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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended September 30, 2006

OR



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

Commission file number: 0-16467



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RANCON REALTY FUND V,

A CALIFORNIA
LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|California                                                     |  | 33-0098488                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                           |  |           
|---------------------------------------------------------- |  | ----------
|400 South El Camino Real, Suite 1100 San Mateo, California |  | 94402-1708
|(Address of principal executive offices)                   |  | (Zip Code)

(650) 343-9300

(Registrants telephone number, including area code)



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

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

Large Accelerated Filer ̈Accelerated Filer ̈Non-accelerated filer  x

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

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

Total number of units outstanding as of November 14, 2006: 83,909



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##### Table of Contents

INDEX

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



|           |  |                                                                                                       |  |         
|---------- |  | ----------------------------------------------------------------------------------------------------- |  | --------
|           |  |                                                                                                       |  | Page No.
|PART I     |  | FINANCIAL INFORMATION                                                                                 |  |         
|           |  |                                                                                                      
|Item 1.    |  | Consolidated Financial Statements of Rancon Realty Fund V (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           |  | 6-7     
|           |  |                                                                                                      
|           |  | 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                                                                                                   



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##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RANCON REALTY FUND V,

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                                                                                                                  |  | $                 | 75,489  |   |                  | $ | 57,538  |  
|Accumulated depreciation                                                                                                           |  |                   | (16,797 | ) |                  |   | (14,693 | )
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Rental properties, net                                                                                                             |  |                   | 58,692  |   |                  |   | 42,845  |  
|                                                                                                                                   |  |                  
|Construction in progress                                                                                                           |  |                   | 451     |   |                  |   | 15,437  |  
|Land held for development                                                                                                          |  |                   | 1,127   |   |                  |   | 899     |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total investments in real estate                                                                                                   |  |                   | 60,270  |   |                  |   | 59,181  |  
|                                                                                                                                   |  |                  
|Cash and cash equivalents                                                                                                          |  |                   | 4,417   |   |                  |   | 3,437   |  
|Short-term investments                                                                                                             |  |                   | 10,000  |   |                  |   |        |  
|Accounts receivable                                                                                                                |  |                   | 939     |   |                  |   | 704     |  
|Deferred costs, net of accumulated amortization of $1,054 and $1,061 at September 30, 2006 and December 31, 2005,
respectively     |  |                   | 3,148   |   |                  |   | 2,666   |  
|Prepaid expenses and other assets                                                                                                  |  |                   | 2,539   |   |                  |   | 666     |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total assets                                                                                                                       |  | $                 | 81,313  |   |                  | $ | 66,654  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Liabilities and Partners equity                                                                                                   |  |                   |         |   |                  |   |         |  
|                                                                                                                                   |  |                  
|Liabilities:                                                                                                                       |  |                   |         |   |                  |   |         |  
|Notes payable and line of credit                                                                                                   |  | $                 | 56,367  |   |                  | $ | 37,824  |  
|Accounts payable and other liabilities                                                                                             |  |                   | 824     |   |                  |   | 759     |  
|Improvement and construction costs payable                                                                                         |  |                   | 139     |   |                  |   | 2,545   |  
|Prepaid rent                                                                                                                       |  |                   | 161     |   |                  |   | 212     |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total liabilities                                                                                                                  |  |                   | 57,491  |   |                  |   | 41,340  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Commitments and contingencies (Notes 3 and 7)                                                                                      |  |                   |         |   |                  |   |         |  
|                                                                                                                                   |  |                  
|Partners equity (deficit):                                                                                                        |  |                   |         |   |                  |   |         |  
|General Partner                                                                                                                    |  |                   | (702    | ) |                  |   | (610    | )
|Limited partners 83,911 and 85,206 limited partnership units outstanding at September 30, 2006 and December 31, 2005,
respectively |  |                   | 24,524  |   |                  |   | 25,924  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total partners equity                                                                                                             |  |                   | 23,822  |   |                  |   | 25,314  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total liabilities and partners equity                                                                                             |  | $                 | 81,313  |   |                  | $ | 66,654  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  

