##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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



For the quarterly period ended June 30, 2005



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



Total number of units outstanding as of August 15, 2005: 86,238



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



2



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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)



|                                                                                                                               |  |              |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                               |  | June 30,2005 |         |   | December 31,2004 |  
|Assets                                                                                                                         |  |              |         |   |                  |   |         |  
|Investments in real estate:                                                                                                    |  |              |         |   |                  |   |         |  
|Rental properties                                                                                                              |  | $            | 48,745  |   |                  | $ | 49,566  |  
|Accumulated depreciation                                                                                                       |  |              | (14,444 | ) |                  |   | (13,330 | )
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Rental properties, net                                                                                                         |  |              | 34,301  |   |                  |   | 36,236  |  
|                                                                                                                               |  |             
|Construction in progress                                                                                                       |  |              | 12,251  |   |                  |   | 4,099   |  
|Land held for development                                                                                                      |  |              | 884     |   |                  |   | 870     |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total investments in real estate                                                                                               |  |              | 47,436  |   |                  |   | 41,205  |  
|                                                                                                                               |  |             
|Cash and cash equivalents                                                                                                      |  |              | 206     |   |                  |   | 967     |  
|Accounts receivable                                                                                                            |  |              | 846     |   |                  |   | 832     |  
|Deferred costs, net of accumulated amortization of $1,397 and $1,123 at June 30, 2005 and December 31, 2004, respectively      |  |              | 2,202   |   |                  |   | 1,689   |  
|Prepaid expenses and other assets                                                                                              |  |              | 1,845   |   |                  |   | 1,001   |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total assets                                                                                                                   |  | $            | 52,535  |   |                  | $ | 45,694  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|                                                                                                                               |  |             
|Liabilities and Partners Equity                                                                                               |  |              |         |   |                  |   |         |  
|Liabilities:                                                                                                                   |  |              |         |   |                  |   |         |  
|Notes payable and lines of credit                                                                                              |  | $            | 23,319  |   |                  | $ | 17,465  |  
|Accounts payable and other liabilities                                                                                         |  |              | 663     |   |                  |   | 774     |  
|Construction costs payable                                                                                                     |  |              | 1,648   |   |                  |   | 1,022   |  
|Prepaid rent                                                                                                                   |  |              | 99      |   |                  |   | 115     |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total liabilities                                                                                                              |  |              | 25,729  |   |                  |   | 19,376  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Commitments and contingent liabilities (Note 6)                                                                                |  |              |         |   |                  |   |         |  
|                                                                                                                               |  |             
|Partners Equity:                                                                                                              |  |              |         |   |                  |   |         |  
|General Partners                                                                                                               |  |              | (434    | ) |                  |   | (557    | )
|Limited partners, 86,501 and 87,410 limited partnership units outstanding at June 30, 2005 and December 31, 2004, respectively |  |              | 27,240  |   |                  |   | 26,875  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total partners equity                                                                                                         |  |              | 26,806  |   |                  |   | 26,318  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  
|Total liabilities and partners equity                                                                                         |  | $            | 52,535  |   |                  | $ | 45,694  |  
|                                                                                                                               |  |              |         |   |                  |   |         |  



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



3



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Consolidated Statements of Operations

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

(Unaudited)

|                                                                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                               |  | Three months endedJune 30, |        |   | Six months endedJune 30, |  
|                                                                                                                               |  | 2005                       |        |   | 2004                     |   |        | 2005 |  |   | 2004   |  
|Operating Revenue - Rental income                                                                                              |  | $                          | 2,506  |   |                          | $ | 2,382  |      |  | $ | 5,047  |   |  | $ | 4,897  |  
|                                                                                                                               |  |                            |        |  
|Operating Expenses                                                                                                             |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Property operating                                                                                                             |  |                            | 981    |   |                          |   | 998    |      |  |   | 1,955  |   |  |   | 1,957  |  
|Depreciation and amortization                                                                                                  |  |                            | 704    |   |                          |   | 628    |      |  |   | 1,386  |   |  |   | 1,253  |  
|Expenses associated with undeveloped land                                                                                      |  |                            | 55     |   |                          |   | 61     |      |  |   | 98     |   |  |   | 108    |  
|General and administrative                                                                                                     |  |                            | 253    |   |                          |   | 316    |      |  |   | 468    |   |  |   | 618    |  
|                                                                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                                                                       |  |                            | 1,993  |   |                          |   | 2,003  |      |  |   | 3,907  |   |  |   | 3,936  |  
|                                                                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Operating income                                                                                                               |  |                            | 513    |   |                          |   | 379    |      |  |   | 1,140  |   |  |   | 961    |  
|                                                                                                                               |  |                            |        |  
|Interest and other income                                                                                                      |  |                            | 29     |   |                          |   | 22     |      |  |   | 46     |   |  |   | 44     |  
|Interest expense                                                                                                               |  |                            | (283   | ) |                          |   | (306   | )    |  |   | (572   | ) |  |   | (555   | )
|                                                                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income before discontinued operations                                                                                          |  |                            | 259    |   |                          |   | 95     |      |  |   | 614    |   |  |   | 450    |  
|                                                                                                                               |  |                            |        |  
|Income (loss) from discontinued operations (including gain on sale of real estate of $1,202 in six months ended June 30, 2005) |  |                            | (13    | ) |                          |   | 14     |      |  |   | 1,219  |   |  |   | 38     |  
|                                                                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                                                                                     |  | $                          | 246    |   |                          | $ | 109    |      |  | $ | 1,833  |   |  | $ | 488    |  
|                                                                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic and diluted net income per limited partnership unit                                                                      |  | $                          | 2.55   |   |                          | $ | 1.11   |      |  | $ | 19.67  |   |  | $ | 4.95   |  
|                                                                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted average number of limited partnership units outstanding during each period                                            |  |                            | 86,714 |   |                          |   | 88,471 |      |  |   | 86,931 |   |  |   | 88,611 |  
|                                                                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  



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



4



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Consolidated Statement of Partners Equity

For the six months ended June 30, 2005

(in
thousands)

(Unaudited)



|                                                    |  |                |      |   |                 |   |        |       |  |   |        |  
|--------------------------------------------------- |  | -------------- | ---- | - | --------------- | - | ------ | ----- |  | - | ------ | -
|                                                    |  | GeneralPartner |      |   | LimitedPartners |   |        | Total | 
|Balance (deficit) at December 31, 2004              |  | $              | (557 | ) |                 | $ | 26,875 |       |  | $ | 26,318 |  
|Redemption of limited partnership units             |  |                |     |   |                 |   | (444   | )     |  |   | (444   | )
|Net income                                          |  |                | 123  |   |                 |   | 1,710  |       |  |   | 1,833  |  
|Distributions ($10.36 per limited partnership unit) |  |                |     |   |                 |   | (901   | )     |  |   | (901   | )
|                                                    |  |                |      |   |                 |   |        |       |  |   |        |  
|Balance (deficit) at June 30, 2005                  |  | $              | (434 | ) |                 | $ | 27,240 |       |  | $ | 26,806 |  
|                                                    |  |                |      |   |                 |   |        |       |  |   |        |  



