UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the year ended December 31, 2008

OR

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

For the transition period from              to             

Commission file number: 0-14207

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

California	33-0016355
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

Partnership’s telephone number, including area code (650) 343-9300

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership Interest

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933, as amended.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act of 1934, as amended.    Yes  ¨    No  x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

Large Accelerated Filer  ¨            Accelerated Filer  ¨            Non-accelerated filer  ¨            Smaller reporting company  x

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

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

DOCUMENTS INCORPORATED BY REFERENCE:

INDEX

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

		Page No.
	PART I
Item 1.	Business	3-4
Item 1A.	Risk Factors	4-6
Item 1B.	Unresolved Staff Comments	6
Item 2.	Properties	6-8
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matters to a Vote of Security Holders	8
	PART II
Item 5.	Market for Partnership’s Common Equity, Related Stockholder Matters and Issuer of Equity Securities	9
Item 6.	Selected Financial Data	9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10-15
Item 7A.	Qualitative and Quantitative Disclosures about Market Risk	16
Item 8.	Financial Statements and Supplementary Data	16
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	16
Item 9A.	Controls and Procedures	16
Item 9A(T).	Controls and Procedures	16
Item 9B.	Other information	16
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	17
Item 11.	Executive Compensation	17
Item 12.	Security Ownership of Certain Beneficial Owners and Management	17-18
Item 13.	Certain Relationships and Related Transactions and Director Independence	18
Item 14.	Principal Accountant Fees and Services	18
	PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	19-20
	SIGNATURES	21

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Part I

Item 1. Business

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

The Partnership’s initial acquisition of property during 1984 and 1985 consisted of approximately 76.56 acres of partially developed and unimproved land located in San Bernardino, California. The property is part of a master-planned development of approximately 153 acres known as Tri-City (“Tri-City”) and is zoned for mixed commercial, office, hotel, transportation-related, and light industrial uses. Other than two properties which were sold in 2005 to Office Max and Chuck E Cheese by the Partnership and Rancon Realty Fund V (“Fund V”), a limited partnership sponsored by the General Partner of the Partnership, respectively, all of the parcels thereof are separately owned by the Partnership and Fund V. As of December 31, 2008, the Partnership has eleven properties consisting of four office buildings and seven retail buildings. The Partnership’s properties are more fully described in Item 2.

In April 1996, the Partnership formed RRF IV Tri-City Limited Partnership, a Delaware limited partnership (“RRF IV Tri-City”). The limited partner of RRF IV Tri-City was the Partnership and the General Partner was RRF IV, Inc. (“RRF IV, Inc.”), a corporation wholly owned by the Partnership. Since the Partnership owned 100% of RRF IV, Inc. and indirectly owned 100% of RRF IV Tri-City, the Partnership considered all assets owned by RRF IV, Inc. and RRF IV Tri-City to be owned by the Partnership. In December 2008, both RRF IV, Inc and RRF IV Tri-City were dissolved.

In November 2005, in connection with a refinancing, the Partnership formed Rancon Realty Fund IV Subsidiary LLC, a Delaware limited liability company (“RRF IV SUB”), which is wholly owned by the Partnership. The new entity was formed to satisfy certain lender requirements for a note obtained in the fourth quarter of 2005. The note is collateralized by eight properties (as discussed in Item 2) which have been contributed to RRF IV SUB by the Partnership.

In 2008, no units of limited partnership interest (“Units”) were redeemed. In 2007 and 2006, a total of 21 and 1,052 Units were redeemed at average prices of $803 and $670, respectively. As of December 31, 2008, there were 65,819 Units outstanding.

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

Competition Within The Market

The Partnership competes in the leasing of its properties primarily with other available properties in the local real estate market. Other than Fund V, management is not aware of any specific competitors of the Partnership’s properties doing business on a significant scale in the local market. Management believes that characteristics influencing the competitiveness of a real estate project include the geographic location of the property, the professionalism of the property manager, the maintenance and appearance of the property and rental rates, in addition to external factors such as general economic circumstances, trends, and the existence of new competing properties in the vicinity. Additional competitive factors with respect to commercial and industrial properties include the ease of access to the property, the adequacy of related facilities, such as parking, and the ability to provide rent concessions and tenant improvements commensurate with local market conditions. Although management believes the Partnership’s properties are competitive with comparable properties as to those factors within the Partnership’s control, over-building and other external factors could adversely affect the ability of the Partnership to attract and retain tenants. The marketability of the properties may also be affected (either positively or negatively) by these factors as well as by changes in general or local economic conditions, including prevailing interest rates and the availability of financing. Depending on market and economic conditions, the Partnership may be required to retain ownership of its properties for periods longer than anticipated, or may need to sell earlier than anticipated or refinance a property, at a time or under terms and conditions that are less advantageous than would be the case if unfavorable economic or market conditions did not exist.

Working Capital

The Partnership’s practice is to maintain cash reserves for normal repairs, replacements, working capital and other contingencies.

Other Factors

Approximately 14.7 acres of the Tri-City land owned by the Partnership was part of a 27-acre landfill operated by the City of San Bernardino (“the City”) from approximately 1950 to 1960. This landfill incorporates two land parcels and part of a third parcel. In 1996, the Santa Ana Regional Water Quality Control Board (“SARWQCB”), with regulatory jurisdiction over the closure and monitoring of landfills, determined that the City was primarily responsible for the landfill. Therefore, the City and the Partnership entered into a Limited Access Easement Agreement, giving the City access to the site for development, implementation and financial responsibility for a plan for the remediation of the landfill. It was determined that the City was to improve the landfill cover system

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(The Waterman Landfill Cover Improvement Plans, April 2002), perform groundwater monitoring and install a permanent gas extraction system (Landfill Gas Collection System). Under the Limited Access Easement Agreement with the Partnership, methane monitoring is handled directly by the City. The City’s installation of the cover improvement system was completed in the first quarter of 2007 along with the gas extraction system. The system is now operational and working properly to eliminate methane from the landfill. All controlled wells are in compliance with County standards. Presently, the Partnership does not have any plans to develop or sell this site. No assurance can be made that circumstances will not arise which could impact the Partnership’s responsibility related to the land.

Item 1A. Risk Factors

Risks of the Current Economic Environment

Financial markets have recently experienced unusual volatility and uncertainty. Liquidity has tightened in all financial markets, including the debt and equity markets. The Partnership’s ability to fund normal recurring expenses and capital expenditures as well as its ability to repay or refinance debt maturities could be adversely affected by an inability to secure financing at reasonable terms, if at all. If economic conditions persist or deteriorate, the Partnership may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents. These conditions could negatively affect the Partnership’s future net income and cash flows and could adversely affect its ability to fund distributions, debt service payments and tenant improvements.

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

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

• any environmental assessments of our properties may not have revealed all potential environmental liabilities,

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

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

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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.

We are not aware of any current liabilities related to environmental matters that are material to us. However, the foregoing risk factor is provided because such risks are inherent to real estate ownership.

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;

• 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 policy insuring the properties. This coverage has policy specifications and insured limits customarily carried for similar properties. However, certain types of losses (such as from earthquakes and floods) may be either uninsurable or not economically insurable. Further, certain 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, as amended and reauthorized to date; however, our policies of insurance may not provide coverage for other acts of terrorism. Any losses from such other acts of terrorism might be uninsured. Should an uninsured loss occur, we could lose some or all of our capital investment, cash flow and anticipated profits related to one or more properties. This could have an adverse effect on our results of operations and financial condition.

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.

5

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 1B. Unresolved Staff Comments

None.

Item 2. Properties

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

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

The Inland Empire is generally broken down into two major markets, Inland Empire East and Inland Empire West. Tri-City is located within the Inland Empire East market, which consists of approximately 14 million square feet of office space. According to a fourth quarter 2008 market view report from an independent broker the overall vacancy rate was 21% within the Inland Empire market as of December 31, 2008.

As of December 31, 2008, the Partnership owned eleven rental properties, 1.6 acres of land under construction, and approximately 14.7 acres of unimproved land.

Properties

The Partnership’s improved properties in Tri-City are as follows:

Property	Type	Square Footage
One Vanderbilt	Four story office building	73,729
Carnegie Business Center I	Two office buildings	62,540
Service Retail Center	Two retail buildings	20,780
Promotional Retail Center	Four strip center retail buildings	66,244
Northcourt Plaza (formerly known as Inland Regional Center (“IRC”))	Two story office building	81,079
TGI Friday’s	Restaurant	9,956
Circuit City	Retail building	39,123
Mimi’s Café	Restaurant	6,455
Palm Court Retail #1	Retail building	5,022
Palm Court Retail #2	Retail building	7,433
Vanderbilt Plaza	Four story office building	114,291
		486,652

The four office properties totaling approximately 332,000 square feet are 91% occupied, and the seven retail properties totaling approximately 155,000 square feet are 83% occupied as of December 31, 2008.

As of December 31, 2008, there were seven tenants occupying substantial portions of leased rental space. These seven tenants, in the aggregate, occupied approximately 304,000 square feet of the 487,000 total rentable square feet at Tri-City and accounted for approximately 67% of the rental income of the Partnership in 2008.

One of those tenants, Circuit City, occupying 100% of the Partnership’s 39,123 square foot retail building filed for bankruptcy in November 2008. Circuit City’s annual rent paid to the Partnership was $633,000, or 7.46% of the Partnership’s total rental income. As of December 31, 2008, the Partnership had reserved for all doubtful collections of accounts receivable due from Circuit City. Subsequent to December 31, 2008, Circuit City notified the Partnership that in conjunction with its bankruptcy proceedings, it would vacate the Partnership’s building in March 2009.