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



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RANCON REALTY FUND V,

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                                                                             |  | $                               | 3,384  |   |                                | $ | 2,648  |      |  | $ | 9,820  |   |  | $ | 7,695  |  
|                                                                                              |  |                                 |        |  
|Operating Expenses                                                                            |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Property operating                                                                            |  |                                 | 1,669  |   |                                |   | 1,299  |      |  |   | 4,020  |   |  |   | 3,254  |  
|Depreciation and amortization                                                                 |  |                                 | 1,175  |   |                                |   | 769    |      |  |   | 3,155  |   |  |   | 2,155  |  
|Expenses associated with undeveloped land                                                     |  |                                 | 23     |   |                                |   | 38     |      |  |   | 55     |   |  |   | 136    |  
|General and administrative                                                                    |  |                                 | 214    |   |                                |   | 262    |      |  |   | 746    |   |  |   | 730    |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                                      |  |                                 | 3,081  |   |                                |   | 2,368  |      |  |   | 7,976  |   |  |   | 6,275  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Operating income                                                                              |  |                                 | 303    |   |                                |   | 280    |      |  |   | 1,844  |   |  |   | 1,420  |  
|                                                                                              |  |                                 |        |  
|Interest and other income                                                                     |  |                                 | 149    |   |                                |   | 20     |      |  |   | 272    |   |  |   | 66     |  
|Interest expense                                                                              |  |                                 | (802   | ) |                                |   | (285   | )    |  |   | (1,874 | ) |  |   | (857   | )
|Loss on early extinguishment of debt                                                          |  |                                 |       |   |                                |   |       |      |  |   | (227   | ) |  |   |       |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|(Loss) income from continuing operations                                                      |  |                                 | (350   | ) |                                |   | 15     |      |  |   | 15     |   |  |   | 629    |  
|                                                                                              |  |                                 |        |  
|Income from discontinued operations (including gain on sale of real estate of $1,202 in 2005) |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   | 1,219  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Net (loss) income                                                                             |  | $                               | (350   | ) |                                | $ | 15     |      |  | $ | 15     |   |  | $ | 1,848  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Basic and diluted net (loss) income per limited partnership unit                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Continuing operations                                                                         |  | $                               | (3.75  | ) |                                | $ | 0.16   |      |  | $ | 0.08   |   |  | $ | 6.71   |  
|Discontinued operations                                                                       |  |                                 |       |   |                                |   |       |      |  |   |       |   |  |   | 13.17  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|                                                                                              |  | $                               | (3.75  | ) |                                | $ | 0.16   |      |  | $ | 0.08   |   |  | $ | 19.88  |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Weighted average number of limited partnership units outstanding during each period           |  |                                 | 83,912 |   |                                |   | 86,130 |      |  |   | 84,232 |   |  |   | 86,664 |  
|                                                                                              |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  

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



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RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statement of Partners Equity

For the nine months ended September 30, 2006

(in thousands)

(Unaudited)



|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  
|--------------------------------------------------- |  | --------------- | ---- | - | --------------- | - | ------ | ----- |  | - | ------ | -
|                                                    |  | General Partner |      |   | LimitedPartners |   |        | Total | 
|Balance (deficit) at December 31, 2005              |  | $               | (610 | ) |                 | $ | 25,924 |       |  | $ | 25,314 |  
|Redemption of limited partnership units             |  |                 |     |   |                 |   | (364   | )     |  |   | (364   | )
|Net income (loss)                                   |  |                 | 22   |   |                 |   | (7     | )     |  |   | 15     |  
|Distributions ($12.21 per limited partnership unit) |  |                 | (114 | ) |                 |   | (1,029 | )     |  |   | (1,143 | )
|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  
|Balance (deficit) at September 30, 2006             |  | $               | (702 | ) |                 | $ | 24,524 |       |  | $ | 23,822 |  
|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  

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



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RANCON REALTY FUND V,

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                                                                                  |  | $                              | 15      |   |      | $ | 1,848   |  
|Adjustments to reconcile net income to net cash provided by operating activities:           |  |                                |         |   |      |   |         |  
|Gain on sale of real estate                                                                 |  |                                |        |   |      |   | (1,202  | )
|Loss on early extinguishment of debt                                                        |  |                                | 227     |   |      |   |        |  
|Depreciation and amortization (including discontinued operations)                           |  |                                | 3,155   |   |      |   | 2,158   |  
|Amortization of loan fees, included in interest expense (including discontinued operations) |  |                                | 73      |   |      |   | 115     |  
|Changes in certain assets and liabilities:                                                  |  |                                |         |   |      |   |         |  
|Accounts receivable                                                                         |  |                                | (313    | ) |      |   | (161    | )
|Deferred costs                                                                              |  |                                | (747    | ) |      |   | (639    | )
|Prepaid expenses and other assets                                                           |  |                                | (1,873  | ) |      |   | (394    | )
|Accounts payable and other liabilities                                                      |  |                                | 366     |   |      |   | 79      |  
|Prepaid rent                                                                                |  |                                | (51     | ) |      |   | (1      | )
|                                                                                            |  |                                |         |   |      |   |         |  
|Net cash provided by operating activities                                                   |  |                                | 852     |   |      |   | 1,803   |  
|                                                                                            |  |                                |         |   |      |   |         |  
|Cash flows from investing activities:                                                       |  |                                |         |   |      |   |         |  
|                                                                                            |  |                               
|Purchase of short-term investments                                                          |  |                                | (10,000 | ) |      |   |        |  
|Net proceeds from sale of real estate                                                       |  |                                |        |   |      |   | 2,032   |  
|Additions to real estate investments                                                        |  |                                | (5,777  | ) |      |   | (12,144 | )
|Payments received from tenant improvement note receivable                                   |  |                                | 78      |   |      |   | 71      |  
|                                                                                            |  |                                |         |   |      |   |         |  
|Net cash used for investing activities                                                      |  |                                | (15,699 | ) |      |   | (10,041 | )
|                                                                                            |  |                                |         |   |      |   |         |  
|Cash flows from financing activities:                                                       |  |                                |         |   |      |   |         |  
|                                                                                            |  |                               
|Proceeds from note payable                                                                  |  |                                | 30,000  |   |      |   | 6,028   |  
|Draws on construction note payable                                                          |  |                                | 2,338   |   |      |   |        |  
|Draws on lines of credit                                                                    |  |                                |        |   |      |   | 4,315   |  
|Payoff of construction note payable                                                         |  |                                | (9,362  | ) |      |   |        |  
|Payoff of line of credit                                                                    |  |                                | (4,000  | ) |      |   |        |  
|Principal payments on note payable                                                          |  |                                | (433    | ) |      |   | (165    | )
|Loan fee                                                                                    |  |                                | (458    | ) |      |   | (328    | )
|Redemption of limited partnership units                                                     |  |                                | (915    | ) |      |   | (678    | )
|Distribution to limited partners                                                            |  |                                | (1,029  | ) |      |   | (901    | )
|Distribution to General Partner                                                             |  |                                | (314    | ) |      |   |        |  
|                                                                                            |  |                                |         |   |      |   |         |  
|Net cash provided by financing activities                                                   |  |                                | 15,827  |   |      |   | 8,271   |  
|                                                                                            |  |                                |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                                   |  |                                | 980     |   |      |   | 33      |  
|                                                                                            |  |                               
|Cash and cash equivalents at beginning of period                                            |  |                                | 3,437   |   |      |   | 967     |  
|                                                                                            |  |                                |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $                              | 4,417   |   |      | $ | 1,000   |  
|                                                                                            |  |                                |         |   |      |   |         |  