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



5



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



|                                                                                                                                       |  |                          |        |   |      |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                                                                       |  | Six months endedJune 30, |       
|                                                                                                                                       |  | 2005                     |        |   | 2004 |  
|Cash flows from operating activities:                                                                                                  |  |                          |        |   |      |   |        |  
|Net income                                                                                                                             |  | $                        | 1,833  |   |      | $ | 488    |  
|Adjustments to reconcile net income to net cash provided by operating activities:                                                      |  |                          |        |   |      |   |        |  
|Gain on sale of real estate                                                                                                            |  |                          | (1,202 | ) |      |   |       |  
|Depreciation and amortization (including discontinued operations)                                                                      |  |                          | 1,389  |   |      |   | 1,271  |  
|Amortization of loan fees, included in interest expense                                                                                |  |                          | 80     |   |      |   | 68     |  
|Changes in certain assets and liabilities:                                                                                             |  |                          |        |   |      |   |        |  
|Accounts receivable                                                                                                                    |  |                          | (28    | ) |      |   | 74     |  
|Deferred costs                                                                                                                         |  |                          | (561   | ) |      |   | (435   | )
|Prepaid expenses and other assets                                                                                                      |  |                          | (40    | ) |      |   | (91    | )
|Accounts payable and other liabilities                                                                                                 |  |                          | (111   | ) |      |   | 90     |  
|Prepaid rent                                                                                                                           |  |                          | (16    | ) |      |   | (336   | )
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Net cash provided by operating activities                                                                                              |  |                          | 1,344  |   |      |   | 1,129  |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Cash flows from investing activities:                                                                                                  |  |                          |        |   |      |   |        |  
|Net proceeds from sale of rental property                                                                                              |  |                          | 2,032  |   |      |   |       |  
|Additions to real estate investments                                                                                                   |  |                          | (7,509 | ) |      |   | (1,899 | )
|Payments received from tenant improvement note receivable                                                                              |  |                          | 14     |   |      |   |       |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Net cash used for investing activities                                                                                                 |  |                          | (5,463 | ) |      |   | (1,899 | )
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Cash flows from financing activities:                                                                                                  |  |                          |        |   |      |   |        |  
|Draws on Lines of credit                                                                                                               |  |                          | 4,315  |   |      |   | 1,003  |  
|Proceeds from notes payable                                                                                                            |  |                          | 1,648  |   |      |   |       |  
|Note payable principal payments                                                                                                        |  |                          | (109   | ) |      |   | (99    | )
|Loan fees for construction loan, unsecured note & line of credit                                                                       |  |                          | (324   | ) |      |   | (141   | )
|Application fee for refinance (refundable)                                                                                             |  |                          | (827   | ) |      |   |       |  
|Redemption of limited partnership units                                                                                                |  |                          | (444   | ) |      |   | (199   | )
|Distributions to limited partners                                                                                                      |  |                          | (901   | ) |      |   |       |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Net cash provided by financing activities                                                                                              |  |                          | 3,358  |   |      |   | 564    |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Net decrease in cash and cash equivalents                                                                                              |  |                          | (761   | ) |      |   | (206   | )
|                                                                                                                                       |  |                         
|Cash and cash equivalents at beginning of period                                                                                       |  |                          | 967    |   |      |   | 1,136  |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                                                                             |  | $                        | 206    |   |      | $ | 930    |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Supplemental disclosure of cash flow information:                                                                                      |  |                          |        |   |      |   |        |  
|Cash paid for interest (excluding the capitalized interest of $255 and $65 for the periods ended June 30, 2005 and 2004,
respectively) |  | $                        | 747    |   |      | $ | 552    |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Supplemental disclosure of non-cash-financing activities:                                                                              |  |                          |        |   |      |   |        |  
|Redemption of limited partnership units                                                                                                |  | $                        | 91     |   |      | $ | 21     |  
|Redemption payable                                                                                                                     |  |                          | (91    | ) |      |   | (21    | )
|                                                                                                                                       |  |                          |        |   |      |   |        |  
|Total                                                                                                                                  |  | $                        |       |   |      | $ |       |  
|                                                                                                                                       |  |                          |        |   |      |   |        |  



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



6



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##### Table of Contents

RANCON REALTY FUND V

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(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 February 1989. The general partners of the Partnership
are Daniel L. Stephenson (DLS) and Rancon Financial Corporation (RFC), hereinafter collectively referred to as the General Partner. RFC is wholly owned by DLS. The Partnership has no employees.



In May 1996, the Partnership formed RRV 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 Partnership considers all assets owned by RRF V, Inc. and RRF V Tri-City to be owned by the Partnership.



During the six months ended June 30, 2005, a total of 909 units of limited partnership interest (Units) were redeemed at an
average price of $488. As of June 30, 2005, there were 86,501 Units outstanding.



In the opinion of the General Partner, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal accruals) necessary to present fairly the consolidated financial position of the
Partnership as of June 30, 2005 and December 31, 2004, and the related consolidated statements of operations for the three and six months ended June 30, 2005 and 2004, partners equity for the six months ended June 30, 2005, and cash flows for
the six months ended June 30, 2005 and 2004. The results for the six months ended June 30, 2005 are not necessarily indicative of the results which may occur for the year ended December 31, 2005.



Allocation of Net Income and Net Loss



Allocations of net income and net losses are made pursuant to the
terms of the Partnership Agreement. Generally, net income 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 negative balance until the balances of the limited partners and General
Partner 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 required 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 and improvements, maintenance, replacement of furniture and
fixtures, working capital and contingent liabilities.