6

Occupancy rates for the Partnership’s properties for each of the five years ended December 31, 2008 were as follows:

	2008		2007		2006		2005		2004
One Vanderbilt	74	%	95	%	100	%	97	%	100	%
Carnegie Business Center I	100	%	100	%	100	%	89	%	100	%
Service Retail Center	89	%	89	%	95	%	100	%	94	%
Promotional Retail Center	63	%	65	%	100	%	100	%	100	%
Northcourt Plaza (formerly known as IRC)	100	%	100	%	100	%	100	%	100	%
TGI Friday’s	100	%	100	%	100	%	100	%	100	%
Circuit City	100	%	100	%	100	%	100	%	100	%
Mimi’s Café	100	%	100	%	100	%	100	%	100	%
Palm Court Retail #1	100	%	100	%	100	%	100	%	100	%
Palm Court Retail #2	100	%	100	%	100	%	100	%	100	%
Vanderbilt Plaza (commenced operations in February 2005)	90	%	89	%	79	%	66	%	N/A
Weighted average occupancy	88	%	91	%	95	%	90	%	99	%

The annual effective rents per square foot for each of the five years ended December 31, 2008 were as follows:

	2008		2007		2006		2005		2004
One Vanderbilt	$	22.32	$	21.34	$	21.99	$	21.33	$	20.71
Carnegie Business Center I	$	17.44	$	16.72	$	16.07	$	13.54	$	12.34
Service Retail Center	$	21.13	$	20.31	$	19.49	$	18.59	$	17.79
Promotional Retail Center	$	13.39	$	13.71	$	12.39	$	12.26	$	11.67
Northcourt Plaza (formerly IRC)	$	17.19	$	17.19	$	17.19	$	16.22	$	16.22
TGI Friday’s	$	19.17	$	20.34	$	20.34	$	19.18	$	19.18
Circuit City	$	16.19	$	14.72	$	14.72	$	14.72	$	14.81
Mimi’s Café	$	14.81	$	14.81	$	14.81	$	14.81	$	14.81
Palm Court Retail #1	$	25.50	$	25.23	$	24.96	$	23.60	$	22.35
Palm Court Retail #2	$	22.38	$	27.81	$	27.00	$	24.99	$	24.26
Vanderbilt Plaza (commenced operations February 2005)	$	23.89	$	23.43	$	22.72	$	20.42		N/A

Annual effective rent is calculated by dividing the aggregate of annualized December monthly rental income by the total square feet occupied at the property.

The Partnership’s properties are owned by the Partnership subject to the following first deeds of trust as of December 31, 2008:

Collateral	Eight properties (discussed below)			Carnegie Business Center and Vanderbilt Plaza
Form of debt		Note payable			Line of credit
Availability		—		$	10,000,000
Outstanding balance	$	23,063,000		$	5,579,000
Interest Rate		5.46	%		30-day LIBOR plus 275 bps (3.95	%)
Monthly payment	$	136,000			Interest only
Maturity date		1/1/16			12/19/09

The note payable is collateralized by Circuit City, Mimi’s Cafe, Palm Court Retail #1 and #2, Promotional Retail Center, Service Retail Center, TGI Friday’s and One Vanderbilt. This note provides for a one-time loan assumption and release provisions for individual assets.

The line of credit was obtained in the fourth quarter of 2008 to replace a prior line of credit with an outstanding balance of $2,600,000 at December 31, 2007. The prior line of credit was collateralized by the Inland Regional Center, had a maturity date of April 15, 2009 and bore interest at the Prime rate (7.25% at December 31, 2007). The balance was paid off with the proceeds from an initial draw on the new 2008 line of credit.

There is no debt collateralized by Northcourt Plaza as of December 31, 2008.

Land

As of December 31, 2008, the Partnership owned approximately 1.6 acres of land under construction, and approximately 14.7 acres of unimproved land.

7

During the third quarter of 2006, the Partnership began developing North River Place, a three-story multi-tenant 71,000 square-foot office building on an approximate 1.6 acre land parcel, plus completion of the balance of the 4.5 acre parking parcel. As a result, the land, pre-development costs and construction costs of North River Place were reclassified from land held for development to construction in progress. Total costs of $11,388,000 as of December 31, 2008 have been incurred on the project, which was placed in service in the first quarter of 2009.

Approximately 14.7 acres of the Tri-City land owned by the Partnership was part of a 27-acre landfill operated by the City of San Bernardino (“the City”) from approximately 1950 to 1960. This landfill incorporates two land parcels and part of a third parcel. In 1996, the Santa Ana Regional Water Quality Control Board (“SARWQCB”), with regulatory jurisdiction over the closure and monitoring of landfills, determined that the City was primarily responsible for the landfill. Therefore, the City and the Partnership entered into a Limited Access Easement Agreement, giving the City access to the site for development, implementation and financial responsibility for a plan for the remediation of the landfill. It was determined that the City was to improve the landfill cover system (The Waterman Landfill Cover Improvement Plans, April 2002), perform groundwater monitoring and install a permanent gas extraction system (Landfill Gas Collection System). Under the Limited Access Easement Agreement with the Partnership, methane monitoring is handled directly by the City. The City’s installation of the cover improvement system was completed in the first quarter of 2007 along with the gas extraction system. The system is now operational and working properly to eliminate methane from the landfill. All controlled wells are in compliance with County standards. Presently, the Partnership does not have any plans to develop or sell this site. No assurance can be made that circumstances will not arise which could impact the Partnership’s responsibility related to the land.

Item 3. 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 in the future have a material adverse effect on the Partnership’s financial position, cash flow or results of operations.

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

None.

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Part II

Item 5. Market for Partnership’s Common Equity, Related Stockholder Matters and Issuer of Equity Securities

Market Information

There is no established trading market for the Units issued by the Partnership.

Holders

As of December 31, 2008, there were 6,913 holders of Units.

Distributions

Distributions are paid from either Cash From Operations or Cash From Sales or Refinancing (as such terms are defined in the Partnership agreement).

Cash From Operations includes all cash receipts from operations in the ordinary course of business (except for the sale, refinancing, exchange or other disposition of real property in the ordinary course of business) after deducting payments for operating expenses. All distributions of Cash From Operations are paid in the ratio of 90% to the limited partners and 10% to the General Partner.

Cash From Sales or Refinancing is the net cash realized by the Partnership from the sale, disposition or refinancing of any property after redemption of applicable mortgage debt and all expenses related to the transaction, together with interest on any notes taken back by the Partnership upon the sale of a property. Distributions of Cash From Sales or Refinancing are generally allocated as follows: (i) first, 1 percent to the General Partner and 99 percent to the limited partners until the limited partners have received an amount equal to their capital contributions, plus a 12 percent return on their unreturned capital contributions (less prior distributions of Cash from Operations); (ii) second, to limited partners who purchased their Units of limited partnership interest prior to April 1, 1985, to the extent they receive an additional return (depending on the date on which they purchased the Units) on their unreturned capital of either 9 percent, 6 percent or 3 percent (calculated through October 31, 1985); and (iii) third, 20 percent to the General Partner and 80 percent to the limited partners. A more detailed statement of these distribution policies is set forth in the Partnership Agreement.

For 2008, the Partnership distributed from operations $2,089,000 to the limited partners and $232,000 to the General Partner.

For 2007, the Partnership distributed from operations $1,816,000 to the limited partners and $202,000 to the General Partner.

For 2006, the Partnership distributed from operations $1,623,000 to the limited partners and $180,000 to the General Partner.

There were no redemptions of Units during 2008.

Item 6. Selected Financial Data

The following is selected financial data for each of the five years ended December 31, 2008 (in thousands, except per unit of limited partnership interest data):

	2008		2007		2006		2005		2004
Operating revenue	$	9,596	$	10,103	$	9,483	$	7,531	$	6,655
Gain on sale of land held for development	$	—	$	—	$	—	$	—	$	1,347
Income from continuing operations	$	49	$	1,470	$	1,474	$	1,233	$	2,191
Income from discontinued operations	$	—	$	—	$	—	$	2,164	$	183
Net income	$	49	$	1,470	$	1,474	$	3,397	$	2,374
Net income allocable to limited partners	$	44	$	1,323	$	1,327	$	3,161	$	2,202
Net income per limited partnership unit	$	0.67	$	20.10	$	20.09	$	46.45	$	31.65
Total assets	$	53,059	$	53,395	$	52,368	$	52,275	$	40,560
Long-term obligations	$	28,642	$	26,028	$	23,773	$	24,100	$	13,236
Cash distributions per limited partnership unit	$	31.74	$	27.60	$	24.62	$	21.84	$	17.68

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our results of operations, liquidity and capital resources, and financial condition should be read in conjunction with the selected financial data in Item 6 and the consolidated financial statements, including the notes thereto, included in Item 15 of Part IV.

Background

The Partnership’s initial acquisition of property during 1984 and 1985 consisted of approximately 76.56 acres of partially developed and unimproved land located in San Bernardino, California. The property is part of a master-planned development of approximately 153 acres known as Tri-City Corporate Centre (“Tri-City”) and is zoned for mixed commercial, office, hotel, transportation-related, and light industrial uses and all of the parcels thereof are separately owned by the Partnership and Rancon Realty Fund V (“Fund V”), a limited partnership sponsored by the General Partner of the Partnership. As of December 31, 2008, the Partnership has eleven properties which consisted of four office buildings and seven retail buildings.

Overview

Leasing

During 2008, management executed one new lease totaling 3,910 square feet of space and renewed five leases totaling 47,526 square feet.

Construction

During the first quarter of 2008 the Partnership continued developing North River Place, a three-story multi-tenant 72,000 square-foot office building on an approximate 1.6 acre land parcel, plus completion of the balance of the 4.5 acre parking parcel. Total costs of $11,388,000 as of December 31, 2008 have been incurred on the project, which was placed in service in the first quarter of 2009.

Unit redemption

During 2008, no Units were redeemed. As of December 31, 2008, there were 65,819 Units outstanding.