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



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



|                                                                                                                                 |  |                                |       |      |   |       |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ----- | ---- | - | ----- | -
|                                                                                                                                 |  | Nine months endedSeptember 30, |      
|                                                                                                                                 |  | 2006                           |       | 2005 |  
|Supplemental disclosure of cash flow information:                                                                                |  |                                |       |      |   |       |  
|Cash paid for interest (net of capitalized interest of $330 and $445 at September 30, 2006 and September 30, 2005,
respectively) |  | $                              | 1,801 |      | $ | 770   |  
|                                                                                                                                 |  |                                |       |      |   |       |  
|Premium paid on redemption of limited partnership units                                                                          |  | $                              | 450   |      | $ |      |  
|                                                                                                                                 |  |                                |       |      |   |       |  
|Supplemental disclosure of non-cash financing activities:                                                                        |  |                                |       |      |   |       |  
|Completed real estate investment transferred out of construction in Progress to rental property                                  |  | $                              |      |      | $ | 7,303 |  
|                                                                                                                                 |  |                                |       |      |   |       |  
|Redemption of limited partnership units                                                                                          |  | $                              |      |      | $ | 55    |  
|Redemption payable                                                                                                               |  |                                |      |      |   | (55   | )
|                                                                                                                                 |  |                                |       |      |   |       |  
|                                                                                                                                 |  | $                              |      |      | $ |      |  
|                                                                                                                                 |  |                                |       |      |   |       |  
|Supplemental disclosure of non-cash investing activities:                                                                        |  |                                |       |      |   |       |  
|Write-off of fully depreciated rental property assets                                                                            |  | $                              | 658   |      | $ | 900   |  
|                                                                                                                                 |  |                                |       |      |   |       |  
|Write-off of fully amortized deferred costs                                                                                      |  | $                              | 297   |      | $ | 299   |  
|                                                                                                                                 |  |                                |       |      |   |       |  

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



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RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. ORGANIZATION

Rancon
Realty Fund V, a California Limited Partnership, (the Partnership), was organized in accordance with the provisions of the California Revised Limited Partnership Act for the purpose of acquiring, developing, operating and selling real
property. The Partnership was organized in 1985 and reached final funding in 1989. The general partners of the Partnership are Daniel L. Stephenson and Rancon Financial Corporation (RFC), hereinafter collectively referred to as the
General Partner. RFC is wholly owned by Daniel L. Stephenson. The Partnership has no employees.

During the three months ended
September 30, 2006, a total of 1,295 units of limited partnership interest (Units) were redeemed at an average price of $629. As of September 30, 2006, there were 83,911 Units outstanding.

The partnership commenced on May 8, 1985 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 Losses

Allocations of net income and net losses are made pursuant to the terms of the Partnership Agreement. Generally, net income and net losses from operations are allocated 90% to the limited partners and 10% to the
General Partner; however, if the limited partners and the General Partner have, as a result of an allocation of net loss, a deficit balance in their capital accounts, net loss shall not be allocated to the limited partners and General Partner in
excess of the positive balance until the balances of the limited partners and General Partners capital accounts are reduced to zero. Capital accounts shall be determined after taking into account the other allocations and distributions
for the fiscal year.

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 12% 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 accounts 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



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Consolidated Financial Statements

(Unaudited)

twelve month period following the date upon
which such Unit was purchased from the Partnership and following the admission of such limited partner; (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 reported results of operations during the reporting period. Actual results could differ from those estimates.

Consolidation

In May 1996, the Partnership formed RRF V Tri-City Limited Partnership, a Delaware limited partnership (RRF V Tri-City). The limited partner of RRF V
Tri-City is the Partnership and the general partner is RRF V, Inc. (RRF V, Inc.), a corporation wholly-owned by the Partnership. Since the Partnership owns 100% of RRF V, Inc. and indirectly owns 100% of RRF V Tri-City, the financial
statements of RRF V, Inc. and RRF V Tri-City have been consolidated with those of the Partnership. In November 2005, the Partnership formed Rancon Realty Fund V Subsidiary LLC, a Delaware limited liability company (RRF V SUB) which is
wholly owned by the Partnership. Since RRF V SUB is wholly owned by the Partnership, the financial statements of RRF V SUB have been consolidated with those of the Partnership. In April 2006, the Partnership formed Rancon Realty Fund V Subsidiary
Two LLC, a Delaware limited liability company (RRF V SUB2) which is wholly owned by the Partnership. Since RRF V SUB2 is wholly owned by the Partnership, the financial statements of RRF V SUB2 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.



