##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2001

OR

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

For the transition period from _____ to _____

Commission file number:        333-9371

|                                                                                            
|--------------------------------------------------------------------------------------------
|CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV                                                   
|                                                                                            
|(Exact name of registrant as specified in its charter)                                      
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Delaware                                                                                    
|                                                                                            
|(State or other jurisdiction of incorporation or organization)                              
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|38-3304095                                                                                  
|                                                                                            
|(IRS Employer Identification Number)                                                        
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|24 Frank Lloyd Wright Drive, Lobby L, 4th Floor
P.O. Box 544, Ann Arbor, Michigan 48106-0544
|                                                                                            
|(Address of principal executive offices, including zip code)                                
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|(734) 994-5505                                                                              
|                                                                                            
|(Issuers telephone number)                                                                 
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Not Applicable                                                                              
|                                                                                            
|(Former name, former address and former fiscal year, if changed since last year)            

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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to filing
requirements for the past 90 days. Yes  No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court: Not applicable

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date: Not applicable





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TABLE OF CONTENTS



|                                                                                              |                                                                                          |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                                                               
|ITEM 1. FINANCIAL STATEMENTS:                                                                
|                                                                                              | BALANCE SHEET, JUNE 30, 2001 AND DECEMBER 31, 2000                                      
|                                                                                              | STATEMENT OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000       
|                                                                                              | STATEMENT OF CHANGES IN PARTNERS CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2001        
|                                                                                              | STATEMENT OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
|                                                                                              | NOTES TO FINANCIAL STATEMENTS                                                           
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|PART II  OTHER INFORMATION                                                                  
|                                                                                              | OTHER INFORMATION                                                                       
|SIGNATURES                                                                                   



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##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

Index to Form 10-Q

|           |  |                                                                                       |  |       |    | 
|---------- |  | ------------------------------------------------------------------------------------- |  | ----- | -- | 
|Item No.   |  |                                                                                       |  | Page  |   
|           |  |                                                                                       |  |       |   
|PART I     |  | FINANCIAL INFORMATION                                                                
|          
|          
|          
|          
|          
|Item 1.    |  | Financial Statements:                                                                
|          
|          
|          
|          
|          
|           |  | Balance Sheet, June 30, 2001 and December 31, 2000                                    |  | 3     |   
|          
|          
|          
|          
|          
|           |  | Statement of Operations for the three and six months
ended June 30, 2001 and 2000     |  | 4     |   
|          
|          
|          
|          
|          
|           |  | Statement of Changes in Partners Capital for the six months
ended June 30, 2001      |  | 5     |   
|          
|          
|          
|          
|          
|           |  | Statement of Cash Flows for the six months
ended June 30, 2001 and 2000               |  | 6     |   
|          
|          
|          
|          
|          
|           |  | Notes to Financial Statements                                                         |  | 78   |   
|          
|          
|          
|          
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  | 911  |   
|          
|          
|          
|          
|          
|PART II    |  | OTHER INFORMATION                                                                    
|          
|          
|          
|          
|           |  | Other Information                                                                     |  | 1213 |   
|          
|          
|          
|          
|          
|SIGNATURES |  |                                                                                       |  |       | 14 | 