Results Of Operations

Comparison of the year ended December 31, 2008 to the year ended December 31, 2007

Revenue

Operating revenue for the year ended December 31, 2008 decreased $507,000, or 5%, compared to the year ended December 31, 2007. The decrease was due to a decrease in rental revenue of $194,000 and a decrease in recoveries of $313,000. The decrease in rental revenue was due to a number of factors including: higher bad debt reserve expenses of $80,000, higher straight line rent amortization of $66,000, lower lease termination income of $143,000 partially offset by the higher recognition of percentage rents in 2008 of $126,000. Gross effective rent was consistent year over year, with increases in rental rates offsetting higher vacancy rates. The decrease in recoveries is due to both a decrease for 2008 which correlates with a decrease in operating expenses, and a decrease related to prior year recoveries. The decrease in prior year recoveries relates to the recovery true up in the second quarter of 2008, related to 2007, for which recoveries were lower due to lower operating expenses than estimated in 2007.

In November 2008, Circuit City, occupying 100% of the Partnership’s 39,123 square foot retail building filed for bankruptcy. Circuit City’s annual rent paid to the Partnership was $633,000, or 7.46% of the Partnership’s total rental income. As of December 31, 2008, the Partnership had reserved for all doubtful collections of accounts receivable due from Circuit City. Subsequent to December 31, 2008, Circuit City notified the Partnership that in conjunction with its bankruptcy proceedings, it would vacate the Partnership’s building in March 2009.

Expenses

Operating expenses decreased $100,000, or 3%, for the year ended December 31, 2008, compared to the year ended December 31, 2007, primarily due to a decrease in the cost of insurance and utilities of $91,000 and $50,000, respectively, partially offset by several smaller increases over a range of operating accounts.

Depreciation and amortization increased $122,000, or 4%, for the year ended December 31, 2008, compared to the year ended December 31, 2007, primarily due to the depreciation of capital improvements of approximately $852,000 placed into service in the current year.

Provision for impairment of real estate of $268,000 for the year ended December 31, 2008 was due to the recognition of an impairment charge for the entire amount of the investment in land in development for which management has determined that development is no longer probable, (refer to Note 4 to the consolidated financial statements).

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Non-operating income / expenses

Interest expense increased $605,000, or 60%, for the year ended December 31, 2008, compared to the year ended December 31, 2007, due to the cessation of interest capitalization on North River Place, and higher interest expense associated with the old line of credit. No interest was capitalized for 2008 since interest capitalization ceased at the end of 2007, whereas $407,000 of interest was capitalized in 2007. Interest expense associated with line of credit borrowings was higher in 2008 compared to 2007 by $191,000, due to higher borrowings.

Comparison of the year ended December 31, 2007 to the year ended December 31, 2006

Revenue

Operating revenue for the year ended December 31, 2007 increased $620,000, or 7%, compared to the year ended December 31, 2006. The increase was due to increases in rental revenue and other of $117,000, and an increase in tenant reimbursements of $503,000. Rental revenue and other was higher primarily due to lease termination income of $143,000 recognized during the second quarter of 2007. The increase in recoveries correlates with an increase in operating expenses and relates primarily to earthquake insurance, janitorial costs and electricity rates. Recoveries were higher due to recoveries related both to 2007 and the 2006 recovery reconciliations completed in the second quarter of 2007.

Expenses

Operating expenses increased $449,000, or 13%, for the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to an increase in the cost of the earthquake insurance policy, janitorial costs and electricity rates which contributed $201,000, $58,000 and $48,000, respectively, to the variance with the balance comprising smaller increases across a range of operating accounts.

Depreciation and amortization increased $404,000, or 16%, for the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to the depreciation of capital improvements of approximately $1,352,000 spent in the current year.

Non-operating income / expenses

Interest and other income decreased $127,000, or 84%, for the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to a decrease in funds held in certificates of deposit and money market accounts. The certificate of deposit matured at the end of January 2007, resulting in only $10,000 of interest being earned in 2007, compared to $130,000 in 2006.

Interest expense decreased $385,000, or 28%, for the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to capitalization of interest for the construction of North River Place. Interest capitalized was $407,000 in 2007 compared to $22,000 in 2006.

Liquidity and Capital Resources

As of December 31, 2008, the Partnership had cash and cash equivalents of $3,039,000.

The Partnership’s primary liability at December 31, 2008 is a note payable of approximately $23,063,000, collateralized by properties with an aggregate net carrying value of approximately $15,016,000. The note has a 10-year term with a 30-year amortization requiring monthly principal and interest payments of approximately $136,000, bears a fixed interest rate of 5.46%, and has a maturity date of January 1, 2016. The note is collateralized by Circuit City, Mimi’s Cafe, Palm Court Retail #1 and #2, Promotional Retail Center, Service Retail Center, TGI Friday’s and One Vanderbilt. This note also provides for a one-time loan assumption and release provisions for individual assets.

The Partnership has a line of credit, which is collateralized by Carnegie Business Center and Vanderbilt Plaza and has a total availability of $10,000,000. The line of credit requires monthly interest-only payments, has a maturity date of December 19, 2009, with two one year extension options and bears variable interest at the 30-day LIBOR plus 2.75% (3.95% at December 31, 2008). As of December 31, 2008, $5,579,000 was outstanding under the line of credit. In order to extend the line of credit the Partnership must be in compliance with the covenants concerning loan constant (prescribed ratio of property results of operations to total availability on the line), minimum net worth, debt to total assets and loan to value ratio, as well as comply with notification requirements and pay an extension fee. The line of credit agreement contains a maximum availability covenant. The Partnership was in compliance with all covenants as at December 31, 2008.

The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the aggregate amount of $643,000 as of December 31, 2008, for sales that were completed in previous years. The subordinated real estate commissions are payable only after the limited partners have received distributions equal to their original invested capital plus a cumulative non-compounded return of 12% per annum on their adjusted invested capital. Since the circumstances under which these commissions would be payable are not currently met, the liability has not been recognized in the accompanying consolidated financial statements. However, the amount will be recorded when and if it becomes payable.

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

Contractual Obligations

At December 31, 2008, we had contractual obligations as follows (in thousands):

	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
Secured mortgage loans	$	385	$	836	$	932	$	20,910	$	23,063
Interest on indebtedness		1,250		2,433		2,337		2,230		8,250
Line of credit		5,579		—		—		—		5,579
Total	$	7,214	$	3,269	$	3,269	$	23,140	$	36,892

Management expects that the Partnership’s cash and cash equivalents as of December 31, 2008, together with cash from operations, sales and financings, will be sufficient to finance the Partnership’s and the properties’ continued operations and development plans on a short-term basis and for the reasonably foreseeable future. There can be no assurance that the Partnership’s results of operations will not fluctuate in the future and at times affect its ability to meet its operating requirements.

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

Operating Activities

During the year ended December 31, 2008, the Partnership’s cash provided by operating activities totaled $3,525,000.

An increase in accounts receivable of $29,000 during 2008 was primarily due to a general increase in accounts receivables balances across multiple properties.

An increase in deferred costs of $237,000 during 2008 was primarily due to lease commissions associated with leasing activity at One Vanderbilt and TGI Fridays, which accounted for $138,000 and $62,000 of the increase, respectively.

A decrease in prepaid expenses and other assets of $142,000 during 2008 was primarily due to a decrease in prepaid insurance of $103,000, due to lower earthquake insurance premiums and a decrease in the straight line rent receivables of $90,000, due to normal amortization, offset by an increase in other prepaid expenses of $51,000.

An increase in accounts payable and other liabilities of $124,000 during 2008 was due to $122,000 of estimated credits due to tenants related to 2008 common area maintenance reimbursements.

An increase in prepaid rents of $76,000 at December 31, 2008 was due to the receipt of January 2009 rents totaling $281,000 in December 2008, in excess of the January 2008 rents of $205,000 received in December 2007.

Investing Activities

During the year ended December 31, 2008, the Partnership’s cash used for investing activities totaled $2,491,000; which consisted entirely of additions to real estate investments ($852,000 for building and tenant improvements, primarily at One Vanderbilt, Promotional Retail Center, Carnegie Business Center I, and North Court Plaza and $1,617,000 for construction costs at North River Place).

Financing Activities

During the year ended December 31, 2008, the Partnership’s cash provided by financing activities totaled $124,000, which consisted of $8,424,000 of draws on lines of credit partially offset by $5,445,000 repayments on lines of credit, $365,000 for principal payments on the note payable, $169,000 in loan fees related to the new line of credit, $2,089,000 for payment of distributions to the limited partners, and $232,000 for payment of distributions to the General Partner. Loan fees includes $103,000 of loan financing fees , payable to Glenborough LLC, incurred in late 2008.

Cash Flows

During 2008, cash provided by operating activities was $3,525,000, as compared to cash provided by operating activities of $4,771,000 for the same period in 2007. The change was almost entirely due to a decrease in net income, after adding back

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depreciation and amortization and asset impairment, of $1,031,000. The decrease in net income was primarily due to lower revenues and higher interest expense, as described earlier. The remaining decrease was due to a number of smaller changes in certain assets and liabilities. During 2008, cash used for investing activities was $2,491,000, as compared to cash used for investing activities of $4,625,000 for the same period in 2007. The change was primarily due to a decrease in additions to real estate due primarily to lower construction costs at North River Place which was substantially completed by the first quarter of 2008. During 2008, cash provided by financing activities was $124,000, as compared to cash provided by financing activities of $151,000 for the same period in 2007. The change was primarily due to higher draws on the line of credit, partially offset by repayments on the line of credit, higher distributions and loan fee payments for the new line of credit.

