximately $48,000 on behalf of Rancon
Realty Fund V (Fund V), a separate partnership sponsored by the General Partner of the Partnership. The amount was repaid in October 2006.

Note 7. COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Matters

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

Approximately 14.7 acres of the Tri-City land owned by the Partnership was part of a 27-acre landfill operated by the City of San Bernardino (the City) from approximately 1950 to 1960. This landfill incorporates two land parcels
and part of a third parcel. In 1996, the Santa Ana Regional Water Quality Control Board (SARWQCB), with regulatory jurisdiction over the closure and monitoring of landfills, determined that the City was primarily responsible for the
landfill. Therefore, the City and the Partnership entered into a Limited Access Easement Agreement, giving the City access to the site for development, implementation and financial responsibility for a plan for the remediation of the landfill. It
was determined that the City was to improve the landfill cover systemThe Waterman Landfill Cover Improvement Plans, April 2002, perform groundwater monitoring and install a permanent gas extraction system (Landfill Gas Collection System).
Under the Limited Access



13



---

##### Table of Contents

RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Easement Agreement with the Partnership, methane
monitoring is handled directly by the City. The Citys installation of the cover improvement system began in October 2004 and the system was completed in the third quarter of 2005. A plan was submitted by the City to the County of San
Bernardino (the County) for review and approval for the gas extraction system. In the last quarter of 2005, the plan was approved and a pilot system to test the viability of the gas extraction system was installed. A permanent carbon
system is in the process of being reviewed by the City, the County and the SARWQCB. It is expected that the installation of the system and the final approval of its operation will be completed in the first quarter of 2007. Future development of this
site remains uncertain. No assurance can be made that circumstances will not arise which could impact the Partnerships responsibility related to the land.

General Uninsured Losses

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

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



14



---

##### Table of Contents

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

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

Background

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

Overview

Tri-City Properties

As of September 30, 2006, the
Partnerships rental properties include four office and seven retail buildings, aggregating approximately 486,000 rentable square feet, of which 331,000 square feet are office space, and 155,000 square feet are retail space. Carnegie Business
Center I, formerly an industrial flex building, was repositioned as an office building on January 1, 2006.



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

As of September 30, 2006, the weighted average occupancy of the eleven
rental properties was 95%.

As of September 30, 2006, there were nine tenants at Tri-City occupying substantial portions of leased rental space. These
nine tenants, in the aggregate, occupied approximately 331,000 square feet of the 486,000 total rentable square feet at Tri-City and accounted for approximately 69% of the rental income of the Partnership during the nine months ended
September 30, 2006.

Tri-City Land

As of
September 30, 2006, the Partnership owned an approximate 1.6 acres land parcel, for which construction began in September 2006 and 14.7 acres of undeveloped land.

During 2006, the Partnership entered into a contract with a construction company for $7,964,000 to build the core and shell of a three-story multi-tenant 72,000 gross-square-foot office building on an approximately
1.6 acres land parcel known as North River Place. The contract cost and other costs are estimated to be approximately $8,900,000. The project is expected to be substantially completed in the second quarter of 2007 and tenant improvement could start
as early as March 2007. Approximately two acres of land which are adjacent to the 14.7-acre landfill will be utilized to build a parking lot to serve North River Place

The remaining approximate 14.7 acres of the Tri-City land owned by the Partnership were part of a 27-acre landfill operated by the City of San Bernardino (the City) from approximately 1950 to 1960. This
landfill incorporates two land parcels and part of a third parcel. In 1996, the Santa Ana Regional Water Quality Control Board SARWQCB, with regulatory jurisdiction over the closure and monitoring of landfills, determined that the City
was primarily responsible for the landfill. Therefore, the City and the Partnership entered into a Limited Access Easement Agreement, giving the City access to the site for development, implementation and financial responsibility for a plan for the
remediation of the landfill. It was determined that the City was to improve the landfill cover systemThe Waterman Landfill Cover Improvement Plans, April 2002, perform groundwater monitoring and install a permanent gas extraction system
(Landfill Gas Collection System). Under the Limited Access Easement Agreement with the Partnership, methane monitoring is handled directly by the City. The Citys installation of the cover improvement system began in October 2004 and the system
was completed in the third quarter of 2005. A plan was submitted by the City to the County of San Bernardino (the County) for review and approval for the gas extraction system. In the last quarter of 2005, the plan was approved and a
pilot system to test the viability of the gas extraction system was installed. A permanent carbon system is in the process of being reviewed by the City, the County and the SARWQCB. It is expected that the installation of the system and the final
approval of its operation will be completed in the first quarter of 2007. Future development of this site remains uncertain. No assurance can be made that circumstances will not arise which could impact the Partnerships responsibility related
to the land.