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##### Table of Contents

RANCON REALTY FUND V,

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
certificates of deposit and money market funds 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, line of credit payable, accounts payable and other liabilities and construction costs payable, recorded amounts approximate fair value due to the
relatively short maturity period.

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. The reimbursements from tenants for real estate taxes are recognized as revenue in the period the expenses are incurred. Other recoverable operating expenses
are recognized as revenue on an estimated basis and the differences between estimated and actual amounts are recognized as revenue in the subsequent year when the amounts are collected.

Sales of Real Estate

The Partnership recognizes sales of real estate when a contract is in place, a closing
has taken place, the buyers investment is adequate to demonstrate a commitment to pay for the property and the Partnership does not have a substantial continuing involvement in the



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Consolidated Financial Statements

(Unaudited)

property. Each property is considered a
separately identifiable component of the Partnership and is reported in discontinued operations when the operations and cash flows of the Property have been (or will be) eliminated from the ongoing operations of the Partnership as a result of the
disposal transaction and the Property will not have any significant continuing involvement in the operations of the Partnership after the disposal transaction.

Net Income (Loss) Per Limited Partnership Unit

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

Income Taxes

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

Concentration risk

Two tenants (Northrop Grumman Corporation and Arrowhead Central Credit Union) represented a combined 25% and one tenant (Arrowhead Central Credit Union) represented 13% 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.

We will initially apply the provisions of SAB 108 using the cumulative effect transition method in connection with
the preparation of our annual financial statements for the year ending December 31, 2006. When we initially apply the provisions of SAB 108, we expect to record an increase in straight line rent receivable of $18,806, an increase in tenant
improvements of $1 million, and increase in accumulated depreciation of $716,668, a reduction in tenant note receivable of $423,690 and a reduction in partners equity (deficit) of approximately $121,552 as of January 1, 2006. The
accompanying financial statements do not reflect these adjustments.

Out-of-period adjustment

During the quarter ended September 30, 2006, the Partnership recorded an out-of-period charge for depreciation and amortization expense related to tenant and building
improvements placed in service in prior interim periods of 2006 of approximately $51,000. The amount of the charge relating to the quarter ended March 31, 2006 and June 30, 2006 was $21,317 and $29,683, respectively. The Partnership has concluded
that these amounts are not material to the respective prior interim periods and the cumulative amount recorded is not material to the results of operations for the three months ended.

Note 3. INVESTMENTS IN REAL ESTATE

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



|                                 |  |      |         |   |      |   |         |  
|-------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                 |  | 2006 |         |   | 2005 |  
|Land                             |  | $    | 6,944   |   |      | $ | 6,293   |  
|Land improvements                |  |      | 1,536   |   |      |   | 1,536   |  
|Buildings                        |  |      | 52,073  |   |      |   | 40,424  |  
|Building and tenant improvements |  |      | 14,936  |   |      |   | 9,285   |  
|                                 |  |      |         |   |      |   |         |  
|                                 |  |      | 75,489  |   |      |   | 57,538  |  
|Less: accumulated depreciation   |  |      | (16,797 | ) |      |   | (14,693 | )
|                                 |  |      |         |   |      |   |         |  
|Total rental properties, net     |  | $    | 58,692  |   |      | $ | 42,845  |  
|                                 |  |      |         |   |      |   |         |  

In January 2005, the Partnership entered into a contract with a construction company for $10,337,000 to build the
core and shell of a three-story office building on a five-acre land parcel known as Brier Corporate Center with a total of approximately 104,000 square feet. The Partnership also entered into a contract with the construction company for $4,708,000
to construct tenant and building improvements at this new building. In the first quarter of 2006, the core and shell of the building and the tenant and building improvements for an office space of approximately 87,000 square feet were completed. In
February 2006, the total costs were reclassed from construction in progress to land, building, building improvements and tenant improvements.



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Consolidated Financial Statements

(Unaudited)

During the nine months ended September 30,
2006, fully depreciated building and tenant improvements of $658,000 were removed from the balances of such accounts.

In February 2005, the Partnership
entered into a contract to sell the property leased to Chuck E. Cheese for a price of $2,157,800. The sale closed in March 2005 and generated net proceeds of approximately $2,032,000 and a gain on sale of approximately $1,202,000. The proceeds were
added to the Partnerships cash reserves.