During 2007, cash provided by operating activities was $4,771,000, as compared to cash provided by operating activities of $2,905,000 for the same period in 2006. The change was primarily due to an increase in net income after adding back depreciation and amortization combined with a decrease in accounts receivable, and prepaid expenses and other assets. Further contributing to the variance was an increase in prepaid rent and accounts payable. During 2007, cash used for investing activities was $4,625,000, as compared to cash used for investing activities of $8,387,000 for the same period in 2006. The change was primarily due to proceeds received from the sale of short-term investments initially purchased in 2006, partially offset by an increase in construction costs at North River Place, which started in late September 2006 and was ongoing throughout 2007. During 2007, cash provided by financing activities was $151,000, as compared to cash used for financing activities of $2,953,000 for the same period in 2006. The change was primarily due to draws on the line of credit and lower redemptions of Units.

Critical Accounting Policies

Revenue recognized on a straight-line basis

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

Carrying value of rental properties and land held for development

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

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

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

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

Recently Issued Accounting Literature

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value and enhances disclosure requirements for fair value measurements. SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

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Financial assets and liabilities recorded on the balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain corporate debt securities and derivative contracts.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes long-term derivative contracts and real estate.

The Partnership adopted SFAS No. 157 with respect to its financial assets and liabilities but not with respect to its nonfinancial assets (such as real estate, which is not subject to annual fair value measurements) as those provisions of SFAS No. 157 have been deferred. There was no material impact on the Partnership’s financial position, results of operations and cash flows as a result of such adoption.

In October 2008, the FASB issued FASB Staff Position FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarified the application of FAS 157. FSP 157-3 clarified how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have an impact on the Partnership’s financial position, results of operations and cash flows.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. It also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. This Statement is effective for fiscal years beginning on or after November 15, 2007. The Partnership does not believe that the adoption of SFAS No. 159 did not have a material impact on its financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, (“SFAS No. 141 (R)”) which improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financials reports about a business combination and its effects. This Statement is effective for fiscal years beginning after December 15, 2008. The Partnership does not believe that the adoption of SFAS No. 141(R) will have a material impact on its financial position, results of operations and cash flows, except that transaction costs will be expensed as incurred.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an Amendment of ARB No. 51, (“SFAS No. 160”) which clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years beginning after December 15, 2008. The Partnership does not believe that the adoption of SFAS No. 160 will have a material impact on its financial position, results of operations and cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133 (“SFAS No. 161”), which requires companies to provide additional disclosures about their objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and related interpretations, and how the derivative instruments and related hedged items affect their financial statements. SFAS No. 161 also requires companies to disclose information about credit risk-related contingent features in their hedged positions. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Partnership does not believe that the adoption of SFAS No. 161 will have a material impact on its financial condition or operating results.

Inflation

Leases at the office properties typically provide for rent adjustment and pass-through of certain operating expenses during the term of the lease. Substantially all of the leases at the office and retail properties provide for pass-through to tenants of certain operating costs, including real estate taxes, common area maintenance expenses, and insurance. We anticipate that these provisions may permit us to increase rental rates or other charges to tenants in response to rising prices and, therefore, serve to reduce our exposure to the adverse effects of inflation.

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Forward Looking Statements; Factors That May Affect Operating Results

This Report on Form 10-K 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:

• Our expectation of making distributions to our partners;

• Our belief that cash and cash generated by operations, sales and financing will be sufficient to meet our operating requirements in both the short and the long-term;

• Our expectation that changes in market interest rates will not have a material impact on the performance or the fair value of our portfolio;

• Our belief that certain claims and lawsuits which have arisen against us in the normal course of business will not have a material adverse effect on our financial position, cash flow or results of operations;

• Our belief that properties are competitive within our market;

• Our expectation to achieve certain occupancy levels;

• Our estimation of market strength;

• Our knowledge of any material environmental matters or issues relating to the landfill property; and

• Our expectation that lease provisions may permit us to increase rental rates or other charges to tenants in response to rising prices, and therefore serve to reduce exposure to the adverse effects of inflation.

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

• market fluctuations in rental rates and occupancy;

• reduced demand for rental space;

• availability and creditworthiness of prospective tenants;

• defaults or non-renewal of leases by customers;

• differing interpretations of lease provisions regarding recovery of expenses;

• increased operating costs;

• changes in construction costs and uncertainty with regard to construction items needed to complete the project;

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

• our failure to obtain necessary outside financing;

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

• the unpredictability of both the frequency and final outcome of litigation; and

• the inability to develop all or any portion of the former landfill site, due to environmental, legal or economic impediments.

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. See Item 1A for further discussion.

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Item 7A. Qualitative and Quantitative Disclosures about Market Risk

Interest Rates

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

For debt obligations, the table below presents principal cash flows by expected maturity dates of the note payable with a fixed interest rate of 5.46% and the line of credit with a variable interest rate of 30-day LIBOR plus 2.75% (3.95% at December 31, 2008.)

	Expected Maturity Date
	2009		2010		2011		2012		2013		Thereafter		Total
	(in thousands)
Collateralized Fixed Rate debt	$	385	$	407	$	429	$	453	$	479	$	20,910	$	23,063
Line of credit		5,579		—		—		—		—		—		5,579
Total	$	5,964	$	407	$	429	$	453	$	479	$	20,910	$	28,642

A change of 1/8% in the index rate to which our variable rate debt is tied would change the annual interest we incurred by approximately $7,000, based upon the balances outstanding on variable rate instruments at December 31, 2008.

The Partnership does not own any derivative instruments.

Item 8. Financial Statements and Supplementary Data

For information with respect to this item, see Financial Statements and Financial Statement Schedule as included in Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

See Item 9A(T).

Item 9A(T). Controls and Procedures

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

The report called for by Item 308T(a) of Regulation S-K is incorporated herein by reference to “Management’s Annual Report on Internal Control Over Financial Reporting” (“Management’s Report”), included in the financial statements included as an exhibit to this report. Management’s Report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section.

There have not been any changes in the Partnership’s internal control over financial reporting identified in connection with Management’s Report that occurred during the Partnership’s fourth fiscal quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Item 9B. Other Information

None.

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Part III

Item 10. Directors, Executive Officers and Corporate Governance

Daniel L. Stephenson and Rancon Financial Corporation (“RFC”) are the general partners of the Partnership. Mr. Stephenson is the Director, President, Chief Executive Officer and Chief Financial Officer of RFC.

Mr. Stephenson, age 65, founded RFC (formerly known as Rancon Corporation) in 1971 for the purpose of establishing a commercial, industrial and residential property syndication, development and brokerage concern. Mr. Stephenson has, from RFC’s inception, held the position of Director. In addition, Mr. Stephenson was President, Chief Executive Officer and Chief Financial Officer of RFC from 1971 to 1986, from August 1991 to September 1992, and from March 31, 1995 to present. Mr. Stephenson is Chairman of the Board of PacWest Group, Inc., a real estate firm which acquired a portfolio of assets from the Resolution Trust Corporation.

Section 16(a) Beneficial Ownership Reporting Compliance

Based on a review of the copies of beneficial ownership reports filed pursuant to Section 16(a) of the Exchange Act received by the Partnership, the Partnership believes that, during the fiscal year ended December 31, 2008, all such ownership reports were filed on a timely basis.

Code of Ethics

The Partnership has not adopted a “code of ethics” as defined in rules adopted by the SEC. Because neither the Partnership nor the General Partner has any employees other than Daniel L. Stephenson, the Partnership has determined that adopting a code of ethics would not appreciably improve the Partnership’s ability to deter wrongdoing or promote the conduct set forth in such SEC rules.

Director Independence

The Partnership has no officers of directors. Information on Mr. Stephenson, one of the general partners of the Partnership and Director, President, Chief Executive Officer and Chief Financial Officer of the other general partner of the Partnership, is provided in the first paragraph of this Item 10. Mr. Stephenson is not “independent” within the meaning of relevant SEC and securities exchange definitions of the term.

Item 11. Executive Compensation

The Partnership has no executive officers. For information relating to fees, compensation, reimbursement and distributions paid to related parties, reference is made to Item 13 below.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners

Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class
Units	Glenborough Fund XV LLC	7,388 Units	11.22%
	400 South El Camino Real, Suite 1100,
	San Mateo, CA 94402
Security Ownership of Management
Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class
Units	Daniel L. Stephenson (I.R.A.)	4 Units (direct)	*
	41391 Kalmia, Suite 200, Murrieta, CA 92562
Units	Daniel L. Stephenson Family Trust	100 Units (direct)	*
	41391 Kalmia, Suite 200, Murrieta, CA 92562

* Less than 1 percent

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Changes in Control

The limited partners have no right, power or authority to act for or bind the Partnership. However, the limited partners generally have the power to vote upon the following matters affecting the basic structure of the Partnership, passage of each of which requires the approval of limited partners holding a majority of the outstanding Units: (i) amendment of the Partnership Agreement; (ii) termination and dissolution of the Partnership; (iii) sale, exchange or pledge of all or substantially all of the assets of the Partnership; (iv) removal of the General Partner or any successor General Partner; (v) election of a new General Partner or General Partner upon the removal, redemption, death, insanity, insolvency, bankruptcy or dissolution of the General Partner or any successor General Partner; and (vi) extension of the term of the Partnership.

Item 13. Certain Relationships and Related Transactions, and Director Independence

During the year ended December 31, 2008, the Partnership distributed $232,000 to the General Partner pursuant to the Partnership Agreement and paid fees, as described in more detail in Note 6 to the consolidated financial statements attached hereto as an exhibit, to Glenborough LLC, an affiliate of Glenborough Fund XV LLC, which holds 11.22% of the Units. Other than such distributions to the General Partner and fees to Glenborough LLC, the Partnership did not incur any expenses or costs reimbursable to any related person of the Partnership during the fiscal year ended December 31, 2008.

Item 14. Principal Accountant Fees and Services

Audit Fees

The Partnership was billed $110,000 and $102,500 for audit services rendered by its current principal accountant during the fiscal years ended December 31, 2008 and 2007, respectively.

Audit-Related Fees

The Partnership did not incur audit-related fees for services provided by its current or former principal accountant during the fiscal years ended December 31, 2008 and 2007.