15



---

##### Table of Contents

Financing

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



|                    |  |                                  |  |                       
|------------------- |  | -------------------------------- |  | ----------------------
|Collateral          |  | Eight properties (details below) |  | Inland Regional Center
|Form of debt        |  | Note payable                     |  | Line of credit        
|Availability        |  |                                 |  | $5,000,000            
|Outstanding balance |  | $23,856,000                      |  | $ 0                   
|Interest Rate       |  | 5.46%                            |  | Prime rate (8.25%)    
|Monthly payment     |  | $136,000                         |  | Interest only         
|Maturity date       |  | 1/1/16                           |  | 4/15/07               

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

Results of Operations

Comparison of the three and nine months ended September 30, 2006 to the three and nine months ended September 30, 2005.

Revenue

Rental income increased $457,000, or 24%, and $1,663,000 or
31%, for the three and nine months ended September 30, 2006, compared to the three and nine months ended September 30, 2005, respectively, primarily due to increases in occupancy at Vanderbilt Plaza, Carnegie Business Center I and Service
Retail Center. Additionally, Vanderbilt Plaza commenced operations in February 2005.

Expenses

Operating expenses increased $173,000, or 22%, and $341,000, or 17%, for the three and nine months ended September 30, 2006, compared to the three and nine months
ended September 30, 2005, respectively, primarily due to increases in occupancy at Vanderbilt Plaza, Carnegie Business Center I and Service Retail Center and an increase in insurance expenses, partially offset by a decrease in property taxes.
Additionally, Vanderbilt Plaza commenced operations in February 2005.

Depreciation and amortization increased $198,000, or 43%, and $524,000, or 39%, for
the three and nine months ended September 30, 2006, compared to the three and nine months ended September 30, 2005, respectively, primarily due to depreciation commencing at Vanderbilt Plaza, depreciation on additional tenant improvements,
and amortization of additional lease commissions.

General and administrative expenses decreased $85,000, or 30%, and $43,000, or 6%, for the three and
nine months ended September 30, 2006, compared to the three and nine months ended September 30, 2005, respectively, primarily due to one-time additional investor service and refinancing expenses in 2005, partially offset by increases in
audit and tax fees and state taxes.

Non-operating income / expenses

Interest and other income increased $38,000 and $114,000 for the three and nine months ended September 30, 2006, compared to the three and nine months ended September 30, 2005, respectively, primarily due to
an increase in the average invested cash balance resulting from the proceeds of the refinancing completed in the fourth quarter of 2005.

Interest expense
increased $179,000 and $738,000 for the three and nine months ended September 30, 2006, compared to the three and nine months ended September 30, 2005, respectively, primarily due to an increase in borrowings and cessation of the
capitalization of interest for the Vanderbilt Plaza development, which commenced operations in February 2005.

Income from discontinued operations of
$2,164,000 for the nine months ended September 30, 2005 reflected the net operating income and gain from the June 2005 sale of the property leased to Office Max.

Liquidity and Capital Resources

As of September 30, 2006, the
Partnership had cash and cash equivalents of $3,470,000.

The Partnerships primary liability at September 30, 2006 is a note payable of
approximately $23,856,000, collateralized by properties with an aggregate net carrying value of approximately $16,016,000. The note has a 10-year term with a 30-year amortization requiring monthly principal and interest payments of approximately
$136,000, bears a fixed interest rate of 5.46%, and has a maturity date of January 1, 2016. The note is collateralized by Circuit City, Mimis Cafe, Palm Court Retail #1 and #2, Promotional Retail Center, Service Retail Center, TGI
Fridays and One Vanderbilt. This note also provides a one-time loan assumption and a release provision for an individual asset.



16



---

##### Table of Contents

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

As of September 30, 2006, the Partnership had a short-term investment of
$5,000,000. The investment is a certificate of deposit with an interest rate of 2.48% and a maturity date of January 27, 2007. Interest income is recognized when earned.