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

Below is a summary of the results of operations of the property leased to Chuck E. Cheese through its disposition date (dollars in thousands):



|                                          |  |                                         |      
|----------------------------------------- |  | --------------------------------------- | -----
|                                          |  | Nine months ended September 30, 2005(1)
|Operating revenue                         |  | $                                       | 50   
|                                          |  |                                         |      
|Operating Expenses                        |  |                                         |      
|Property operating                        |  |                                         | 30   
|Depreciation and amortization             |  |                                         | 3    
|                                          |  |                                         |      
|Total operating expenses                  |  |                                         | 33   
|                                          |  |                                         |      
|Income before gain on sale of real estate |  |                                         | 17   
|Gain on sale of real estate               |  |                                         | 1,202
|                                          |  |                                         |      
|Income from discontinued operations       |  | $                                       | 1,219
|                                          |  |                                         |      

---

|(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 0.5 and 5.5 acres of land with a cost basis of $166 and $817 at September 30, 2006 and December 31, 2005,
respectively) |  | $                 | 451 |                  | $ | 15,437
|                                                                                                                                                |  |                   |     |                  |   |       

The construction costs of Brier Corporate Center were reclassed to land, building and tenant improvements when the
property was completed and the first tenant moved in during the first quarter of 2006 (See Note 3 for discussion).

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 4 acres of land as of September 30, 2006 and December 31, 2005, respectively) |  | $                 | 1,127 |                  | $ | 899
|                                                                                                      |  |                   |       |                  |   |    

The increase in cost was primarily due to the expenses related to the pre-design activities.



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Consolidated Financial Statements

(Unaudited)

Note 5. NOTES PAYABLE AND LINE OF CREDIT

Notes 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 #1 collateralized by first deeds of trust on seven 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 $151.                                      |  | $                 | 26,529 |                  | $ | 26,800
|Note payable #2 collateralized by first deeds of trust on four properties (discussed below). The note has a fixed interest rate of 5.61%, a
maturity date of May 1, 2016 and a 10-year term with a 30-year amortization requiring monthly payments of principal and interest totaling $173.                                           |  |                   | 29,838 |                  |   |      
|Construction note payable collateralized by Brier Corporate Center. The note had a variable interest rate of 30-day LIBOR plus 2% (6.37% as of
December 31, 2005), monthly interest-only payments and a maturity date of April 27, 2007. This note was paid off in April 2006.                                                        |  |                   |       |                  |   | 7,024 
|Line of credit collateralized by first deed of trust on Two Parkside. The line of credit had a total availability of $7.425 million, a
variable interest rate of Prime Rate (7.25% as of December 31, 2005), monthly interest-only payments, and a maturity date of April 15, 2007. This line of credit was paid off in April 2006. |  |                   |       |                  |   | 4,000 
|                                                                                                                                                                                                                                                                                                                                      |  |                   |        |                  |   |       
|Total                                                                                                                                                                                                                                                                                                                                 |  | $                 | 56,367 |                  | $ | 37,824
|                                                                                                                                                                                                                                                                                                                                      |  |                   |        |                  |   |       

Note payable #1 is collateralized by Ballys Health Club, Carnegie Business Center II, Lakeside Tower,
Outback Steakhouse, Pat & Oscars, Palm Court Retail #3 and One Carnegie Plaza with an aggregate net carrying value of approximately $17,281,000 and $17,924,000 at September 30, 2006 and December 31, 2005, respectively. Note
payable #2 is collateralized by Brier Corporate Center, One Parkside, Two Parkside and Two Carnergie Plaza with an aggregate net carrying value of approximately $30,952,000 at September 30, 2006. Both notes provide a one-time loan assumption
and a release provision for an individual asset.

In April 2006, the Partnership obtained a loan (note payable #2) in the amount of $30,000,000. The
proceeds from note payable #2 were used to pay off the construction loan for Brier Corporate Center and the line of credit collateralized by Two Parkside. The net loan proceeds from the new loan in the amount of approximately $16,180,000 were added
to the Partnerships cash reserve. The loss on early extinguishment in connection with the pay off of the construction note payable for Brier Corporate Center and the line of credit was approximately $227,000.

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



|           |  |   |       
|---------- |  | - | ------
|2006       |  | $ | 193   
|2007       |  |   | 795   
|2008       |  |   | 840   
|2009       |  |   | 888   
|2010       |  |   | 938   
|Thereafter |  |   | 52,713
|           |  |   |       
|Total      |  | $ | 56,367
|           |  |   |       

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 ($243,000 and $224,000 for the nine months ended September 30, 2006, and 2005, respectively); (ii) a construction services fee which
was included in the rental properties in the balance sheets ($35,000 and $51,000 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



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Notes to Consolidated Financial Statements

(Unaudited)

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 ($403,000 and $177,000 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 $43,000 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, respectively); (vi) a financing services fee of 1% of gross loan amount ($300,000 and
$134,000 for the nine months ended September 30, 2006 and 2005, respectively); 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 ($230,000 and $473,000 for the
nine months ended September 30, 2006 and 2005, respectively). The fees for the above services (excluding property management fees) totaled $1,193,000 and $1,101,000 for the nine months ended September 30, 2006 and 2005, respectively.

As of September 30, 2006, Glenborough held 6,044 or 7.2% 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 IV (Fund IV),
a separate partnership sponsored by the General Partner of the Partnership. The amount was received 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.

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 2004; 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 $102,000 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.