Tax Fees

The Partnership did not incur tax fees for services provided by its current or former principal accountant during the fiscal years ended December 31, 2008 and 2007.

All Other Fees

The Partnership did not incur any other fees for services provided by its current or former principal accountant during the fiscal years ended December 31, 2008 and 2007.

18

Part IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following documents are filed as part of the report:

Management’s Annual Report on Internal Control over Financial Reporting

(1) Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2008 and 2007

Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006

Consolidated Statements of Partners’ Equity for the years ended December 31, 2008, 2007 and 2006

Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006

Notes to Consolidated Financial Statements

(2) Financial Statement Schedule:

Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2007 and Notes thereto

(3) Exhibits:

(3.1)	Second Amended and Restated Certificate and Agreement of Limited Partnership of the Partnership (included as Exhibit B to the Prospectus dated December 29, 1986, as amended on January 5, 1987, filed pursuant to Rule 424(b), file number 2-90327), is incorporated herein by reference.
(3.2)	First Amendment to the Second Amended and Restated Agreement and Certificate of Limited Partnership of the Partnership, dated March 11, 1991 (included as Exhibit 3.2 to 10-K dated October 31, 1992, file number 0-14207), is incorporated herein by reference.
(3.3)	Limited Partnership Agreement of RRF IV Tri-City Limited Partnership, a Delaware limited partnership of which Rancon Realty Fund IV, a California Limited Partnership is the limited partner (filed as Exhibit 3.3 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1996, file number 0-14207), is incorporated herein by reference.
(10.1)	First Amendment to the Second Amended Management, Administration and Consulting Agreement and amendment thereto for services rendered by Glenborough Corporation, dated August 31, 1998 (filed as Exhibit 10.1 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1998, file number 0-14207), is incorporated herein by reference.
(10.2)	Promissory note in the amount of $6,400,000, dated April 19, 1996, secured by Deeds of Trust on three of the Partnership’s Properties (filed as Exhibit 10.6 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1996, file number 0-14207), is incorporated herein by reference.
(10.3)	Agreement for Acquisition of Management Interests, dated December 20, 1994 (filed as Exhibit 10.3 to the Partnership’s quarterly report on Form 10-Q for the quarter ended September 30, 2003, file number 0-14207), is incorporated herein by reference.
(10.4)	Property Management and Services Agreement dated July 30, 2004 (filed as Exhibit 10.4 to the Partnership’s quarterly report on Form 10-Q for the period ended September 30, 2004), is incorporated herein by reference.
(10.5)	First Amendment to the Property Management and Services Agreement dated March 30, 2005 (filed as Exhibit 10.4 to the Partnership’s current report on Form 8-K, filed with the SEC on February 27, 2009 is incorporated herein by reference.
(10.6)	Second Amendment to the Property Management and Services Agreement dated December 1, 2005 (filed as Exhibit 10.4 to the Partnership’s current report on Form 8-K, filed with the SEC on February 27, 2009 is incorporated herein by reference.

19

(10.7)	Third Amendment to the Property Management and Services Agreement dated May 1, 2006 (filed as Exhibit 10.4 to the Partnership’s current report on Form 8-K, filed with the SEC on February 27, 2009 is incorporated herein by reference.
(10.8)	Fourth Amendment to Property Management and Services Agreement dated March 1, 2009 (filed as Exhibit 10.4 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009 is incorporated herein by reference.
(10.9)	Promissory note in the amount of $24,100,000, dated November 15, 2005 secured by Deeds of Trust on eight of the Partnership’s Properties (announcement was filed to the Partnership’s report on Form 8-K on December 7, 2005; Promissory Note is being filed as an exhibit to this Form 10-K because it was not previously filed with the SEC.)
(31)	Section 302 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of the General Partner of the Partnership.
(32)	Section 906 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of the General Partner of the Partnership. *

* This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as required by Section 906, is not to be deemed “filed” with the SEC or subject to the rules and regulations promulgated by the SEC under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of said Act.

20

SIGNATURES

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

	RANCON REALTY FUND IV,
	a California limited partnership
	By: Rancon Financial Corporation
	a California corporation,
	its General Partner
Date: March 27, 2009	By:  /s/ Daniel L. Stephenson
	Daniel L. Stephenson, President
Date: March 27, 2009	By:  /s/ Daniel L. Stephenson
	Daniel L. Stephenson,
	General Partner

21

INDEX TO FINANCIAL STATEMENTS

AND SCHEDULE

	Page No.
Management’s Annual Report on Internal Control over Financial Reporting	23
Report of Independent Registered Public Accounting Firm	24
Consolidated Balance Sheets as of December 31, 2008 and 2007	25
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006	26
Consolidated Statements of Partners’ Equity for the years ended December 31, 2008, 2007 and 2006	27
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006	28
Notes to Consolidated Financial Statements	29-39
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2008 and Notes thereto	40-41

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

22

Management’s Annual Report on Internal Control over Financial Reporting

The Partnership, as such, has no officers or directors, but is managed by the General Partner. The General Partner’s principal officer is responsible for establishing and maintaining adequate internal control over financial reporting for the Partnership. The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Partnership’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of the management and directors of the General Partner; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets of the Partnership that could have a material effect on the financial statements of the Partnership.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its assessment, management determined that the Partnership maintained effective internal control over financial reporting as of December 31, 2008.

This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by the Partnership’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.

This report of management on internal control over financial reporting shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

March 27, 2009

23

Report of Independent Registered Public Accounting Firm

To The General Partner

Rancon Realty Fund IV, a California Limited Partnership

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Rancon Realty Fund IV, a California Limited Partnership (the “Partnership”) and its subsidiaries at December 31, 2008 and 2007 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule, listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Francisco, CA

March 27, 2009

24

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP, and SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2008 and 2007

(in thousands, except Units outstanding)

	2008			2007
Assets
Investments in real estate:
Rental properties	$	52,575		$	52,472
Accumulated depreciation		(17,358	)		(15,493	)
Rental properties, net		35,217			36,979
Construction in progress		11,388			10,752
Land held for development		—			246
Total investments in real estate		46,605			47,977
Cash and cash equivalents		3,039			1,881
Accounts receivable, net		88			59
Deferred costs, net of accumulated amortization of $1,665 and $1,510 at December 31, 2008 and 2007, respectively		1,964			1,973
Prepaid expenses and other assets		1,363			1,505
Total assets	$	53,059		$	53,395
Liabilities and Partners’ Equity
Liabilities:
Note payable and line of credit	$	28,642		$	26,028
Accounts payable and other liabilities		485			258
Construction costs payable		—			981
Prepaid rent		281			205
Total liabilities		29,408			27,472
Commitments and contingencies (Notes 4 and 7)
Partners’ Equity (Deficit):
General Partner		(819	)		(592	)
Limited partners, 65,819 limited partnership units outstanding at both December 31, 2008 and 2007		24,470			26,515
Total partners’ equity		23,651			25,923
Total liabilities and partners’ equity	$	53,059		$	53,395

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

25

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP, and SUBSIDIARIES

Consolidated Statements of Operations

For the years ended December 31, 2008, 2007 and 2006

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

	2008			2007			2006
Operating Revenue
Rental revenue and other	$	8,490		$	8,684		$	8,567
Tenant reimbursements		1,106			1,419			916
Total operating revenue		9,596			10,103			9,483
Operating Expenses
Property operating		3,689			3,789			3,340
Depreciation and amortization		3,030			2,908			2,504
Provision for impairment of real estate		268			—			—
General and administrative		977			956			927
Total operating expenses		7,964			7,653			6,771
Operating income		1,632			2,450			2,712
Interest and other income		26			24			151
Interest expense (including amortization of loan fees)		(1,609	)		(1,004	)		(1,389	)
Net income	$	49		$	1,470		$	1,474
Basic and diluted income per limited partnership unit:
Net income	$	0.67		$	20.10		$	20.09
Weighted average number of limited partnership units outstanding during each year		65,819			65,825			66,035

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

26

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP, and SUBSIDIARIES

Consolidated Statements of Partners’ Equity

For the years ended December 31, 2008, 2007 and 2006

(in thousands)

	General Partner			Limited Partners			Total
Balance (deficit) at December 31, 2005	$	(504	)	$	28,026		$	27,522
Redemption of limited partnership units		—			(705	)		(705	)
Net income		147			1,327			1,474
Distributions ($24.62 per limited partnership unit)		(180	)		(1,623	)		(1,803	)
Balance (deficit) at December 31, 2006		(537	)		27,025			26,488
Redemption of limited partnership units		—			(17	)		(17	)
Net income		147			1,323			1,470
Distributions ($27.60 per limited partnership unit)		(202	)		(1,816	)		(2,018	)
Balance (deficit) at December 31, 2007		(592	)		26,515			25,923
Net income		5			44			49
Distributions ($31.74 per limited partnership unit)		(232	)		(2,089	)		(2,321	)
Balance (deficit) at December 31, 2008	$	(819	)	$	24,470		$	23,651

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

27

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP, and SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2008, 2007 and 2006

(in thousands)