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##### Table of Contents

RANCON REALTY FUND V

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



All excess
cash from operations shall be distributed 90 percent to the limited partners and 10 percent 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 percent to the General Partner and 99 percent to the limited partners in proportion to the outstanding positive amounts of Adjusted Invested Capital (as defined in the Partnership
Agreement) for each of their Units until Adjusted Invested Capital (as defined in the Partnership Agreement) for each Unit is reduced to zero; (ii) second, 1 percent to the General Partner and 99 percent to the limited partners until each of the
limited partners has received an amount which, including cash from operations previously distributed to the limited partners, equals a 12 percent annual cumulative, non-compounded return on the Adjusted Invested Capital (as defined in the
Partnership Agreement) of their Units plus such limited partners Limited Incremental Preferential Return (as defined in the Partnership Agreement), if any, with respect to each such Unit, on the Adjusted Investment Capital (as defined in the
Partnership Agreement) of such Units for the twelve month period following the date upon which such Unit was purchased from the Partnership and following the admission of such limited partner; (iii) third, 99 percent to the General Partner and 1
percent to the limited partners, until the General Partner has received an amount equal to 20 percent of all distributions of cash from sales or refinancing; and (iv) the balance, 80 percent to the limited partners, pro rata in proportion to the
number of Units held by each, and 20 percent to the General Partner.



Management Agreement



In January
1995, Glenborough Corporation (GC) entered into a ten-year agreement with the Partnership to manage the Partnerships assets and properties. In October 2000, GC merged into Glenborough Realty Trust Incorporated
(Glenborough). During the ten years ended December 31, 2004, the Partnership paid Glenborough for its services as follows: (i) a specified asset administration fee ($331,000 for the six months ended June 30, 2004); (ii) sales fees of 2%
for improved properties and 4% for land; (iii) a refinancing fee of 1% ($74,000 for the six months of June 30, 2004) and (iv) a management fee of 5% of gross rental receipts. Glenborough is not an affiliate of RFC or the Partnership.



In July 2004, the Partnership extended its management relationship with Glenborough through
December 31, 2006. The following provides the general terms of the new agreement. Commencing on January 1, 2005 and ending December 31, 2006, the Partnership engages Glenborough to perform services for the following fees: (i) a property management
fee of 3% of gross rental revenue; (ii) a construction services fee per certain schedules ($18,000 for the six months ended June 30, 2005); (iii) a specified asset and Partnership management fee of $300,000 per year with reimbursements of certain
expenses and consulting service fees ($148,000 for the six months ended June 30, 2005); (iv) a leasing services fee ($150,000 for the six months ended June 30, 2005); (v) a sales fee of 2% for improved properties ($43,000 for the six months ended
June 30, 2005) and 4% for unimproved properties; (vi) a financing services fee of 1% of gross loan amount ($134,000 for the six months ended June 30, 2005); and (vii) a development fee equal to 5% of the hard costs of the development project
($473,000 for the six months ended June 30, 2005). The hard costs exclude the cost of the land. The development fee and the general contractors fee shall not exceed 11.5%, in the aggregate, of the hard costs of the development project.



The new management agreement represents an annual reduction of $361,000 for
the asset and Partnership services fee in 2005 and 2006, compared to the asset and Partnership management fee paid in 2004; as well as a reduction of 2% in the property management fee from 5% in 2004 to 3% in 2005 and 2006, respectively.



Risks and Uncertainties



The Partnerships ability to (i) achieve positive cash flow from operations, (ii) meet
its debt obligations, (iii) provide distributions either from operations or the ultimate disposition of the Partnerships properties or (iv) continue as a going concern may be impacted by changes in interest rates, property values, local and
regional economic conditions, or the entry of other competitors into the market. The accompanying consolidated financial statements do not provide for adjustments with regard to these uncertainties.



Note 2. SIGNIFICANT ACCOUNTING POLICIES



Basis of Accounting



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



8



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##### Table of Contents

RANCON REALTY FUND V

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



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



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



|                          |  |                                                                                          
|------------------------- |  | -----------------------------------------------------------------------------------------
|Building and improvements |  | 5 to 40 years                                                                            
|Tenant improvements       |  | Lesser of the initial term of the related lease 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.



Fair Value of Financial Instruments



For certain financial instruments, including cash and cash equivalents, accounts receivable, loans payable, accounts payable, other liabilities, construction costs payable, and lines of credit payable, recorded amounts approximate fair
value due to the relatively short maturity period. Based on interest rates available to the Partnership for debt with comparable maturities and other terms, the estimated fair value of the Partnerships secured notes payable as of June 30,
2005, and December 31, 2004 would be approximately $8,645,000 and $9,259,000, respectively.



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##### Table of Contents

RANCON REALTY FUND V

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



Deferred Costs



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



Revenues



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



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



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 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



One tenant represented 13% and 14% of rental income for the six months ended June 30, 2005
and 2004, respectively.



Reference to
2004 Audited Consolidated Financial Sstatements



These unaudited
consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements included in the December 31, 2004 audited consolidated financial statements on Form 10-K.



Note 3. RENTAL PROPERTIES



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



|                                  |  |      |         |   |      |   |         |  
|--------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                  |  | 2005 |         |   | 2004 |  
|Land                              |  | $    | 5,833   |   |      | $ | 6,246   |  
|Land improvements                 |  |      | 1,536   |   |      |   | 2,372   |  
|Buildings                         |  |      | 33,107  |   |      |   | 32,627  |  
|Buildings and tenant improvements |  |      | 8,269   |   |      |   | 8,321   |  
|                                  |  |      |         |   |      |   |         |  
|                                  |  |      | 48,745  |   |      |   | 49,566  |  
|Less: accumulated depreciation    |  |      | (14,444 | ) |      |   | (13,330 | )
|                                  |  |      |         |   |      |   |         |  
|Total rental properties, net      |  | $    | 34,301  |   |      | $ | 36,236  |  
|                                  |  |      |         |   |      |   |         |  



The Partnerships rental
properties include five office and five retail buildings, aggregating approximately 535,000 rentable square feet, at the Tri-City Corporate Center in San Bernardino, California.



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##### Table of Contents

RANCON REALTY FUND V

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



The
Partnership entered into a contract to sell the property leased to Chuck E. Cheese for a price of $2,157,800 in February 2005. On March 31 2005, the sale closed 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 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):



|                                                 |  |                            |     |                          |      |   |         |  |      |       |  |   |   
|------------------------------------------------ |  | -------------------------- | --- | ------------------------ | ---- | - | ------- |  | ---- | ----- |  | - | --
|                                                 |  | Three months endedJune 30, |     | Six months endedJune 30,
|                                                 |  | 2005(1)                    |     |                          | 2004 |   | 2005(1) |  | 2004
|Operating Revenue  rental income                |  | $                          |    |                          |      | $ | 36      |  | $    | 50    |  | $ | 83
|                                                 |  |                            |     |                          |      |   |         |  |      |       |  |   |   
|Property operating                               |  |                            | 13  |                          |      |   | 13      |  |      | 30    |  |   | 27
|Depreciation and amortization                    |  |                            |    |                          |      |   | 9       |  |      | 3     |  |   | 18
|                                                 |  |                            |     |                          |      |   |         |  |      |       |  |   |   
|Total operating expenses                         |  |                            | 13  |                          |      |   | 22      |  |      | 33    |  |   | 45
|                                                 |  |                            |     |                          |      |   |         |  |      |       |  |   |   
|Income (loss) before gain on sale of real estate |  |                            | 13  |                          |      |   | 14      |  |      | 17    |  |   | 38
|Gain on sale of real estate                      |  |                            |    |                          |      |   |        |  |      | 1,202 |  |   |  
|                                                 |  |                            |     |                          |      |   |         |  |      |       |  |   |   
|Income (loss) from discontinued operations       |  | $                          | (13 | )                        |      | $ | 14      |  | $    | 1,219 |  | $ | 38
|                                                 |  |                            |     |                          |      |   |         |  |      |       |  |   |   