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##### Table of Contents

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

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

Background

The Partnerships initial
acquisition of property in June 1985 consisted of approximately 76.21 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. The balance of Tri-City is owned by Rancon Realty Fund IV (Fund IV), 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 retail and eight office
buildings, aggregating approximately 722,000 rentable square feet, of which 42,000 square feet are retail space, and 680,000 square feet are office space. Carnegie Business Center II, formerly an industrial flex building, was repositioned to an
office building on January 1, 2006.



|                                                              |  |                                |  |               
|------------------------------------------------------------- |  | ------------------------------ |  | --------------
|Property                                                      |  | Type                           |  | Square Footage
|One Carnegie Plaza                                            |  | Two two-story office buildings |  | 107,278       
|Two Carnegie Plaza                                            |  | Two-story office building      |  | 68,957        
|Carnegie Business Center II                                   |  | Two-story office building      |  | 50,867        
|Lakeside Tower                                                |  | Six-story office building      |  | 112,791       
|One Parkside                                                  |  | Four-story office building     |  | 70,068        
|Ballys Health Club (Ballys)                                 |  | Health club facility           |  | 25,000        
|Outback Steakhouse (Outback)                                  |  | Restaurant                     |  | 6,500         
|Palm Court Retail #3                                          |  | Retail                         |  | 6,004         
|Two Parkside                                                  |  | Three-story office building    |  | 82,004        
|Pat & Oscars                                                  |  | Restaurant                     |  | 5,100         
|Three Carnegie                                                |  | Two-story office building      |  | 83,635        
|Brier Corporate Center (commenced operation in February 2006) |  | Three-story office building    |  | 104,048       

As of September 30, 2006, the weighted average occupancy of the twelve
rental properties was 87%.

As of September 30, 2006, there are nine tenants at Tri-City occupying substantial portions of leased rental space. These
nine tenants, in the aggregate, occupy approximately 309,000 square feet of the 722,000 total rentable square feet at Tri-City and account for approximately 51% of the rental income generated at Tri-City for the Partnership as of September 30,
2006.

Tri-City Land

As of September 30,
2006, the Partnership owned approximately 4.5 acres of land, of which 0.5 acre is currently a construction pad ready for development, and the remaining 4 acres of land are part undeveloped and part used as parking lots. The Partnership is looking
into developing all the available acres of land to generate more operating income for the Partnership.

Financing

The Partnerships Tri-City rental properties are owned by the Partnership, in fee, subject to the following two notes:



|                                                  |  |                    |            |          |      |               |      |   |                |                     |              |          
|------------------------------------------------- |  | ------------------ | ---------- | -------- | ---- | ------------- | ---- | - | -------------- | ------------------- | ------------ | ---------
|Collateral                                        |  | Outstandingbalance |            | Mortgage |      | Interest rate |      |   | Monthlypayment |                     | Maturitydate
|Note payable #1  Seven properties (listed below) |  | $                  | 26,529,000 |          | Note |               | 5.46 | % |                | Principal &Interest |              | 1/01/2016
|                                                  |  |                    |            |          |     
|Note payable #2  Four properties (listed below)  |  | $                  | 29,838,000 |          | Note |               | 5.61 | % |                | Principal &Interest |              | 5/01/2016

Note payable #1 is collateralized by Ballys, Carnegie Business Center II, Lakeside Tower, Outback,
Pat & Oscars, Palm Court Retail #3 and One Carnegie Plaza.

Note payable #2 is collateralized by Brier Corporate
Center, One Parkside, Two Parkside and Two Carnergie Plaza.

There is no debt collateralized by Three Carnegie.



15



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##### Table of Contents

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 $736,000, or 28%, and $2,125,000, or 28% 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 the commencement of operations at Three Carnegie and Brier Corporate Center and an increase in occupancy at One Parkside, partially offset by a decrease in occupancies at One
Carnegie Plaza and Carnegie Business Center II.

Expenses

Property operating expenses increased $370,000, or 28%, and $766,000, or 24%, 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
commencement of operations at Three Carnegie and Brier Corporate Center and an increase in occupancy at One Parkside, partially offset by a decrease in occupancies at One Carnegie Plaza and Carnegie Business Center II.

Depreciation and amortization increased $406,000, or 53%, and $1,000,000, or 46%, 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 and amortization commencing at Three Carnegie and Brier Corporate Center for the buildings, tenant improvements and lease commissions.

Expenses associated with undeveloped land decreased $15,000, or 39%, and $81,000, or 60%, 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 decreases in association dues and property taxes resulting from the transfer of Brier Corporate Center from construction in progress to rental property for the three
months ended September 30, 2006, as well as the transfer of Three Carnegie from construction in progress to rental property for the nine months ended September 30, 2006.

General and administrative expenses decreased $48,000, or 18%, for the three months ended September 30, 2006, compared to the three months ended September 30, 2005, primarily due to one-time additional
investor service and refinancing expenses in 2005, partially offset by increases in audit fee, tax fee and state taxes for the additional two wholly-owned subsidiaries and General and administrative expenses increased $16,000, 2%, for the nine
months ended September 30, 2006, compared to the nine months ended September 30, 2005, primarily due to increases in audit fee, tax fee and state taxes for the additional two wholly-owned subsidiaries, partially offset by the one-time
additional investor service and refinancing expenses in 2005.