	2008			2007			2006
Cash flows from operating activities:
Net income	$	49		$	1,470		$	1,474
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,030			2,908			2,504
Amortization of loan fees, included in interest expense interest expense		102			87			102
Provision for impairment of real estate assets		268			—			—
Changes in certain assets and liabilities:
Accounts receivable		(29	)		240			(46	)
Deferred costs		(237	)		(178	)		(484	)
Prepaid expenses and other assets		142			98			(488	)
Accounts payable and other liabilities		124			52			(197	)
Prepaid rent		76			94			40
Net cash provided by operating activities		3,525			4,771			2,905
Cash flows from investing activities:
Proceeds from sale (purchase) of short-term investments		—			5,075			(5,075	)
Additions to real estate investments		(2,491	)		(9,700	)		(3,312	)
Net cash used in investing activities		(2,491	)		(4,625	)		(8,387	)
Cash flows from financing activities:
Draws on line of credit		8,424			2,600			—
Payments on line of credit		(5,445	)		—			—
Principal payments on notes payable		(365	)		(345	)		(327	)
Loan fees for note payable and line of credit		(169	)		(69	)		(28	)
Refund of loan application fee		—			—			89
Redemption of limited partnership units		—			(17	)		(727	)
Distributions to limited partners		(2,089	)		(1,816	)		(1,623	)
Distributions to General Partner		(232	)		(202	)		(337	)
Net cash provided by (used in) financing activities		124			151			(2,953	)
Net increase (decrease) in cash and cash equivalents		1,158			297			(8,435	)
Cash and cash equivalents at beginning of year		1,881			1,584			10,019
Cash and cash equivalents at end of year	$	3,039		$	1,881		$	1,584
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $0, $407 and $22 in 2008, 2007 and 2006, respectively)	$	1,489		$	917		$	1,287
Construction costs	$	—		$	981		$	1,790
Construction costs payable		—			(981	)		(1,790	)
	$	—		$	—		$	—
Supplemental disclosure of non-cash investing activities:
Adjustment of balance sheet for fully depreciated rental property assets	$	749		$	208		$	347
Adjustment of balance sheet for fully amortized deferred costs	$	363		$	224		$	77

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

28

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 1. ORGANIZATION

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

The Partnership’s initial acquisition of property between December 1984 and August 1985 consisted of approximately 76.56 acres (unaudited) of partially developed and unimproved land located in San Bernardino, California. The property is part of a master-planned development of 153 acres (unaudited) known as Tri-City (“Tri-City”) and is zoned for mixed commercial, office, hotel, transportation-related, and light industrial uses and all of the parcels thereof are separately owned by the Partnership and Rancon Realty Fund V (“Fund V”), a limited partnership sponsored by the General Partner of the Partnership. As of December 31, 2008, the Partnership has eleven properties which consisted of four office buildings and seven retail buildings.

In April 1996, the Partnership formed RRF IV Tri-City Limited Partnership, a Delaware limited partnership (“RRF IV Tri-City”). The limited partner of RRF IV Tri-City is the Partnership and the general partner is RRF IV, Inc. (“RRF IV, Inc.”), a corporation wholly-owned by the Partnership. Since the Partnership owns 100% of RRF IV, Inc. and indirectly owns 100% of RRF IV Tri-City, the Partnership considers all assets owned by RRF IV, Inc. and RRF IV Tri-City to be owned by the Partnership. In December 2008, both RRF IV, Inc and RRF IV Tri-City were dissolved.

In November 2005, in connection with a refinancing, the Partnership formed Rancon Realty Fund IV Subsidiary LLC, a Delaware limited liability company (“RRF IV SUB”) which is wholly owned and consolidated by the Partnership. The new entity was formed to satisfy certain lender requirements for a note obtained in the fourth quarter of 2005. The note is collateralized by eight properties (as discussed in Note 5) which have been contributed to RRF IV SUB by the Partnership.

In 2008 no units of limited partnership interest (“Units”) were redeemed. In 2007 and 2006, a total of 21 and 1,052, units of limited partnership interest (“Units”) were redeemed at average prices of $803 and $670, respectively. As of December 31, 2008, there were 65,819 Units outstanding.

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

Any references to the number of buildings, square footage, customers and occupancy stated in the financial statement footnotes are unaudited.

Allocation of Net Income and Net Loss

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

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

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

29

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

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

Distribution of Cash

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

All excess cash from operations shall be distributed 90 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; (for limited partners admitted to the Partnership before March 31, 1985, there are additional cumulative non-compounded returns of 9 percent, 6 percent, or 3 percent depending on purchase date, through October 31, 1985) (iii) third, 99 percent to the General Partner and 1 percent to the limited partners, until the General Partner has received an amount equal to 20 percent of all distributions of cash from sales or refinancing: (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.

Note 2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Consolidation

The accompanying consolidated financial statements present the consolidated financial position of the Partnership and its wholly-owned subsidiaries as of December 31, 2008 and 2007, the consolidated statements of operations, of partners’ equity and of cash flows of the Partnership and its wholly-owned subsidiaries for the years ended December 31, 2008, 2007 and 2006. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the results of operations during the reporting period. Actual results could differ from those estimates.

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. There was no impairment of rental properties as of December 31, 2008.

30

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

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 improvement
Furniture and equipment	5 to 7 years

Construction in Progress and Land Held for Development

Construction in progress and land held for development are stated at cost unless events or circumstances indicate that cost cannot be recovered, in which case, the carrying value is reduced to estimated fair value. Estimated fair value: (i) is based on the Partnership’s plans for the development of each property; (ii) is computed using estimated sales price, based upon market values for comparable properties; and (iii) considers the cost to complete and the estimated fair value of the completed project. The fulfillment of the Partnership’s plans related to each of its properties is dependent upon, among other things, the presence of economic conditions which will enable the Partnership to either hold the properties for eventual sale or obtain financing for further development. Construction in progress and land held for development are reviewed for impairment whenever there is a triggering event and at least annually. See Note 4 to the financial statements for discussion of impairment charge recorded for the year ended December 31, 2008.

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

Cash and Cash Equivalents

The Partnership considers money market funds and certificates of deposit with original maturities of less than ninety days when purchased to be cash and cash equivalents.

Deferred Costs

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

Revenues

The Partnership recognizes rental revenue on a straight-line basis over the term of the leases. Actual amounts collected could be lower or higher than the amounts recognized on a straight-line basis if specific tenants are unable to pay rent that the Partnership has previously recognized as revenue. For tenants with percentage rent, the Partnership recognizes revenue when the tenants’ specified sales targets have been met. The reimbursements from tenants for real estate taxes and 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 periodically evaluates the collectability of amounts due from tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under the lease agreements.

In November 2008, Circuit City, occupying 100% of the Partnership’s 39,123 square foot retail building filed for bankruptcy. Circuit City’s annual rent paid to the Partnership was $633,000, or 7.46% of the Partnership’s total rental income. As of December 31, 2008, the Partnership had reserved for all doubtful collections of accounts receivable due from Circuit City. Subsequent to December 31, 2008, Circuit City notified the Partnership that in conjunction with its bankruptcy proceedings, it would vacate the Partnership’s building in March 2009.

Net Income Per Limited Partnership Unit

Net income per Unit is calculated using the weighted average number of Units outstanding during the period and the limited partners’ allocable share of the net income.

31

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Net income per Unit is as follows (in thousands, except for weighted average shares and per share amounts):

	2008				2007				2006
	General Partner		Limited Partners		General Partner		Limited Partners		General Partner		Limited Partners
Income allocation:
Net income	$	5	$	44	$	147	$	1,323	$	147	$	1,327
Weighted average number of limited partnership units outstanding during each year				65,819				65,825				66,035
Basic and diluted income per limited partnership unit:
Net income			$	0.67			$	20.10			$	20.09

Income Taxes

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

Concentration Risk

Three tenants (Inland Regional Center, University of Phoenix and The Art Institute of California) represented 42% and 41% in aggregate of rental revenue for the years ended December 31, 2008 and December 31, 2007, respectively.

Reclassifications

Certain prior year balances have been reclassified to conform to the current year presentation, with no effect on consolidated results of operations.

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value and enhances disclosure requirements for fair value measurements. SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

Financial assets and liabilities recorded on the balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain corporate debt securities and derivative contracts.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes long-term derivative contracts and real estate.

32

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The Partnership adopted SFAS No. 157 with respect to its financial assets and liabilities but not with respect to its nonfinancial assets (such as real estate, which is not subject to annual fair value measurements) as those provisions of SFAS No. 157 have been deferred. There was no material impact on the Partnership’s financial position, results of operations and cash flows as a result of such adoption.

In October 2008, the FASB issued FASB Staff Position FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarified the application of FAS 157. FSP 157-3 clarified how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have an impact on the Partnership’s financial position, results of operations and cash flows.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. It also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. This Statement is effective for fiscal years beginning on or after November 15, 2007. The Partnership does not believe that the adoption of SFAS No. 159 will have a material impact on its financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, (“SFAS No. 141(R)”) which improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financials reports about a business combination and its effects. This Statement is effective for fiscal years beginning after December 15, 2008. The Partnership does not believe that the adoption of SFAS No. 141(R) will have a material impact on its financial position, results of operations and cash flows, except that transaction costs will be expensed as incurred.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an Amendment of ARB No. 51, (“SFAS No. 160”) which clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years beginning after December 15, 2008. The Partnership does not believe that the adoption of SFAS No. 160 will have a material impact on its financial position, results of operations and cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (“SFAS No. 161”), which requires companies to provide additional disclosures about their objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and related interpretations, and how the derivative instruments and related hedged items affect the their financial statements. SFAS No. 161 also requires companies to disclose information about credit risk-related contingent features in their hedged positions. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Partnership does not believe that the adoption of SFAS No. 161 did not have a material impact on its financial condition or operating results.

Note 3. INVESTMENTS IN REAL ESTATE

Rental properties consisted of the following at December 31, 2008 and 2007 (in thousands):

	2008			2007
Land	$	4,471		$	4,471
Buildings		37,268			37,268
Building and tenant improvements		10,836			10,733
		52,575			52,472
Less: accumulated depreciation		(17,358	)		(15,493	)
Total rental properties, net	$	35,217		$	36,979

As of December 31, 2008, the Partnership’s rental properties included four office properties and seven retail properties.

During the year ended December 31, 2008, fully depreciated building and tenant improvements of $749,000 were removed from the balances of such accounts.