---

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



Note 4. CONSTRUCTION IN PROGRESS AND LAND HELD FOR DEVELOPMENT



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



|                                                                                                                        |  |      |        |      |   |      
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | -----
|                                                                                                                        |  | 2005 |        | 2004
|Tri-City (approximately 6 acres of land with a cost basis of $841 at June 30, 2005 and December 31, 2004, respectively) |  | $    | 12,251 |      | $ | 4,099
|                                                                                                                        |  |      |        |      |   |      



In January 2004, the Partnership
entered into a contract with a construction company for $5,900,000 to build a two-story office building at Three Carnegie with a total of 86,200 gross square feet. The core and shell of the property was substantially completed in June 2005. As of
June 30, 2005, construction, tenant improvements and other costs of $7,580,000 had been incurred.



In January 2005, the Partnership entered into another contract with a construction company for $10,300,000 to build a three-story office building at Brier Corporate Center with a total of 109,000 gross square feet.
The core and shell of the project is estimated to be substantially completed in December 2005. As of June 30, 2005, construction and other costs of $4,219,000 had been incurred.



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



|                                                                                        |  |      |     |      |   |    
|--------------------------------------------------------------------------------------- |  | ---- | --- | ---- | - | ---
|                                                                                        |  | 2005 |     | 2004
|Tri-City (approximately 4.5 acres at June 30, 2005 and December 31, 2004, respectively) |  | $    | 884 |      | $ | 870
|                                                                                        |  |      |     |      |   |    



Currently one acre of land is
undeveloped, and 3.5 acres of land are used as parking lots.



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##### Table of Contents

RANCON REALTY FUND V

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



Note 5.
NOTES PAYABLE AND LINES OF CREDIT



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



|                                                                                                                                                                                                                                                                                                                                                                                       |  |      |        |      |   |       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                                                                                                                                                                                                                                                                                                                                                                       |  | 2005 |        | 2004
|Note payable-collateralized by first deeds of trust on Lakeside Tower, One Parkside and Two Carnegie Plaza, a 10-year 9.39% fixed rate loan
with a 25-year amortization, monthly principal and interest payments of $83, and a maturity date of June 1, 2006.                                                                                                                          |  | $    | 8,246  |      | $ | 8,355 
|                                                                                                                                                                                                                                                                                                                                                                                       |  |     
|Note payable (construction loan)-collateralized by Brier Corporate Center, with a variable interest rate of 30-day LIBOR plus 2% (5.13% as of
June 30, 2005), monthly interest-only payments, and a maturity date of April 27, 2007.                                                                                                                                                   |  |      | 148    |      |   |      
|                                                                                                                                                                                                                                                                                                                                                                                       |  |     
|Note payable-unsecured, with a variable interest rate of Prime Rate (6% as of June 30, 2005), monthly interest-only payments, and
a maturity date of August 22, 2005.                                                                                                                                                                                                                |  |      | 1,500  |      |   |      
|                                                                                                                                                                                                                                                                                                                                                                                       |  |     
|Line of credit-collateralized by first deeds of trust on One Carnegie Plaza and Carnegie Business Center II, with a total availability of $6
million, a variable interest rate of Prime Rate plus 0.75% with the floor set at 5.5% (6.75% and 6% as of June 30, 2005 and December 31, 2004, respectively), monthly interest-only payments, and a maturity date of September 5,
2005. |  |      | 6,000  |      |   | 5,920 
|                                                                                                                                                                                                                                                                                                                                                                                       |  |     
|Line of credit-collateralized by first deed of trust on Two Parkside, with a total availability of $7.425 million, a variable interest rate of
Prime Rate (6% and 5.25% as of June 30, 2005 and December 31, 2004), monthly interest-only payments, and a maturity date of April 15, 2007.                                                                                           |  |      | 7,425  |      |   | 3,190 
|                                                                                                                                                                                                                                                                                                                                                                                       |  |      |        |      |   |       
|Total                                                                                                                                                                                                                                                                                                                                                                                  |  | $    | 23,319 |      | $ | 17,465
|                                                                                                                                                                                                                                                                                                                                                                                       |  |      |        |      |   |       



The note payable, collateralized by
Lakeside Tower, One Parkside and Two Carnegie Plaza, may be prepaid with a penalty based on a yield maintenance formula. There is no prepayment penalty if the note is repaid within six months of the maturity date of the note. The Partnership intends
to pay off this note with the proceeds from the pending refinance (as discussed below) when the prepayment penalty period ends on December 1, 2005. No assurance can be made that circumstances will not arise which could impact the close of the
pending refinance to repay this note at maturity.



In 2004, a line of credit,
collateralized by Two Parkside, was obtained to provide the funding for the construction costs at Three Carnegie. In 2005, a construction loan in the amount of $11,917,000, collateralized by Brier Corporate Center was obtained to provide funding for
the construction costs at Brier Corporate Center. The Partnership is required to pay a minimum equity contribution to the project in the amount of $4,800,000, prior to the first draw from the construction loan. The maturity date of the loan is April
27, 2007. As of June 30, 2005, $148,000 was drawn from the reserve fund to pay the loan fee for this construction loan.



The Partnership intends to refinance the above fixed-rate loan and the lines of credit. A new loan is assumable and expected to total $26.8 million, bears interest at a
fixed rate of 5.58% with a 10-year term and is collateralized by a total of seven properties, of which four properties are from the existing fixed-rate loan and lines of credit. The new loan consists of two release parcels. The first release parcel
would be collateralized by six properties with a loan amount of $14,532,200 and is estimated to close in the third quarter of 2005. The second release parcel would be collateralized by one property with a loan amount of $12,267,800 and is estimated
to close in December 2005, after the above note payable is paid off.