2



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##### Table of Contents












Captec Franchise Capital Partners L.P. IV
Balance Sheet

|                                     |                                       |                                       |                                 |            |            |             |            |            |              |  |  | 
|------------------------------------ | ------------------------------------- | ------------------------------------- | ------------------------------- | ---------- | ---------- | ----------- | ---------- | ---------- | ------------ |  |  | 
|                                     |                                       |                                       |                                 |            |            | (Unaudited) |           
|                                     |                                       |                                       |                                 |            |            | June 30,    |            |            | December 31, | 
|                                     |                                       |                                       |                                 |            |            | 2001        |            |            | 2000         | 
|                                     |                                       |                                       |                                 |            |            |            
|                                    
|                                     |                                       |                                       |                                 | Assets    
|                                    
|                                    
|                                    
|                                    
|                                    
|Cash and cash equivalents            |                                       | $                                     | 428,011                         |            |            | $           | 78,837     |           
|                                    
|                                    
|                                    
|                                    
|Restricted cash                      |                                       |                                       | 150,230                         |            |            |             | 100,229    |           
|                                    
|                                    
|                                    
|                                    
|Investment in property under leases:
|                                    
|                                    
|                                    
|                                    
|                                     | Operating leases, net                 |                                       |                                 | 29,641,846 |            |             |            | 29,869,323 |             
|                                    
|                                    
|                                    
|                                    
|                                     | Financing leases, net                 |                                       |                                 | 4,921,768  |            |             |            | 5,536,386  |             
|                                    
|                                    
|                                    
|                                    
|Accounts receivable                  |                                       |                                       | 16,856                          |            |            |             | 26,751     |           
|                                    
|                                    
|                                    
|                                    
|Unbilled rent, net                   |                                       |                                       | 898,518                         |            |            |             | 730,375    |           
|                                    
|                                    
|                                    
|                                    
|Due from related parties             |                                       |                                       | 12,268                          |            |            |             | 966        |           
|                                    
|                                    
|                                    
|                                    
|Deferred financing costs, net        |                                       |                                       | 446,396                         |            |            |             | 476,155    |           
|                                     |                                       |                                       |                                 |            |            |            
|                                     |                                       | Total assets                          |                                 | $          | 36,515,893 |             |            | $          | 36,819,022   | 
|                                     |                                       |                                       |                                 |            |            |            
|                                    
|                                     |                                       |                                       | Liabilities & Partners Capital
|                                    
|                                    
|                                    
|                                    
|                                    
|Liabilities:                        
|                                    
|                                    
|                                    
|                                    
|                                     | Notes payable                         |                                       | $                               | 14,005,292 |            |             | $          | 13,389,750 |             
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable and accrued expenses |                                       |                                 | 123,782    |            |             |            | 110,184    |             
|                                    
|                                    
|                                    
|                                    
|                                     | Due to related parties                |                                       |                                 | 72,682     |            |             |            | 253,454    |             
|                                     |                                       |                                       |                                 |            |            |            
|                                     |                                       | Total liabilities                     |                                 |            | 14,201,756 |             |            |            | 13,753,388   | 
|                                     |                                       |                                       |                                 |            |            |            
|Partners capital:                  
|                                    
|                                    
|                                    
|                                    
|Limited partners capital accounts   |                                       |                                       | 22,307,624                      |            |            |             | 23,069,410 |           
|                                    
|                                    
|                                    
|                                    
|General partners capital accounts   |                                       |                                       | 6,513                           |            |            |             | (3,776     | )         
|                                     |                                       |                                       |                                 |            |            |            
|                                     |                                       | Total partners capital               |                                 |            | 22,314,137 |             |            |            | 23,065,634   | 
|                                     |                                       |                                       |                                 |            |            |            
|                                     |                                       | Total liabilities & partners capital |                                 | $          | 36,515,893 |             |            | $          | 36,819,022   | 
|                                     |                                       |                                       |                                 |            |            |            

The accompanying notes are an integral part of
the financial statements.

3



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Captec Franchise Capital Partners L.P. IV
Statement of Operations(Unaudited)