33

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 4. CONSTRUCTION IN PROGRESS AND LAND HELD FOR DEVELOPMENT

Construction in progress consisted of the following at December 31, 2008 and 2007 (in thousands):

	2008		2007
Three-story multi-tenant 72,000 square-foot office building (on approximately 1.6 acres of land with a cost basis of $219 at both December 31, 2008 and 2007)	$	11,388	$	10,752

During the third quarter of 2006, the Partnership began developing North River Place, a three-story multi-tenant 72,000 square-foot office building on an approximate 1.6 acre land parcel, plus completion of the balance of the 4.5 acre parking parcel. As a result, the land, pre-development costs and construction costs of North River Place were reclassified from land held for development to construction in progress. The building shell was substantially completed in the first quarter of 2008, and building improvements completed during the second and third quarters. The building is still in the lease up phase so the building has not been placed into service as of December 31, 2008.

Land held for development consisted of the following at December 31, 2008 and 2007 (in thousands):

	2008		2007
Tri-City Corporate Center, San Bernardino, CA (approximately 14.7 acres at both December 31, 2008 and 2007)	$	—	$	246

As of December 31, 2008, the Partnership owned approximately 14.7 acres of undeveloped land which is part of a landfill-monitoring program managed by the City of San Bernardino (as discussed in Note 7). During the fourth quarter of 2008, the partnership conducted a comprehensive review of all real estate assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets, which indicates that asset values should be analyzed whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable. The process entailed the analysis of each asset for instances where the book value exceeded the estimated fair value. As a result of this analysis the Partnership concluded that this asset was impaired and accordingly the asset was written down to net realizable value and a non-cash impairment charge of $268,000 was recognized, as management does not believe development or sale of this asset is probable.

Note 5. NOTE PAYABLE AND LINE OF CREDIT

Note payable and line of credit as of December 31, 2008 and 2007 were as follows (in thousands):

	2008		2007
Note payable collateralized by first deeds of trust on eight properties (discussed below). The note has a fixed interest rate of 5.46%, a maturity date of January 1, 2016, with a 30-year amortization requiring monthly payments of principal and interest totaling $136.	$	23,063	$	23,428
Line of credit		5,579		2,600
Total note payable and line of credit	$	28,642	$	26,028

The note payable is collateralized by Circuit City, Mimi’s Cafe, Palm Court Retail #1 and #2, Promotional Retail Center, Service Retail Center, TGI Friday’s and One Vanderbilt. This note provides for a one-time loan assumption and release provisions for individual assets.

In the fourth quarter of 2008 the Partnership obtained a new line of credit, which is collateralized by Carnegie Business Center and Vanderbilt Plaza and has a total availability of $10,000,000. The proceeds from the new line of credit were used to pay off the previous line of credit balance. The line of credit requires monthly interest-only payments, has a maturity date of December 19, 2009, with two one year extension options and bears variable interest at the 30-day LIBOR plus 2.75% (3.95% at December 31, 2008).

The old line of credit was collateralized by Inland Regional Center, had a total availability of $5,445,000, monthly interest-only payments, and bore variable interest at the Prime Rate (7.25%) as of December 31, 2007. As of December 31, 2007, $2,600,000 was outstanding under the line of credit.

34

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The annual maturities of the Partnership’s note payable subsequent to December 31, 2008 are as follows (in thousands):

2009	$	385
2010		407
2011		429
2012		453
2013		479
Thereafter		20,910
Total	$	23,063

Note 6. RELATED PARTY TRANSACTIONS

In May 2006, the Partnership extended its then current Property Management and Services Agreement (the “Agreement”) with Glenborough Properties L.P. (“Glenborough”) through December 31, 2009. On November 29, 2006, due to the merger of Glenborough and a third party, a new entity, Glenborough LLC, was formed and the Partnership Property Management and Service Agreement was transferred from Glenborough to Glenborough LLC. All other terms and conditions remained unchanged. The Partnership engaged Glenborough LLC to perform services for the following fees:

		Year Ended December 31,
		2008		2007		2006
(i)	property management fees of 3% of gross rental revenue which were included in property operating expenses in the accompanying consolidated statements of operations	$	303,000	$	303,000	$	271,000
(ii)	construction services fees which were capitalized and included in rental properties on the accompanying consolidated balance sheets		33,000		44,000		10,000
(iii)	an asset and partnership management fee which was included in general and administrative expenses in the accompanying consolidated statements of operations		300,000		300,000		300,000
(iv)	leasing services fees which were included in deferred costs on the accompanying consolidated balance sheets		139,000		50,000		245,000
(v)	a financing services fee of 1% of the gross loan amount which was included in the deferred costs on the accompanying consolidated balance sheets		100,000		54,000		—
(vi)	a development fee equal to 5% of the hard costs of the development project which was included in the construction in progress and/or rental properties on the accompanying consolidated balance sheets; excluding 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 fee project		—		240,000		223,000
(vii)	data processing fees which were included in property operating expenses in the accompanying consolidated statements of operations		68,000		53,000		53,000
(viii)	engineering fees which were included in property operating expenses in the accompanying consolidated statements of operations		15,000		16,000		—

Subsequent to year end, on March 1, 2009, the Partnership and Glenborough amended the Agreement, effective March 1, 2009 to reduce certain fees charged by Glenborough, and extend the term of the agreement through December 31, 2015 or, if earlier, until the completion of sale of all the real property assets of the Partnership.

As of December 31, 2008, Glenborough Fund XV LLC, an affiliate of Glenborough LLC, held 7,388 or 11.22% of the Units, all of which were purchased from unaffiliated third parties.

35

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 7. COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Matters

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

Approximately 14.7 acres of the Tri-City land owned by the Partnership was part of a 27-acre landfill operated by the City of San Bernardino (“the City”) from approximately 1950 to 1960. This landfill incorporates two land parcels and part of a third parcel. In 1996, the Santa Ana Regional Water Quality Control Board (“SARWQCB”), with regulatory jurisdiction over the closure and monitoring of landfills, determined that the City was primarily responsible for the landfill. Therefore, the City and the Partnership entered into a Limited Access Easement Agreement, giving the City access to the site for development, implementation and financial responsibility for a plan for the remediation of the landfill. It was determined that the City was to improve the landfill cover system (The Waterman Landfill Cover Improvement Plans, April 2002), perform groundwater monitoring and install a permanent gas extraction system (Landfill Gas Collection System). Under the Limited Access Easement Agreement with the Partnership, methane monitoring is handled directly by the City. The City’s installation of the cover improvement system was completed in the first quarter of 2007 along with the gas extraction system. The system is now operational and working properly to eliminate methane from the landfill. All controlled wells are in compliance with County standards. Presently, the Partnership does not have any plans to develop or sell this site. No assurance can be made that circumstances will not arise which could impact the Partnership’s responsibility related to the land.

General Uninsured Losses

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

Other Matters

The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the aggregate amount of $643,000 at December 31, 2008, for sales that were completed in previous years. The subordinated real estate commissions are payable only after the Limited Partners have received distributions equal to their original invested capital plus a cumulative non-compounded return of 12% per annum on their adjusted invested capital. Since the circumstances under which these commissions would be payable are not met currently, the liability has not been recognized in the accompanying consolidated financial statements; however, the amount will be recorded when and if it becomes payable.

Note 8. LEASES

The Partnership’s rental properties are leased under non-cancelable operating leases that expire at various dates through January 2020. In addition to monthly base rents, several of the leases provide for additional rents based upon a percentage of sales levels attained by the tenants. Future minimum rents under non-cancelable operating leases as of December 31, 2008 are as follows (in thousands):

2009	$	7,632
2010		6,625
2011		5,480
2012		3,898
2013		3,080
Thereafter		7,806
Total	$	34,521

36

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

In addition to minimum rental payments, certain tenants pay reimbursements for their pro rata share of specified operating expenses, which were included in operating revenue in the consolidated statements of operations and amounted to $1,106,000, $1,419,000 and $916,000, for the years ended December 31, 2008, 2007 and 2006, respectively.

Note 9. TAXABLE INCOME

The Partnership’s tax returns, the qualification of the Partnership as a partnership for federal income tax purposes, and the amount of reported income or loss are subject to examination by federal and state taxing authorities. If such examinations result in changes to the Partnership’s taxable income or loss, the tax liability of the partners could change accordingly.

The following is a reconciliation for the years ended December 31, 2008, 2007 and 2006 of the net income for financial reporting purposes to the estimated taxable income determined in accordance with accounting practices used in preparation of federal income tax returns (in thousands):

	2008		2007		2006
Net income as reported in the accompanying consolidated financial statements	$	49	$	1,470	$	1,474
Financial reporting depreciation in excess of tax reporting depreciation*		853		790		575
Provision for impairment not deducted for tax *		268
Operating expenses reported in a different period for financial reporting than for income tax reporting, net*		615		68		24
Net income for federal income tax purposes*	$	1,785	$	2,328	$	2,073

The following is a reconciliation of partners’ equity for financial reporting purposes to estimated partners’ equity for federal income tax purposes as of December 31, 2008 and 2007 (in thousands):

	2008		2007
Partners’ equity as reported in the accompanying consolidated financial statements	$	23,651	$	25,923
Provision for impairment of investments in real estate		9,668		9,400
Syndication costs*		314		314
Financial and tax accounting differences related to depreciation, carrying cost methodologies, and initial acquisition/reorganization transaction		7,012		5,544
Partners’ equity for federal income tax purposes*	$	40,645	$	41,181

* Unaudited

37

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Note 10. UNAUDITED QUARTERLY RESULTS OF OPERATIONS

The following represents an unaudited summary of quarterly results of operations for the years ended December 31, 2008 and 2007 (in thousands, except for per unit amounts and units outstanding):

	Quarter Ended (unaudited)
	March 31, 2008			June 30, 2008			Sept. 30, 2008			Dec. 31, 2008
Operating Revenue
Rental revenue and other	$	2,136		$	2,165		$	2,110		$	2,079
Tenant reimbursements		384			338			300			84
Total operating revenue		2,520			2,503			2,410			2,163
Operating Expenses
Property operating		889			927			1,060			813
Depreciation and amortization		758			759			754			759
Provision for impairment of real estate		––			––			––			268
General and administrative		232			294			209			242
Total operating expenses		1,879			1,980			2,023			2,082
Operating income		641			523			387			81
Interest and other income		1			2			16			7
Interest expense		(380	)		(380	)		(412	)		(437	)
Net income (loss)	$	262		$	145		$	(9	)	$	(349	)
Basic and diluted income (loss) per limited partnership unit: *	$	3.59		$	1.98		$	(0.12	)	$	(5.26	)
Weighted average number of limited partnership units outstanding during each period		65,819			65,819			65,819			65,819

* The sum of the quarterly per unit amounts may not total to the year to date per unit amounts due to the different methodology used in allocating income and losses between the general partner and limited partners. The allocation is done based upon the annual net income or loss, however the calculation for each quarter is based upon that quarter’s income or loss. In addition changes in the number of outstanding partnership units and rounding will also affect the result.