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

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

Contractual Obligations

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



|                                    |  |                 |       |              |   |              |  |                  |       |       |   |        |  |   |       
|----------------------------------- |  | --------------- | ----- | ------------ | - | ------------ |  | ---------------- | ----- | ----- | - | ------ |  | - | ------
|                                    |  | Less than 1year |       | 1 to 3 years |   | 3 to 5 years |  | More than 5years |       | Total
|Secured mortgage loans              |  | $               | 83    |              | $ | 710          |  | $                | 792   |       | $ | 22,271 |  | $ | 23,856
|Interest on indebtedness            |  |                 | 325   |              |   | 2,559        |  |                  | 2,478 |       |   | 5,773  |  |   | 11,135
|Construction contract commitment(1) |  |                 | 1,258 |              |   | 6,212        |  |                  |      |       |   |       |  |   | 7,470 
|                                    |  |                 |       |              |   |              |  |                  |       |       |   |        |  |   |       
|Total                               |  | $               | 1,666 |              | $ | 9,481        |  | $                | 3,270 |       | $ | 28,044 |  | $ | 42,461
|                                    |  |                 |       |              |   |              |  |                  |       |       |   |        |  |   |       

---

|(1) | During 2006, the Partnership entered into a contract with a construction company for $7,964,000 to build the core and shell of a three-story multi-tenant
72,000-gross-square-foot office building on an approximately 1.6 acres land parcel known as North River Place. The contract cost and other costs are estimated to be approximately $8,900,000. The project is expected to be substantially completed in
the second quarter of 2007 and tenant improvement could start as early as March 2007. As of September 30, 2006, the contract costs of $494,000 had been incurred.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

Operating Activities

During the nine months ended September 30,
2006, the Partnerships cash provided by operating activities totaled $2,013,000.

The $73,000 decrease in accounts receivable at September 30,
2006, compared to December 31, 2005, was primarily due to collection of receivables related to tenant improvements, partially offset by an increase in accruals in interest income related to the short-term investment and tenant percentage rent.

The $486,000 increase in deferred costs at September 30, 2006, compared to December 31, 2005, was primarily due to increases in lease
commissions paid for new leases at Vanderbilt Plaza and the renewal of leases at Carnegie Business Center I, Palm Court Retail 2 and TGI Fridays. The Partnership paid to Glenborough in leasing service of approximately $245,000 for the nine
months ended September 30, 2006.

The $577,000 increase in prepaid expenses and other assets at September 30, 2006, compared to December 31,
2005, was primarily due to an increase in the straight line rent receivable and earthquake insurance premiums paid, partially offset by the amortization of prepaid insurance.

The $81,000 decrease in accounts payable and other liabilities at September 30, 2006, compared to December 31, 2005, was primarily due to property taxes paid in April 2006, distributions to the General
Partner and the redemption of Partnership Units, partially offset by increases in accruals in audit and tax preparation fees and investor service expenses.



17



---

##### Table of Contents

The $36,000 increase in prepaid rents at September 30, 2006, compared to December 31, 2005, was due to the
receipt of October 2006 rents in September 2006, in excess of the January 2006 rents received in December 2005.

Investing Activities

During the nine months ended September 30, 2006, the Partnerships cash used for investing activities totaled $6,593,000, which consisted of $5,000,000 used for
the purchase of short-term investments, as well as $1,593,000 in additions to real estate investments primarily due to building and tenant improvements at Vanderbilt Plaza, Carnegie Business Center I, TGI Fridays, Service Retail Center and One
Vanderbilt.

Financing Activities

During the nine
months ended September 30, 2006, the Partnerships cash used for financing activities totaled $1,969,000, which consisted of $244,000 for principal payments on a note payable, $28,000 annual loan fee for the line of credit, $727,000 for
redemption of the limited partnership Units, $811,000 for payment of distributions to the limited partners, and $247,000 for payment of distributions to the General Partner, of which $157,000 was accrued in 2005, partially offset by a refund of
$88,000 from loan application fees, net of payment of loan related expenses.