|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |           |           |   |           |           |           | 
|---------------------------------------------------------------- | -------------------------------- | ---------------------------------- | ------- | ------------------ | ------- | - | ---------------- | ------- | ------- | ---- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                                                 |                                  |                                    |         | Three months ended |         |   | Six months ended |        
|                                                                 |                                  |                                    |         | June 30,           |         |   | June 30,         |        
|                                                                 |                                  |                                    |         |                    |         |   |                  |        
|                                                                 |                                  |                                    |         | 2001               |         |   | 2000             |         |         | 2001 |           |           | 2000      |  
|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |           |           |  
|Operating revenue:                                              
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Rental income                    |                                    | $       | 840,954            |         |   | $                | 731,541 |         |      | $         | 1,681,908 |           |   | $         | 1,451,713 |          
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Finance income                   |                                    |         | 119,938            |         |   |                  | 153,806 |         |      |           | 248,832   |           |   |           | 306,293   |          
|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |          
|                                                                 |                                  | Total operating revenue            |         |                    | 960,892 |   |                  |         | 885,347 |      |           |           | 1,930,740 |   |           |           | 1,758,006 | 
|                                                                
|                                                                
|                                                                
|                                                                
|Operating costs and expenses:                                   
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Interest expense                 |                                    |         | 305,654            |         |   |                  | 214,067 |         |      |           | 604,117   |           |   |           | 428,134   |          
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Depreciation                     |                                    |         | 120,738            |         |   |                  | 93,986  |         |      |           | 241,477   |           |   |           | 188,505   |          
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | General and administrative       |                                    |         | 29,691             |         |   |                  | 18,149  |         |      |           | 55,761    |           |   |           | 44,729    |          
|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |          
|                                                                 |                                  | Total operating costs and expenses |         |                    | 456,083 |   |                  |         | 326,202 |      |           |           | 901,355   |   |           |           | 661,368   | 
|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |          
|                                                                 |                                  | Income from operations             |         |                    | 504,809 |   |                  |         | 559,145 |      |           |           | 1,029,385 |   |           |           | 1,096,638 | 
|                                                                
|                                                                
|                                                                
|                                                                
|Other income (expense):                                         
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Interest and other income        |                                    |         |                   |         |   |                  | 50      |         |      |           |          |           |   |           | 50        |          
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | (Loss) gain on sale of equipment |                                    |         |                   |         |   |                  |        |         |      |           | (258      | )         |   |           | 42,433    |          
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Other expense                    |                                    |         |                   |         |   |                  |        |         |      |           | (182      | )         |   |           |          |          
|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |          
|                                                                 |                                  | Total other income (expense)       |         |                    |        |   |                  |         | 50      |      |           |           | (440      | ) |           |           | 42,483    | 
|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |          
|Net income                                                       |                                  |                                    | 504,809 |                    |         |   | 559,195          |         |         |      | 1,028,945 |           |           |   | 1,139,121 |          
|                                                                
|                                                                
|                                                                
|                                                                
|Net income allocable to general partner                          |                                  |                                    | 5,048   |                    |         |   | 5,592            |         |         |      | 10,289    |           |           |   | 11,391    |          
|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |          
|Net income allocable to limited partners                         |                                  | $                                  | 499,761 |                    |         | $ | 553,603          |         |         | $    | 1,018,656 |           |           | $ | 1,127,730 |          
|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |          
|Net income per limited partnership unit                          |                                  | $                                  | 16.95   |                    |         | $ | 18.59            |         |         | $    | 34.47     |           |           | $ | 37.81     |          
|                                                                 |                                  |                                    |         |                    |         |   |                  |         |         |      |           |          
|Weighted average number of limited partnership
units outstanding |                                  |                                    | 29,486  |                    |         |   | 29,773           |         |         |      | 29,555    |           |           |   | 29,828    |          

The accompanying notes are an integral part of the financial statements.

4



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Captec Franchise Capital Partners L.P. IV
Statement of Changes in Partners Capital
for the six months ended June 30, 2001
(Unaudited)

|                                        |  |           |        |   |           |   |            |           |  |           |          |   |  |   |            |  
|--------------------------------------- |  | --------- | ------ | - | --------- | - | ---------- | --------- |  | --------- | -------- | - |  | - | ---------- | -
|                                        |  | Limited   |        |   | Limited   |   |            | General   |  |           | Total    |  
|                                        |  | Partners' |        |   | Partners' |   |            | Partner's |  | Partners' |         
|                                        |  | Units     |        |   | Accounts  |   |            | Accounts  |  |           | Capital  |  
|                                        |  |           |        |   |           |   |            |           |  |           |          |  
|Balance, December 31, 2000              |  |           | 29,625 |   |           | $ | 23,069,410 |           |  | $         | (3,776   | ) |  | $ | 23,065,634 |  
|                                       
|                                       
|                                       
|                                       
|                                       
|Distributions  ($56.47 per unit)       |  |           |       |   |           |   | (1,665,000 | )         |  |           |         |   |  |   | (1,665,000 | )
|                                       
|                                       
|                                       
|                                       
|                                       
|Repurchase of limited partnership units |  |           | (139   | ) |           |   | (115,442   | )         |  |           | (115,442 | )
|                                       
|                                       
|                                       
|                                       
|                                       
|Net income                              |  |           |       |   |           |   | 1,018,656  |           |  |           | 10,289   |   |  |   | 1,028,945  |  
|                                        |  |           |        |   |           |   |            |           |  |           |          |  
|                                       
|Balance, June 30, 2001                  |  |           | 29,486 |   |           | $ | 22,307,624 |           |  | $         | 6,513    |   |  | $ | 22,314,137 |  
|                                        |  |           |        |   |           |   |            |           |  |           |          |  