38

RANCON REALTY FUND IV

A California Limited Partnership, and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

	Quarter Ended (unaudited)
	March 31, 2007			June 30, 2007			Sept. 30, 2007			Dec. 31, 2007
Operating Revenue
Rental revenue and other	$	2,158		$	2,296		$	2,101		$	2,129
Tenant reimbursements		257			531			240			391
Total operating revenue		2,415			2,827			2,341			2,520
Operating Expenses
Property operating		875			861			1,034			1,019
Depreciation and amortization		681			713			748			766
General and administrative		240			277			206			233
Total operating expenses		1,796			1,851			1,988			2,018
Operating income		619			976			353			502
Interest and other income		16			4			1			3
Interest expense		(302	)		(256	)		(218	)		(228	)
Net income	$	333		$	724		$	136		$	277
Basic and diluted per limited partnership unit: *	$	4.56		$	9.89		$	1.85		$	3.79
Weighted average number of limited partnership units outstanding during each period		65,829			65,826			65,824			65,820

* The sum of the quarterly per unit amounts may not total to the year to date per unit amounts due to the different methodology used in allocating income and losses between the general partner and limited partners. The allocation is done based upon the annual net income or loss, however the calculation for each quarter is based upon that quarters income or loss. In addition changes in the number of outstanding partnership units and rounding will also affect the result.

39

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP, AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2008

(in thousands)

COLUMN A	COLUMN B			COLUMN C					COLUMN D					COLUMN E									COLUMN F		COLUMN G	COLUMN H	COLUMN I
Description	Encumbrances			Initial Cost to Partnership					Cost Capitalized Subsequent to Acquisition					Gross Amount Carried at December 31, 2008									Accumulated Depreciation		Date Construction Began	Date Acquired	Life Depreciated Over
				Land			Buildings and Improvements		Improvements			Carrying Cost		Land			Buildings and Improvements			(a) Total
Rental Properties:
Commercial Office -
One Vanderbilt	$		(c)	$	572		$	—	$	6,934		$	—	$	572		$	6,934		$	7,506		$	3,687	11/30/85	11/06/84	3-40 yrs.
Carnegie Business Center I		(b	)		380			—		5,427			—		380			5,427			5,807			2,332	7/31/86	11/06/84	3-40 yrs.
Nothcourt Plaza (formerly known as IRC)		—			608			—		8,113			—		946			7,775			8,721			2,504	1/96	6/26/87	10-40 yrs.
Less: Provision for impairment of real estate		—			—			—		(1,678	)		—		(196	)		(1,482	)		(1,678	)		—
Vanderbilt Plaza		(b	)		511			—		14,876			—		511			14,876			15,387			3,200	11/03	11/06/84	40yrs.
		—			2,071			—		33,672			—		2,213			33,530			35,743			11,723
Commercial Retail -
Service Retail Center		(c	)		300			—		1,652			—		300			1,652			1,952			810	7/31/86	11/06/84	3-40 yrs.
Less: Provision for impairment of real estate		—			—			—		(250	)		—		(41	)		(209	)		(250	)		—
Promo Retail		(c	)		811			—		6,018			—		811			6,018			6,829			2,107	2/01/93	11/06/84	10-40 yrs.
Less: Provision for impairment of real estate		—			—			—		(119	)		—		(7	)		(112	)		(119	)		—
TGI Friday’s		(c	)		181			1,624		79			—		181			1,703			1,884			515	N/A	2/28/97	40yrs.
Circuit City		(c	)		284			—		3,613			—		454			3,443			3,897			1,544	7/96	11/06/84	20-40yrs.
Mimi’s Café		(c	)		149			675		66			—		154			736			890			245	7/98	11/06/84	40yrs.
Palm Court Retail #1		(c	)		194			617		68			—		194			685			879			237	7/98	11/06/84	40yrs.
Palm Court Retail #2		(c	)		212			636		22			—		212			658			870			177	7/98	11/06/84	40yrs.
		28,642			2,131			3,552		11,149			—		2,258			14,574			16,832			5,635
Construction in progress -1.6 acres		—			219			—		11,169			—		219			11,169			11,388			—	10/2006	11/06/84	N/A
		—			219			—		11,169			—		219			11,169			11,388			—
Land held for development - 14.7 acres		—			2,750			—		4,871			—		7,407			214			7,621			—	N/A	11/06/84	N/A
Less: Provision for impairment of real estate		—			(2,750	)		—		(4,871	)		—		(7,407	)		(214	)		(7,621	)		—
		—			—			—		—			—		—			—			—			—
	$	28,642		$	4,421		$	3,552	$	55,990		$	—	$	4,690		$	59,273		$	63,963		$	17,358

(a) The aggregate cost of land and buildings for federal income tax purposes is $69,926 (unaudited).

(b) Carnegie Business Center I and Vanderbilt Plaza are collateral for the debt of line of credit in the amount of $5,579.

(c) One Vanderbilt, Service Retail Center, Promo Retail, TGI Friday’s, Circuit City, Mimi Café, Palm Court Retail #1 and #2 are collateral for debt in the aggregate amount of $23,063.

(continued)

40

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP, AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

(in thousands)

Reconciliation of gross amount at which real estate was carried for the years ended December 31, 2008, 2007 and 2006:

	2008			2007			2006
Investments in real estate:
Balance at beginning of year	$	63,470		$	54,787		$	50,032
Additions during year		1,510			8,891			5,102
Provision for impairment		(268	)		—			—
Write-off of fully depreciated rental property		(749	)		(208	)		(347	)
Sales of real estate		—			—			—
Balance at end of year	$	63,963		$	63,470		$	54,787
Accumulated Depreciation:
Balance at beginning of year	$	15,493		$	13,207		$	11,451
Additions charged to expense		2,614			2,494			2,103
Write-off of fully depreciated rental property		(749	)		(208	)		(347	)
Sales of real estate		—			—			—
Balance at end of year	$	17,358		$	15,493		$	13,207

See accompanying independent registered public accounting firm’s report.

41

EXHIBIT INDEX

Exhibit No.	Exhibit Title
(3.1)	Second Amended and Restated Certificate and Agreement of Limited Partnership of the Partnership (included as Exhibit B to the Prospectus dated December 29, 1986, as amended on January 5, 1987, filed pursuant to Rule 424(b), file number 2-90327), is incorporated herein by reference.
(3.2)	First Amendment to the Second Amended and Restated Agreement and Certificate of Limited Partnership of the Partnership, dated March 11, 1991 (included as Exhibit 3.2 to 10-K dated October 31, 1992, file number 0-14207), is incorporated herein by reference.
(3.3)	Limited Partnership Agreement of RRF IV Tri-City Limited Partnership, a Delaware limited partnership of which Rancon Realty Fund IV, a California Limited Partnership is the limited partner (filed as Exhibit 3.3 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1996, file number 0-14207), is incorporated herein by reference.
(10.1)	First Amendment to the Second Amended Management, Administration and Consulting Agreement and amendment thereto for services rendered by Glenborough Corporation, dated August 31, 1998 (filed as Exhibit 10.1 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1998, file number 0-14207), is incorporated herein by reference.
(10.2)	Promissory note in the amount of $6,400,000, dated April 19, 1996, secured by Deeds of Trust on three of the Partnership’s Properties (filed as Exhibit 10.6 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1996, file number 0-14207), is incorporated herein by reference.
(10.3)	Agreement for Acquisition of Management Interests, dated December 20, 1994 (filed as Exhibit 10.3 to the Partnership’s quarterly report on Form 10-Q for the quarter ended September 30, 2003, file number 0-14207), is incorporated herein by reference.
(10.4)	Property Management and Services Agreement dated July 30, 2004 (filed as Exhibit 10.4 to the Partnership’s quarterly report on Form 10-Q for the quarter ended September 30, 2004) is incorporated herein by reference.
(10.5)	First Amendment to Property Management and Services Agreement dated March 30, 2005 (filed as Exhibit 10.4 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference.
(10.6)	Second Amendment to Property Management and Services Agreement dated December 1, 2005 (filed as Exhibit 10.4 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 200,9 is incorporated herein by reference.
(10.7)	Third Amendment to Property Management and Services Agreement dated May 1, 2006 (filed as Exhibit 10.4 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference.
(10.8)	Fourth Amendment to Property Management and Services Agreement dated March 1, 2009 (filed as Exhibit 10.4 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference.
(10.9)	Promissory note in the amount of $24,100,000, dated November 15, 2005 secured by Deeds of Trust on eight of the Partnership’s Properties (announcement was filed to the Partnership’s report on Form 8-K on December 7, 2005; Promissory Note is being filed as an exhibit to this Form 10-K because it was not previously filed with the SEC).
(31)	Section 302 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of the General Partner and the Partnership.
(32)	Section 906 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of the General Partner and the Partnership.*

* This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as required by Section 906, is not to be deemed “filed” with the SEC or subject to the rules and regulations promulgated by the SEC under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of said Act.

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