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



|      |  |   |       
|----- |  | - | ------
|2005  |  | $ | 7,614 
|2006  |  |   | 8,132 
|2007  |  |   | 7,573 
|      |  |   |       
|Total |  | $ | 23,319
|      |  |   |       





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##### Table of Contents

RANCON REALTY FUND V

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

June 30, 2005 and 2004

(Unaudited)



Note 6.
COMMITMENTS AND CONTINGENT LIABILITIES



Environmental Matters



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



General Uninsured Losses



The Partnership carries
property and liability insurance with respect to the properties. This coverage has policy specification and insured limits customarily carried for similar properties. However, certain types of losses (such as from earthquakes and floods) may be
either uninsurable or not economically insurable. Should the properties sustain damage as a result of an earthquake or flood, the Partnership may incur losses due to insurance deductibles, co-payments on insured losses or uninsured losses.
Additionally, the Partnership has elected to obtain insurance coverage for certified acts of terrorism as defined in the Terrorism Risk Insurance Act of 2002; however, our insurance policies may not provide coverage for other acts of
terrorism. Any losses from such other acts of terrorism might be uninsured. Should an uninsured loss occur, the Partnership could lose some or all of its capital investment, cash flow and anticipated profits related to the properties.



Other Matters



The Partnership is contingently liable for subordinated real estate commissions payable to
the General Partner in the amount of $102,000 at June 30, 2005 for sales that occurred 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 limited, the liability has not been recognized in the
accompanying consolidated financial statements; however, the amount will be recorded when and if it becomes payable.



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##### Table of Contents

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



Background



Rancon Realty Fund 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 February 1989. The general partners of the Partnership are Daniel L. Stephenson
(DLS) and Rancon Financial Corporation (RFC), hereinafter collectively referred to as the General Partner. RFC is wholly-owned by DLS. The Partnership has no employees.



In May 1996, the Partnership formed RRV 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 Partnership considers all assets owned by RRF V, Inc. and RRF V Tri-City to be owned by the Partnership.



Overview



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. Since the acquisition of the land, the Partnership
has constructed eleven projects at Tri-City consisting of five office buildings, one industrial building, and five retail buildings. One retail building was sold in 2005. The Partnerships properties are more fully described below. As of June
30, 2005, the Partnership owned ten rental properties, and approximately 10.5 acres of land in the Tri-City master-planned development.



Tri-City



In 1985, the Partnership acquired 76.21 acres of partially developed land in Tri-City for a total acquisition price of $14,118,000. Between 1984 and 1985, a total of
76.56 acres within Tri-City were acquired by Fund IV.



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



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



As of June 30, 2005, the Partnership has 441,000 square feet of office space with an average vacancy rate of 6%, 51,000 square feet of industrial space with an average vacancy rate of 16%, and 43,000 square feet of
retail space with no vacancy.



Tri-City
Properties



The Partnerships rental properties are as follows:



|                            |  |                                 |  |            
|--------------------------- |  | ------------------------------- |  | -----------
|Property                    |  | Type                            |  | Square Feet
|One Carnegie Plaza          |  | Two, two story office buildings |  | 107,278    
|Two Carnegie Plaza          |  | Two story office building       |  | 68,957     
|Carnegie Business Center II |  | Two industrial buildings        |  | 50,867     
|Lakeside Tower              |  | Six story office building       |  | 112,791    
|One Parkside                |  | Four story office building      |  | 70,068     
|Ballys Health Club         |  | Health club facility            |  | 25,000     
|Outback Steakhouse          |  | Restaurant                      |  | 6,500      
|Palm Court Retail #3        |  | Retail                          |  | 6,004      
|Two Parkside                |  | Three story office building     |  | 82,004     
|Pat & Oscars                |  | Restaurant                      |  | 5,100      



These ten properties total
approximately 535,000 rentable square feet and offer a wide range of office, retail and industrial product to the market.



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##### Table of Contents

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



|                            |  |      |   |  |      |  
|--------------------------- |  | ---- | - |  | ---- | -
|                            |  | 2005 |   |  | 2004 |  
|One Carnegie Plaza          |  | 99   | % |  | 86   | %
|Two Carnegie Plaza          |  | 98   | % |  | 100  | %
|Carnegie Business Center II |  | 84   | % |  | 87   | %
|Lakeside Tower              |  | 98   | % |  | 93   | %
|One Parkside                |  | 70   | % |  | 100  | %
|Ballys Health Club         |  | 100  | % |  | 100  | %
|Outback Steakhouse          |  | 100  | % |  | 100  | %
|Palm Court Retail #3        |  | 100  | % |  | 100  | %
|Two Parkside                |  | 100  | % |  | 100  | %
|Pat & Oscars                |  | 100  | % |  | 100  | %
|                            |  |     
|Weighted average occupancy  |  | 94   | % |  | 95   | %



As of June 30, 2005, tenants at
Tri-City occupying substantial portions of leased rental space included: (i) Computer Associates with a lease through November 2005; (ii) Paychex with a lease through July 2006; (iii) Chicago Title with leases through May 2007 and February 2009;
(iv) First Franklin Financial with a lease through February 2009; (v) Gresham, Savage, Nolan & Tilden with a lease through March 2009; (vi) Arrowhead Central Credit Union with two leases through September 2006 and September 2010; (vii) Holiday
Spa Health Club with a lease through December 2010; and (viii) Lewis, Damato, Brisbois and Bisgaard, LLP with a lease through December 2012. These eight tenants, in the aggregate, occupy approximately 209,000 square feet of the 535,000 total
rentable square feet at Tri-City and account for approximately 45% of the rental income generated at Tri-City for the Partnership as of June 30, 2005.



Computer Associates plans to relocate to another building within the Tri-City when their lease expires in November 2005.



During 2004, four new tenants leased the previously vacant office spaces at One Carnegie
Plaza. In February 2005, a tenant that occupied 21,000 square feet office space at One Parkside relocated to Vanderbilt Plaza, a new building developed by Fund IV. A new lease with approximately 7,000 square feet within this vacant space at One
Parkside was signed in May 2005. The new tenant has taken occupancy to perform tenant improvements at the space and rent commencement will begin on October 1, 2005.. Management is actively marketing the available office spaces to minimize the
extended vacancy period.