The accompanying notes are an integral part of the financial statements.

5



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Captec Franchise Capital Partners L.P. IV
Statement of Cash Flowsfor the six months ended June 30, 2001 and 2000
(Unaudited)

|                                               |                                                                               |   |                                                              |            |      |          |            |            |   |          |  
|---------------------------------------------- | ----------------------------------------------------------------------------- | - | ------------------------------------------------------------ | ---------- | ---- | -------- | ---------- | ---------- | - | -------- | -
|                                               |                                                                               |   |                                                              |            | 2001 |          |            | 2000       |  
|                                               |                                                                               |   |                                                              |            |      |          |            |            |  
|Cash flows from operating activities:         
|                                              
|                                              
|                                              
|                                              
|                                               | Net Income                                                                    |   | $                                                            | 1,028,945  |      |          | $          | 1,139,121  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Adjustments to net income:                                                   
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                               |   | Depreciation                                                 |            |      | 241,477  |            |            |   | 188,505  |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                               |   | Amortization of debt issuance costs                          |            |      | 29,760   |            |            |   | 29,760   |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                               |   | (Loss) gain on sale of equipment                             |            |      | 258      |            |            |   | (42,433  | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                               |   | Increase in unbilled rent                                    |            |      | (168,143 | )          |            |   | (171,988 | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                               |   | Decrease in accounts receivable                              |            |      | 9,895    |            |            |   | 17,915   |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                               |   | Increase (decrease) in accounts payable and accrued expenses |            |      | 13,598   |            |            |   | (37,023  | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                               |   | (Increase) decrease in due from related parties              |            |      | (11,302  | )          |            |   | 11,644   |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                               |   | Decrease in due to related parties                           |            |      | (180,772 | )          |            |   | (11,773  | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                               |   | (Increase) decrease in restricted cash                       |            |      | (50,001  | )          |            |   | 165,468  |  
|                                               |                                                                               |   |                                                              |            |      |         
|Net cash provided by operating activities      |                                                                               |   | 913,715                                                      |            |      |          | 1,289,196  |           
|                                               |                                                                               |   |                                                              |            |      |         
|Cash flows from investing activities:         
|                                              
|                                              
|                                              
|                                              
|                                               | Purchase and construction advances for properties
subject to operating leases |   |                                                              | (14,000    | )    |          |            |           |  
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from sale of equipment                                               |   |                                                              |           |      |          |            | 611,121    |  
|                                              
|                                              
|                                              
|                                              
|                                               | Principal collections on financing leases                                     |   |                                                              | 614,359    |      |          |            | 667,659    |  
|                                               |                                                                               |   |                                                              |            |      |         
|Net cash provided by investing activities      |                                                                               |   | 600,359                                                      |            |      |          | 1,278,780  |           
|                                               |                                                                               |   |                                                              |            |      |         
|Cash flows from financing activities:         
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from issuance of notes payable                                       |   |                                                              | 703,000    |      |          |            |           |  
|                                              
|                                              
|                                              
|                                              
|                                               | Repayments of notes payable                                                   |   |                                                              | (87,458    | )    |          |            |           |  
|                                              
|                                              
|                                              
|                                              
|                                               | Repurchase of limited partnership units                                       |   |                                                              | (115,442   | )    |          |            | (99,282    | )
|                                              
|                                              
|                                              
|                                              
|                                               | Distributions to limited partners                                             |   |                                                              | (1,665,000 | )    |          |            | (1,810,001 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Distributions to general partner                                              |   |                                                              |           |      |          |            | (9,205     | )
|                                               |                                                                               |   |                                                              |            |      |         
|Net cash used in financing activities          |                                                                               |   | (1,164,900                                                   | )          |      |          | (1,918,488 | )         
|                                               |                                                                               |   |                                                              |            |      |         
|Net increase in cash and cash equivalents      |                                                                               |   | 349,174                                                      |            |      |          | 649,488    |           
|                                              
|                                              
|                                              
|                                              
|Cash and cash equivalents, beginning of period |                                                                               |   | 78,837                                                       |            |      |          | 701,725    |           
|                                               |                                                                               |   |                                                              |            |      |         
|Cash and cash equivalents, end of period       |                                                                               | $ | 428,011                                                      |            |      | $        | 1,351,213  |           
|                                               |                                                                               |   |                                                              |            |      |         