Cash Flows

During the nine months ended September 30, 2006, cash provided by operating activities was $2,013,000, as compared to cash provided by operating activities of
$1,340,000 for the same period in 2005. The change was primarily due to an increase in rental income resulting from increases in occupancy at Vanderbilt Plaza, Carnegie Business Center I and Service Retail Center, an increase in prepaid rent, as
well as a decrease in deferred costs, partially offset by an increase in prepaid expenses and other assets, as well as accounts payable and other liabilities. During the nine months ended September 30, 2006, cash used for investing activities
was $6,593,000, as compared to cash provided by investing activities of $437,000 for the same period in 2005. The change was primarily due to cash used for the purchase of the short-term investments and a decrease in proceeds from sales of real
estate, partially offset by a decrease in construction costs at Vanderbilt Plaza, which was completed in February 2005. During the nine months ended September 30, 2006, cash used for financing activities was $1,969,000, as compared to cash
provided by financing activities of $921,000 for the same period in 2005. The change was primarily due to decreases in borrowings from the line of credit and increases in principal payments on the note payable, redemptions of limited partnership
units and distributions to limited partners and the General Partner, partially offset by the refund of the loan application fee.

Inflation

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

Forward Looking Statements; Factors That May Affect Operating Results

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



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



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



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



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



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



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

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



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



18



---

##### Table of Contents

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



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



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



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



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



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

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

Risks of Litigation

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

Item 3. Qualitative and Quantitative Information About Market Risk

Interest Rates

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

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



|                      |  |                        |      |   |      |   |      |      |  |   |      |   |  |      |      |   |            |   |      |       |  |   |            |   |  |   |        |   |  |   |       
|--------------------- |  | ---------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | - |  | ---- | ---- | - | ---------- | - | ---- | ----- |  | - | ---------- | - |  | - | ------ | - |  | - | ------
|                      |  | Expected Maturity Date |      |   |      |   |      |     
|                      |  | 2006                   |      |   | 2007 |   |      | 2008 |  |   | 2009 |   |  | 2010 |      |   | Thereafter |   |      | Total |  |   | Fair Value
|                      |  | (in thousands)         |      |   |      |   |      |     
|Collateralized Fixed  |  |                        |      |   |      |   |      |      |  |   |      |   |  |      |      |   |            |   |      |       |  |   |            |   |  |   |        |   |  |   |       
|Rate Debt             |  | $                      | 83   |   |      | $ | 345  |      |  | $ | 365  |   |  | $    | 385  |   |            | $ | 407  |       |  | $ | 22,271     |   |  | $ | 23,856 |   |  | $ | 23,351
|Average interest rate |  |                        | 5.46 | % |      |   | 5.46 | %    |  |   | 5.46 | % |  |      | 5.46 | % |            |   | 5.46 | %     |  |   | 5.46       | % |  |   | 5.46   | % |  |   |       

As of September 30, 2006, the Partnership had cash equivalents of $3,470,000 in an interest-bearing money
market account, and $5,000,000 in short-term investments. Declines in interest rates over time would reduce Partnership interest income. The Partnership does not own any derivative instruments.

Item 4. Controls and Procedures

The principal executive officer and principal financial officer of the General Partner
has evaluated the disclosure controls and procedures of the Partnership as of the end of the period covered by this quarterly report. As used herein, the term disclosure controls and procedures has the meaning given to the term by Rule
13a-15 under the Securities Exchange Act of 1934, as amended (Exchange Act), and includes the controls and other procedures of the Partnership that are designed to ensure that information required to be disclosed by the Partnership in
the reports that it files with the SEC under the Exchange Act is



19



---

##### Table of Contents

recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Based
upon his evaluation, the principal executive officer and principal financial officer of the General Partner has concluded that the Partnerships disclosure controls and procedures were effective such that the information required to be
disclosed by the Partnership in this quarterly report is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms applicable to the preparation of this report and is accumulated and
communicated to the General Partners management, including the General Partners principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

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



20



---

##### 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 1A. Risk Factors

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

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other information

None.

Item 6. Exhibits

(a) Exhibits:



| | 31 | Rule 13a-14 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.
| | -- | ------------------------------------------------------------------------------------------------------------------------------



| | 32 | Section 1350 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.
| | -- | -------------------------------------------------------------------------------------------------------------------------------



21



---

##### 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: November 14, 2006 |  |                                                         |  | By:                                                                        |  | /s/ Daniel L. Stephenson       
|                        |  |                                                         |  |                                                                            |  | Daniel L. Stephenson, President
|                        |  |                                                        
|Date: November 14, 2006 |  | By:                                                     |  | /s/ Daniel L. Stephenson Daniel L. Stephenson, General Partner            
|                        |  |                                                         | 



22