The Partnerships rental properties are owned by
the Partnership, subject to the following notes and three lines of credit:



|                                                    |  |                    |           |          |                |               |                             |                |   |               |  |        
|--------------------------------------------------- |  | ------------------ | --------- | -------- | -------------- | ------------- | --------------------------- | -------------- | - | ------------- |  | -------
|Security                                            |  | Outstandingbalance |           | Mortgage |                | Interest rate |                             | Monthlypayment |   | Maturitydate 
|Lakeside Tower, One Parkside and Two Carnegie Plaza |  | $                  | 8,246,000 |          | Note           |               | 9.39%                       |                | $ | 83,142        |  | 6/1/06 
|                                                    |  |                    |           |          |               
|Brier Corporate Center                              |  | $                  | 148,000   |          | Note           |               | LIBOR plus 2%(5.13%)        |                |   | Interest-only |  | 4/27/07
|                                                    |  |                    |           |          |               
|One Carnegie Plaza & Carnegie Business Center II    |  | $                  | 6,000,000 |          | Line of credit |               | Prime rate plus .75%(6.75%) |                |   | Interest-only |  | 9/5/05 
|                                                    |  |                    |           |          |               
|Two Parkside                                        |  | $                  | 7,425,000 |          | Line of credit |               | Prime rate (6%)             |                |   | Interest-only |  | 4/15/07
|                                                    |  |                    |           |          |               
|Unsecured note                                      |  | $                  | 1,500,000 |          | Note           |               | Prime rate (6%)             |                |   | Interest-only |  | 8/22/05



The note payable, collateralized by
Lakeside Tower, One Parkside and Two Carnegie Plaza, may be prepaid with a penalty based on a yield maintenance formula. There is no prepayment penalty if the note is repaid within six months of the maturity date of the note. The Partnership intends
to pay off this note with the proceeds from the pending refinance (as discussed below) when the prepayment penalty period ends on December 1, 2005. No assurance can be made that circumstances will not arise which could impact the close of the
pending refinance to repay this note at maturity.



In 2004, a line of credit,
collateralized by Two Parkside, was obtained to provide the funding for the construction costs at Three Carnegie. In 2005, a construction loan in the amount of $11,917,000, collateralized by Brier Corporate Center was obtained to provide funding for
the construction costs at Brier Corporate Center. The Partnership is required to pay a minimum equity contribution to the project in the amount of $4,800,000, prior to the first draw from the construction loan. The maturity date of the loan is April
27, 2007. As of June 30, 2005, $148,000 was drawn from the reserve fund to pay the loan fee for this construction loan.



15



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The Partnership intends to refinance the above fixed-rate loan and the lines of credit. A new loan is assumable and
expected to total $26.8 million, bears interest at a fixed rate of 5.58% with a 10-year term and is collateralized by a total of seven properties, of which four properties are from the existing fixed-rate loan and lines of credit. The new loan
consists of two release parcels. The first release parcel would be collateralized by six properties with a loan amount of $14,532,200 and is estimated to close in the third quarter of 2005. The second release parcel would be collateralized by one
property with a loan amount of $12,267,800 and is estimated to close in December 2005, after the above note payable is paid off.



Tri-City Land



As of June 30, 2005, the Partnership owned approximately 10.5 acres of land, 6 acres are under construction and 3.5 acres are currently used as parking lots. The
remaining one acre is undeveloped. The Partnerships plan is to develop the remaining acre of land to generate more operating income for the Partnership in this fast-growing market.



In January 2004, the Partnership entered into a contract with a construction company for $5,900,000 to build a two-story office building at
Three Carnegie with a total of 86,200 gross square feet. The core and shell of the property was substantially completed in June 2005. As of June 30, 2005, construction, tenant improvement and other costs of $7,580,000 had been incurred.



In January 2005, the Partnership entered into another contract with a construction company
for $10,300,000 to build a three-story office building at Brier Corporate Center with a total of 109,000 gross square feet. The core and shell of the project is estimated to be substantially completed in December 2005. As of June 30, 2005,
construction and other costs of $4,219,000 had been incurred. A new lease with a ten-year term for office space of approximately 85,000 square feet at Brier Corporate Center was signed in the first quarter of 2005. The new tenant should occupy the
new building in January 2006.

|
|



Results of Operations



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



Revenue



Rental income increased $124,000 for the three months
ended June 30, 2005, compared to the three months ended June 30, 2004, primarily due to increases in occupancy at One Carnegie Plaza and Two Parkside (as discussed above), offset by partial decrease in occupancy at One Parkside (as discussed above).



Expenses



Operating expenses were relatively flat for the three months ended June 30, 2005, compared to the three months ended June 30, 2004,
primarily due to a reduction in property management fees from 5% to 3%, offset by an increase in property taxes expenses resulting from the reassessment value of Carnegie Business Center I.



Depreciation and amortization increased $76,000, or 12%, for the three months ended June 30,
2005, compared to the three months ended June 30, 2004, primarily due to depreciation of one new building, land improvements and tenant improvements placed into service in the second quarter of 2005.



Expenses associated with undeveloped land decreased $6,000, or 10%, for the three months
ended June 30, 2005, compared to the three months ended June 30, 2004, primarily due to capitalization of property taxes and insurance at three Carnegie and Brier Corporation Center during the construction period.



General and administrative expenses decreased $63,000, or 20%, for the three months ended
June 30, 2005, compared to the three months ended June 30, 2004, primarily due to a reduction in asset and Partnership management fees in 2005.



Non-operating income / expenses



Interest and other income increased $7,000 for the three months ended June 30, 2005, compared to the three months ended June 30, 2004, primarily due to an increase in
invested cash balance resulting from the sale of the property leased to Chuck E. Cheese in March 2005.



Interest expense decreased $23,000, or 8%, during the three months ended June 30, 2005, compared to the three months ended June 30, 2004, primarily due to a decrease in capitalization of interest to Three Carnegie and
Brier Corporate Center during the construction period, offset by an increase in interest rates from the lines of credit.



Loss from discontinued operations during the three months ended June 30, 2005, reflected the reimbursement to Chuck E. Cheese for the 2004 operating expenses which was
the difference of actual expenses and estimates. Income from discontinued operations during the three months ended June 30, 2004, reflected the net operating income from the sold property (See Note 3 of the financial statements).



16



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



Revenue



Rental income increased $150,000 for the six months ended June 30, 2005, compared to the six months ended June 30, 2004, primarily due to
increases in occupancy at One Carnegie Plaza and Two Parkside (as discussed above), offset by a decrease in occupancy at One Parkside (as discussed above).



Expenses



Operating expenses were relatively flat for the six months ended June 30, 2005, compared to the six months ended June 30, 2004. This change primarily due to a reduction in the property management fees from 5% to 3%,
offset by an increase in property taxes expenses resulting from the reassessment of the value of Carnegie Business Center I.



Depreciation and amortization increased $133,000, or 11%, for the six months ended June 30, 2005, compared to the six months ended June 30, 2004, primarily due to
depreciation of one new building, land improvements and tenant improvements placed into service in the second quarter of 2004.



Expenses associated with undeveloped land decreased $10,000, or 9%, for the six months ended June 30, 2005, compared to the six months ended June 30, 2004, primarily due
to capitalization of property taxes and insurance at three Carnegie and Brier Corporate Center during the construction period.