The accompanying notes are an integral part of the financial statements.

6



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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS



|1. |  | THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Captec Franchise Capital Partners L.P. IV (the Partnership), a Delaware
limited partnership, was formed on July 23, 1996 for the purpose of
acquiring income-producing commercial real properties and equipment
leased on a triple net or double net basis, primarily to operators of
national and regional chain and nationally franchised fast food and
family style restaurants, as well as other national and regional retail
chains. The general partners of the Partnership upon formation of the
Partnership were Captec Franchise Capital Corporation IV (the
Corporation), a wholly owned subsidiary of Captec Financial Group, Inc.
(Captec), and Patrick L. Beach, an individual, hereinafter collectively
referred to as the Sponsor. Patrick L. Beach is also the Chairman of the
Board of Directors, President and Chief Executive Officer of the
Corporation and Captec. In August, 1998 the general partnership interest
of the Partnership was acquired by Captec Net Lease Realty, Inc., an
affiliate of Captec, for $2,912,000.                  
|  
|   |  | The Partnership commenced a public offering of limited partnership
interest units on December 23, 1996. A maximum of 30,000 units, priced
at $1,000 per unit, were offered on a best efforts, part or none basis.
The Partnership broke impound on March 5, 1997, and the Partnership
immediately commenced operations. The Partnership completed the sale of
all 30,000 units in 1998. During 1999 the Partnership repurchased a
total of 117 units for $105,399, or 90% of the investors capital
account. In April 2000 the Partnership repurchased a total of 110 Units
for $99,282, or 90% of the investors capital account. In October 2000
the Partnership repurchased 148 Units for $131,080, or 89% of the
investors capital account. An additional 139 Units were repurchased in
April 2001 for $115,442, or 83% of the investors capital account. The
repurchase of the units was completed pursuant to the terms of the
Repurchase Plan set forth in the Partnerships Prospectus. At June 30,
2001, the Partnership had 29,486 units issued and outstanding.
|  
|   |  | Allocation of profits, losses and cash distributions from operations and
cash distributions from sale or refinancing are made pursuant to the
terms of the Partnership Agreement. Profits and losses from operations
are allocated among the limited partners based upon the number of units
owned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | The balance sheet of the Partnership as of June 30, 2001 and the
statements of operations and cash flows for the period ending June 30,
2001 and 2000 have not been audited. In the opinion of the Management,
these unaudited financial statements contain all adjustments necessary to
present fairly the financial position and results of operations and cash
flows of the Partnership for the periods then ended. Results of
operations for the interim periods are not necessarily indicative of
results for the full year. These unaudited financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Partnerships annual report on Form 10-K for the year
ended December 31, 2000 filed with the United States Securities and
Exchange Commission on March 30, 2001.                                                                                                                                                                                                                                         