Non-operating income / expenses

Interest and other income increased $129,000 and $206,000 during the three and nine months ended September 30, 2006, compared to the three and nine months ended
September 30, 2005, primarily due to higher average invested cash balances and the short-term investment resulting from the proceeds of a new loan.

Interest expense increased $517,000 and $1,017,000 during the three and nine months ended September 30, 2006, compared to the three and nine months ended September 30, 2005, primarily due to an increase in borrowings and cessation
of the capitalization of interest at Three Carnegie and Brier Corporate Center, which commenced operations in July 2005 and February 2006, respectively.

Loss on early extinguishment of debt of $227,000 during the nine months ended September 30, 2006 represented the write-off of unamortized original financing costs in connection with the pay off of the construction note payable for
Brier Corporate Center.

Liquidity and Capital Resources

As of September 30, 2006, the Partnership had cash and cash equivalents of $4,417,000.

The Partnerships liabilities at September 30, 2006, include two notes payable. The borrowings totaled approximately $56,367,000, collateralized by properties
with an aggregate net carrying value of approximately $48,233,000.

In December 2005, the Partnership obtained a loan (note payable #1) in the amount of
$26,800,000. The proceeds from note payable #1 were used to pay off a fixed-rate note, which was collateralized by Lakeside Tower, One Parkside and Two Carnegie Plaza, a line of credit, which was collateralized by One Carnegie Plaza and Carnegie
Business Center II, and pay down a line of credit collateralized by Two Parkside. The net loan proceeds from note payable #1 in the amount of approximately $853,000 were added to the Partnership cash reserve. There was no prepayment penalty incurred
at the time of payoff of the aforementioned note payable. In April 2006, the Partnership obtained a loan (note payable #2) in the amount of $30,000,000. The proceeds from note payable #2 were used to pay off the construction note payable for Brier
Corporate Center and the line of credit collateralized by Two Parkside. The net loan proceeds from note payable #2 in the amount of approximately $16,180,000 were added to the Partnership cash reserve. The loss on early extinguishment in connection
with the pay off of the construction note payable for Brier Corporate Center and the line of credit was approximately $227,000.



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As of September 30, 2006, the Partnership had a short-term investment of $10,000,000. The investment is a
certificate of deposit with an interest rate of 4.9% and a maturity date of November 6, 2006. Interest income is recognized when earned.

During the
nine months ended September 30, 2006, cash provided by operating activities was insufficient to pay distributions by $491,000. The shortfalls were funded from the loan proceeds.

The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the aggregate amount of $102,000 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, 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
development of other properties or distribution to the partners.

Contractual Obligations

At September 30, 2006, we had contractual obligations as follows (in thousands):



|                             |  |                 |     |              |   |              |  |                   |       |       |   |        |  |   |       
|---------------------------- |  | --------------- | --- | ------------ | - | ------------ |  | ----------------- | ----- | ----- | - | ------ |  | - | ------
|                             |  | Less than 1year |     | 1 to 3 years |   | 3 to 5 years |  | More than 5 years |       | Total
|Collateralized mortgage loan |  | $               | 193 |              | $ | 1,635        |  | $                 | 1,826 |       | $ | 52,713 |  | $ | 56,367
|Interest on indebtedness     |  |                 | 780 |              |   | 6,138        |  |                   | 5,947 |       |   | 14,346 |  |   | 27,211
|                             |  |                 |     |              |   |              |  |                   |       |       |   |        |  |   |       
|Total                        |  | $               | 973 |              | $ | 7,773        |  | $                 | 7,773 |       | $ | 67,059 |  | $ | 83,578
|                             |  |                 |     |              |   |              |  |                   |       |       |   |        |  |   |       

Management expects that the Partnerships cash balance at September 30, 2006, together with cash from
operations, sales and financings will be sufficient to finance the Partnerships and the properties continuing 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 and its ability to fund distributions.

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

For the nine months ended September 30, 2006, the Partnerships cash provided by operating activities
totaled $852,000.

The $227,000 in loss on early extinguishment of debt at September 30, 2006 represented the write-off of unamortized original
financing costs in connection with the pay off of the construction note payable for Brier Corporate Center.

The $313,000 increase in accounts receivable
at September 30, 2006, compared to December 31, 2005, was primarily due to increases in interest income accruals related to the short-term investment, as well as tenant rents receivable, partially offset by the collection of tenant note
receivable.

The $747,000 increase in deferred costs at September 30, 2006, compared to December 31, 2005, was due to lease commissions paid for
the initial lease-up of Three Carnegie and Brier Corporate Center and loan fees related to note payable #2. Included in the increase are fees paid to Glenborough for leasing services of approximately $403,000 and financing services of approximately
$300,000 for the nine months ended September 30, 2006.

The $1,873,000 increase in prepaid expenses and other assets at September 30, 2006,
compared to December 31, 2005, was primarily due to an increase in straight line rent receivables and earthquake insurance premiums paid, partially offset by the amortization of prepaid insurance.

The $366,000 increase in accounts payable and other liabilities at September 30, 2006, compared to December 31, 2005, was primarily due to an increase in
security deposits and accrual for operating expenses, partially offset by payments of property taxes, distribution to General Partner and the redemption of Partnership Units.

The $51,000 decrease in prepaid rents at September 30, 2006 was due to a higher amount of January 2006 rents received in December 2005, as compared to the balance of October 2006 rents received in September 2006.