General and administrative expenses decreased $150,000, or 24%, for the six months ended June 30, 2005, compared to the six months ended June 30, 2004, primarily due to a
reduction in asset and Partnership management fees in 2005.



Non-operating
income / expenses



Interest expense increased $17,000, or 3%, during the
six months ended June 30, 2005, compared to the six months ended June 30, 2004, primarily due to an increase in interest rates from the lines of credit, offset by capitalization of interest at Three Carnegie and Brier Corporate Center during
construction.



Income from discontinued operations during the six months ended
June 30, 2005, resulted from the sale of the property leased to Chuck E. Cheese. Income from discontinued operations during the six months ended June 30, 2004, reflected the net operating income from the sold property (See Note 3 of the financial
statements).



Liquidity and Capital
Resources



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



The Partnerships liabilities at June 30, 2005, included a note payable, two lines of credit, a construction loan and an unsecured note. The note payable and the two lines of credit totaled approximately
$21,671,000, collateralized by properties with an aggregate net book value of approximately $29,706,000. The note payable requires monthly principal and interest payments of $83,000, bears a fixed interest rate of 9.39%, and has a maturity date of
June 1, 2006. One line of credit with a total availability of $6,000,000 requires monthly interest-only payments, bears an interest rate of prime plus 0.75% with a floor set at 5.5% (6.75 % and 6% as of June 30, 2005 and December 31, 2004,
respectively), and has a maturity date of September 5, 2005. Another line of credit with a total availability of $7,425,000 requires monthly interest-only payments, bears an interest rate of prime rate (6% and 5.25% as of June 30, 2005 and December
31, 2004, respectively), and has a maturity date of April 15, 2007. The construction loan requires monthly interest-only payments (currently the interest payments are drawn from the interest reserve), with a variable interest rate of LIBOR
Rate plus 2% (5.13% as of June 30, 2005) collateralized by Brier Corporate Center, and has a maturity date of April 27, 2007 (as discussed in Note 5).



The Partnership intends to refinance the above fixed-rate loan and the lines of credit. A new loan is assumable and expected to total $26.8 million, bears interest at a
fixed rate of 5.58% with a 10-year term and is collateralized by a total of seven properties, of which four properties are from the existing fixed-rate loan and lines of credit. The new loan consists of two release parcels. The first release parcel
would be collateralized by six properties with a loan amount of $14,532,200 and is estimated to close in the third quarter of 2005. The second release parcel would be collateralized by one property with a loan amount of $12,267,800 and is estimated
to close in December 2005, after the above note payable is paid off.



The
Partnership entered into a contract to sell the property leased to Chuck E. Cheese for a price of $2,157,800 in February 2005. On March 31, 2005, the sale closed 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.



The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the amount of $102,000 at June 30, 2005 for sales that occurred in previous years. The subordinated
real estate commissions are payable only after



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the Limited Partners have received distributions equal to their original invested capital plus a cumulative, non-compounded return of 12 percent per annum on
their adjusted invested capital. Since the circumstances under which these commissions would be payable are limited, the liability has not been recognized in the accompanying consolidated financial statements; however, the amount will be recorded
when and if it becomes payable.



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



Management expects that the Partnerships cash balance at June 30, 2005, 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 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.



Contractual Obligations



As of June 30, 2005, we had
contractual obligations as follows (in thousands):



|                                    |  |                 |        |              |   |              |  |                  |   |       |   |   |  |   |       
|----------------------------------- |  | --------------- | ------ | ------------ | - | ------------ |  | ---------------- | - | ----- | - | - |  | - | ------
|                                    |  | Less than 1year |        | 1 to 3 years |   | 3 to 5 years |  | More than5 years |   | Total
|Secured mortgage loan               |  | $               | 114    |              | $ | 8,132        |  | $                |  |       | $ |  |  | $ | 8,246 
|Secured bank lines of credit        |  |                 | 6,000  |              |   | 7,573        |  |                  |  |       |   |  |  |   | 13,573
|Unsecured note                      |  |                 | 1,500  |              |   |              |  |                  |  |       |   |  |  |   | 1,500 
|Interest on indebtedness(1)         |  |                 | 714    |              |   | 1,037        |  |                  |  |       |   |  |  |   | 1,751 
|Construction contract commitment(2) |  |                 | 6,962  |              |   |             |  |                  |  |       |   |  |  |   | 6,962 
|                                    |  |                 |        |              |   |              |  |                  |   |       |   |   |  |   |       
|Total                               |  | $               | 15,290 |              | $ | 16,742       |  | $                |  |       | $ |  |  | $ | 32,032
|                                    |  |                 |        |              |   |              |  |                  |   |       |   |   |  |   |       

---

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

|(2) | In January 2004, the Partnership entered into a contract with a construction company for $5,900,000 to build a two-story office building with a total of 86,200 gross square feet,
known as Three Carnegie. The core and shell of the project was substantially completed in June 2005. As of June 30, 2005, the contract costs of $5,900,000 had been incurred. In January 2005, the Partnership entered into another contract with the
construction company for $10,300,000 to build a three-story office building with a total of 109,000 gross square feet, known as Brier Corporate Center. The core and shell of the project is estimated to be substantially completed in December 2005. As
of June 30, 2005, the contract costs of $3,338,000 had been incurred.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Partnership knows of no other 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 and
unsecured debt that would constrain its ability to obtain additional capital.



Operating Activities



For the six months ended June 30, 2005,
the Partnerships cash provided by operating activities totaled $1,344,000.



The $28,000 increase in accounts receivable at June 30, 2005, compared to December 31, 2004, was primarily due to the tenant rents receivable.



The $561,000 increase in deferred costs at June 30, 2005, compared to December 31, 2004, was primarily due to lease commissions paid for Three Carnegie and Brier
Corporate Center.



The $40,000 increase in prepaid expenses and other assets at
June 30, 2005, compared to December 31, 2004, was primarily due to an increase in straight line rent receivable, offset by a decrease in prepaid insurance and impound account related to the note payable.



The $111,000 decrease in accounts payable and other liabilities at June 30, 2005, compared to
December 31, 2004, was primarily due to accruals of property operating expenses, investor service expenses and redemptions, offset by payment of distribution to General Partner, which was accrued in 2004.



The $16,000 decrease in prepaid rent at June 30, 2005, compared to December 31, 2004, was due
to July 2005 rents received in June 2005, offset by January 2005 rents received in December 2004.



Investing Activities



During the six
months ended June 30, 2005, the Partnerships cash used for investing activities totaled $5,463,000, which consisted of $2,032,000 net proceeds from the sale of the property leased to Chuck E. Cheese, and the partial collection of $14,000 from
a note receivable related to tenant improvements, offset by $161,000 used for building and tenant improvements, and $7,348,000 used for construction costs at Three Carnegie and Brier Corporate Center.