7



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##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS (continued)



|2. |  | LAND AND BUILDING SUBJECT TO OPERATING LEASES:                                           
|-- |  | -----------------------------------------------------------------------------------------
|  
|   |  | The net investment in operating leases as of June 30, 2001 is comprised
of the following:

|                              |  |   |            |  
|----------------------------- |  | - | ---------- | -
|Land                          |  | $ | 11,197,200 |  
|                             
|                             
|                             
|                             
|Building and improvements     |  |   | 19,549,581 |  
|                              |  |   |           
|                              |  |   | 30,746,781 |  
|                             
|                             
|                             
|                             
|Less accumulated depreciation |  |   | (1,104,935 | )
|                              |  |   |           
|Total                         |  | $ | 29,641,846 |  
|                              |  |   |           



|3. |  | NET INVESTMENT IN FINANCING LEASES:                                                      
|-- |  | -----------------------------------------------------------------------------------------
|  
|   |  | The net investment in financing leases as of June 30, 2001 is comprised
of the following:

|                                      |  |   |            |  
|------------------------------------- |  | - | ---------- | -
|Minimum lease payments to be received |  | $ | 6,404,562  |  
|                                     
|                                     
|                                     
|                                     
|Estimated residual value              |  |   | 232,697    |  
|                                      |  |   |           
|Gross investment in financing leases  |  |   | 6,637,259  |  
|                                     
|                                     
|                                     
|                                     
|Less unearned income                  |  |   | (1,589,380 | )
|                                     
|                                     
|                                     
|                                     
|Less direct origination costs         |  |   | (126,111   | )
|                                      |  |   |           
|Net investment in financing leases    |  | $ | 4,921,768  |  
|                                      |  |   |           



|4. |  | NOTES PAYABLE:                                                                                                                                                                                                                                                                              
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In November, 1998, the Partnership entered into a $6.375 million term
note, the proceeds of which were used to acquire additional properties.
The note has a 10-year term, is collaterized by certain properties
subject to operating leases, and bears an interest rate of 8.13% per
annum.
|  
|   |  | In March, 1999, the Partnership entered into an additional $3.3 million
term note. The note also has a 10-year term, is collaterized by certain
properties subject to operating leases, and bears an interest rate of
8.5% per annum.                                                       
|  
|   |  | In October 2000, the Partnership assumed a $3.7 million term note in
connection with the acquisition of a net leased property. The note has a
10-year term, and bears an interest rate of 8.35% per annum.                                                                                  
|  
|   |  | Debt issuance costs of approximately $595,500 in aggregate were incurred
in connection with the issuance of the notes, and are being amortized
using the straight-line method over the 10-year term.                                                                                        

8



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##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I  FINANCIAL INFORMATION




|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

When used in this discussion, the words, intends, anticipates, expects,
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which could
cause actual results to differ materially from those projected. Such risks and
uncertainties include the following: (i) a tenant may default in making rent
payments, (ii) a fire or other casualty may interrupt the cash flow stream from
a property, (iii) the properties may not be able to be leased at the assumed
rental rates, (iv) unexpected expenses may be incurred in the ownership of the
properties, and (v) properties may not be able to be sold at the presently
anticipated prices and times.

As a result of these and other factors, the Partnership may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition and
operating results. These forward-looking statements speak only as of the date
hereof. The Partnership undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2001.During the three months ended June 30, 2001
total operating revenue increased 8.5% to approximately $961,000 as compared to
approximately $885,000 for the three months ended June 30, 2000. Rental
revenue from operating leases for the three months ended June 30, 2001
increased 15.0% to approximately $841,000 as compared to approximately $732,000
for the three months ended June 30, 2000, primarily due to the acquisition of
one net leased property in October 2000. Earned income from financing leases
for the three months ended June 30, 2001 decreased 22.0% to approximately
$120,000 as compared to approximately $154,000 for the three months ended June
30, 2000 due to the amortization of principal balances.

Operating expenses were approximately $456,000 for the three months ended June
30, 2001 as compared to approximately $326,000 for the three months ended June
30, 2000. The increase in operating expenses for the three months ended June
30, 2001 as compared to the three months ended June 30, 2000 is due to a full
period of depreciation for properties acquired in preceding periods and an
increase in interest expense related to the $3.7 million term note that the
Partnership entered into in October 2000, in conjunction with the acquisition
of a property.