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Investing Activities

During the nine months ended September 30, 2006, the Partnerships cash used for investing activities totaled $15,699,000, which consisted of $10,000,000 for the purchase of the short-term investments, $5,777,000 primarily used
for building and tenant improvements at Three Carnegie, Brier Corporate Center, Carnegie Business Center II and One Parkside, partially offset by the partial collection of $78,000 from a note receivable related to tenant improvements.

Financing Activities

During the nine months ended September 30,
2006, the Partnerships cash provided by financing activities totaled $15,827,000, which consisted of $30,000,000 from the proceeds of a new loan closed in April 2006 and $2,338,000 from draws on the construction note payable, partially offset
by $9,362,000 and $4,000,000 for the pay off of the construction note payable and line of credit, respectively, $433,000 of principal payments made on the notes payable, $458,000 for the loan fees in connection with the new financing, $915,000 for
payment of redemption of limited partnership units, $1,029,000 for payment of distributions to limited partners and $314,000 for payment of distributions to the General Partner, of which $200,000 was accrued in 2005.

Cash flows

For the nine months ended September 30, 2006, cash
provided by operating activities was $852,000, as compared to $1,803,000 for the same period in 2005. The change was primarily due to increases in accounts receivable, prepaid expenses and other assets, partially offset by an increase in rental
income resulting from the commencement of operations at Three Carnegie Plaza and Brier Corporate Center in July 2005 and February 2006, respectively, and an increase in accounts payable and other liabilities. For the nine months ended
September 30, 2006, cash used for investing activities was $15,699,000, as compared to $10,041,000 for the same period in 2005. The change was primarily due to the purchase of short-term investments and sale proceeds received in 2005 from the
sale of the property leased to Chuck E. Cheese, partially offset by a decrease in construction costs at Brier Corporate Center which commenced operations in February 2006. For the nine months ended September 30, 2006, cash provided by financing
activities was $15,827,000, as compared to $8,271,000 for the same period in 2005. The change was primarily due to the proceeds from a new loan and an increase in draws on construction note payable, partially offset by the pay offs of the
construction note payable and line of credit, a decrease in draws on the line of credit and increases in the redemption of limited partnership units and in distributions to the limited partners and the General Partner.

Inflation

Leases at the office properties typically provide
for rent adjustment 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 plan to develop its remaining land to generate more operating income;
|- |  | ---------------------------------------------------------------------------------------



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



| |  | The Partnerships expectation that changes in market interest rates will not have a material impact on the performance or 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; 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. It is important to note that the Partnerships actual results could differ materially from those stated or implied in such forward-looking statements. The following factors, among
others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:



| |  | failure to obtain anticipated outside financing;
|- |  | ------------------------------------------------



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##### Table of Contents

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



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



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



| |  | availability and credit worthiness of prospective tenants and our ability to execute lease deals with them;
|- |  | -----------------------------------------------------------------------------------------------------------



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



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



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



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



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

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 Disclosures 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. The Partnership does not own any derivative instruments.

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



|                               |  |                        |      |   |       |   |      |      |  |   |      |   |  |      |      |   |            |   |      |   |  |   |        |   |  |   |        |  
|------------------------------ |  | ---------------------- | ---- | - | ----- | - | ---- | ---- |  | - | ---- | - |  | ---- | ---- | - | ---------- | - | ---- | - |  | - | ------ | - |  | - | ------ | -
|                               |  | Expected Maturity Date |      |   | Total |  
|                               |  | 2006                   |      |   | 2007  |   |      | 2008 |  |   | 2009 |   |  | 2010 |      |   | Thereafter |   |     
|                               |  | (in thousands)         |      |   |       |  
|Collateralized Fixed Rate Debt |  | $                      | 193  |   |       | $ | 795  |      |  | $ | 840  |   |  | $    | 888  |   |            | $ | 938  |   |  | $ | 52,713 |   |  | $ | 56,367 |  
|Average interest rate          |  |                        | 5.54 | % |       |   | 5.54 | %    |  |   | 5.54 | % |  |      | 5.54 | % |            |   | 5.54 | % |  |   | 5.54   | % |  |   | 5.54   | %

As of September 30, 2006, the Partnership had cash equivalents of $4,417,000 invested in an interest-bearing
money market account and $10,000,000 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 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.



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



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##### 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



| | 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.
| | -- | -------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

SIGNATURES

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



|                        |  |                                  |  |                                       |  |                                
|----------------------- |  | -------------------------------- |  | ------------------------------------- |  | -------------------------------
|                        |  | RANCON REALTY FUND V,           
|                        |  | a California limited partnership
|                        |  |                                 
|                        |  | By                               |  | Rancon Financial Corporation         
|                        |  |                                  |  | a California corporation,            
|                        |  |                                  |  | its General Partner                  
|                        |  |                                  | 
|Date: November 17, 2006 |  |                                  |  | By:                                   |  | /s/ Daniel L. Stephenson       
|                        |  |                                  |  |                                       |  | Daniel L. Stephenson, President
|                        |  |                                 
|Date: November 17, 2006 |  | By:                              |  | /s/ Daniel L. Stephenson             
|                        |  |                                  |  | Daniel L. Stephenson, General Partner



22