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Financing Activities



During the six months ended June 30, 2005, the Partnerships cash provided by financing activities totaled $3,358,000, which consisted of $5,962,000 of draws on
lines of credit (as discussed above), offset by $108,000 in principal payments on the note payable, $324,000 in payments of loan fees for the construction loan and lines of credit, $827,000 in payment of a refundable fee for the anticipated
refinance (as discussed in Note 5 of the financial statements), $444,000 paid to redeem limited partnership Units, and $901,000 in payment of distributions to limited partners.



Critical Accounting Policies



Revenue recognized on a straight-line basis



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



Carrying value of rental properties and land held for development



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



Land held for development is stated at cost unless events or circumstances
indicate that cost cannot be recovered, in which case, the carrying value is reduced to estimated fair value. Estimated fair value: (i) is based on the Partnerships plans for the development of each property; (ii) is computed using estimated
sales price, based upon market values for comparable properties; and (iii) considers the cost to complete and the estimated fair value of the completed project. The fulfillment of the Partnerships plans related to each of its properties is
dependent upon, among other things, the presence of economic conditions which will enable the Partnership to either hold the properties for eventual sale or obtain financing to further develop the properties.



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



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



Forward Looking Statements; Factors That May Affect Operating Results



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



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



| |  | The Partnerships intent to refinance existing debt and pay off a note on December 1, 2005 when the pre-payment periods expires;
|- |  | --------------------------------------------------------------------------------------------------------------------------------



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



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



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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:



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



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



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



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



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



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



| |  | continuing threat of terrorist attacks.
|- |  | ---------------------------------------



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



Risk Factors



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



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



Tenants Defaults Could Adversely Affect Our
Operations



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



Potential Liability Due to
Environmental Matters



Under federal, state and local laws relating to
protection of the environment, or Environmental Laws, a current or previous owner or operator of real estate may be liable for contamination resulting from the presence or discharge of petroleum products or other hazardous or toxic substances on the
property. These owners may be required to investigate and clean-up the contamination on the property as well as the contamination which has migrated from the property. Environmental Laws typically impose liability



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



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



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



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



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



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



Environmental Liabilities May Adversely Affect Operating Costs and Ability to Borrow



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



General Risks of Ownership of Real Estate



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



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



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



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



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



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



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



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



Uninsured Losses May Adversely Affect Operations



We, or in certain instances, tenants of our properties, carry property
and liability insurance with respect to the properties. This coverage has policy 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. Further, certain of the properties are located in areas that are subject to earthquake activity and floods. Should a property sustain damage as a result of an earthquake or flood, we may incur losses due to
insurance deductibles, co-payments on insured losses or uninsured losses. Additionally, we have elected to obtain insurance coverage for certified acts of terrorism as defined in the Terrorism Risk Insurance Act of 2002; however, our
insurance policies may not provide coverage for other acts of terrorism. Any losses from such other acts of terrorism might be uninsured. Should an uninsured loss occur, we could lose some or all of our capital investment, cash flow and anticipated
profits related to one or more properties. This could have an adverse effect on our results of operations and financial condition.





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



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



Potential Liability Under the Americans With Disabilities Act



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



Risks of Litigation



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



Item 3. Qualitative and Quantitative Information About Market Risk



Interest Rates



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



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



|                                                           |  |                        |       |   |      |   |       |      |  |   |       |   |  |            |        |   |  |   |       
|---------------------------------------------------------- |  | ---------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---------- | ------ | - |  | - | ------
|                                                           |  | Expected Maturity Date |       |   |      |   |       |     
|                                                           |  | 2005                   |       |   | 2006 |   |       | 2007 |  |   | Total |   |  | Fair Value
|                                                           |  | (in thousands)         |       |   |      |   |       |     
|Secured Fixed Rate Debt                                    |  | $                      | 114   |   |      | $ | 8,132 |      |  | $ |      |   |  | $          | 8,246  |   |  | $ | 8,645 
|Average interest rate                                      |  |                        | 9.39  | % |      |   | 9.39  | %    |  |   |      |   |  |            | 9.39   | % |  |   |       
|                                                           |  |                        |       |   |     
|Secured Variable Rate-line of credit and construction note |  | $                      | 6,000 |   |      | $ |      |      |  | $ | 7,573 |   |  | $          | 13,573 |   |  | $ | 13,573
|Average interest rate                                      |  |                        | 6.75  | % |      |   |      | %    |  |   | 6.01  | % |  |            | 6.38   | % |  |   |       
|                                                           |  |                        |       |   |     
|Unsecured Variable Rate-note                               |  | $                      | 1,500 |   |      | $ |      |      |  | $ |      |   |  | $          | 1,500  |   |  | $ | 1,500 
|Average interest rate                                      |  |                        | 6     | % |      |   |      | %    |  |   |      | % |  |            | 6      | % |  |   |       



A change of 1/8% in the index rate to
which the Partnerships variable rate debt is tied would change the annual interest the Partnership incurred by approximately $20,000, based upon the balances outstanding on variable rate instruments at June 30, 2005.



As of June 30, 2005, the Partnership had no investments in interest-bearing certificates of
deposit. The Partnership does not own any derivative instruments.



Item 4. Controls and procedures



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



22



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##### Table of Contents

|         |  |                                                                                                                                                                                                                                                                              
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Part II. |  | OTHER INFORMATION                                                                                                                                                                                                                                                            
|         | 
|Item 1.  |  | Legal Proceedings                                                                                                                                                                                                                                                            
|         | 
|         |  | Certain claims and lawsuits have arisen against the Partnership in its normal course of business. The Partnership believes that such claims and lawsuits will not have a material adverse
effect on the Partnerships financial position, cash flow or results of operations.
|         | 
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                                                                                                                  
|         | 
|         |  | None.                                                                                                                                                                                                                                                                        
|         | 
|Item 3.  |  | Defaults Upon Senior Securities                                                                                                                                                                                                                                              
|         | 
|         |  | None.                                                                                                                                                                                                                                                                        
|         | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                                                                                                                                                                                          
|         | 
|         |  | None.                                                                                                                                                                                                                                                                        
|         | 
|Item 5.  |  | Other information                                                                                                                                                                                                                                                            
|         | 
|         |  | None.                                                                                                                                                                                                                                                                        
|         | 
|Item 6.  |  | Exhibits                                                                                                                                                                                                                                                                     



|     |  |                                                                                                                               
|---- |  | ------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Section 302 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.
|     | 
|32.1 |  | Section 906 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.



23



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



24