As a result of the foregoing, the Partnerships net income decreased 9.7% to
$505,000 for the three months ended June 30, 2001 as compared to $559,000 for
the three months ended June 30, 2000.

9



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##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I  FINANCIAL INFORMATION

Six Months Ended June 30, 2001.During the six months ended June 30, 2001
total operating revenue increased 9.8% to approximately $1,931,000 as compared
to approximately $1,758,000 for the six months ended June 30, 2000. Rental
revenue from operating leases for the six months ended June 30, 2001 increased
15.9% to approximately $1,682,000 as compared to approximately $1,452,000 for
the six months ended June 30, 2000, primarily due to the acquisition of one net
leased property in October 2000. Earned income from financing leases for the
six months ended June 30, 2001 decreased 18.8% to approximately $249,000 as
compared to approximately $306,000 for the six months ended June 30, 2000 due
to the sale of one equipment lease in March 2000 and the amortization of
principal balances.

Operating expenses were approximately $901,000 for the six months ended June
30, 2001 as compared to approximately $661,000 for the six months ended June
30, 2000. The increase in operating expenses for the six months ended June 30,
2001 as compared to the six months ended June 30, 2000 is due to a full period
of depreciation for properties acquired in preceding periods and an increase in
interest expense related to the $3.7 million term note that the Partnership
entered into in October 2000, in conjunction with the acquisition of a
property.

Other expenses were $440 for the six months ended June 30, 2001 as compared to
other income of approximately $42,000 for the six months ended June 30, 2000.
The other income was a result of a gain on the sale of one equipment lease.

As a result of the foregoing, the Partnerships net income decreased 9.7% to
$1,029,000 for the six months ended June 30, 2001 as compared to $1,139,000 for
the six months ended June 30, 2000.

Distributions.The Partnership announced second quarter distributions of
$740,000, of which $643,891 was distributed to its Limited Partners on July 16,
2001 and the remaining $96,109 will be distributed to those limited partners
who elected to receive distributions on a monthly basis.

10



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##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I  FINANCIAL INFORMATION

LIQUIDITY AND CAPITAL COMMITMENTS

The Partnership commenced the offering of up to 30,000 limited partnership
units registered under the Securities Act of 1933, as amended, by means of a
Registration Statement which was declared effective by the Securities and
Exchange Commission on December 23, 1996. The Offering reached final funding
in December, 1998 with subscriptions for the entire offering of 30,000 units.
Net proceeds after offering expenses were approximately $26.1 million.

In December, 1998 the Partnership entered into a $6.375 million term note. The
Partnership entered into an additional $3.276 million term note in June, 1999.
Proceeds from the notes were used to acquire additional properties. The notes
have a 10-year term, are collaterized by certain properties subject to
operating leases, and bear interest at rates ranging from 8.13 to 8.5% per
annum. Debt issuance costs of approximately $595,500 in aggregate incurred in
connection with the issuance of the notes are being amortized into interest
expense over the life of the notes using the straight-line method.

The Partnership purchased one net leased real estate property in October 2000.
The Partnership assumed a $3.75 million term note in connection with the
acquisition. The note has a 10-year term and bears interest at the rate of
8.35% per annum.

At June 30, 2001, the Partnership had invested $31.9 million in 21 net leased
real estate properties and $7.7 million in 23 equipment packages. As of June
30, 2001 the Partnerships investments were allocated approximately 80% to
properties and 20% to equipment.

The Partnership expects to require limited amounts of liquid assets since the
properties and equipment leases require the lessees to pay all taxes and
assessments, maintenance and repair items (except, with respect to double net
properties, costs associated with maintenance and repair of the exterior walls
and roof of the property) and insurance premiums, including casualty insurance.
The general partners expect that the cash flow to be generated by the
Partnerships properties and equipment will be adequate to pay operating
expenses and provide distributions to Limited Partners.

11



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##### Table of Contents









CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART II  OTHER INFORMATION

|        |  |                                                            |  | 
|------- |  | ---------------------------------------------------------- |  | 
|ITEM 1. |  | LEGAL PROCEEDINGS. None.                                  
|       
|       
|       
|       
|       
|ITEM 2. |  | CHANGES IN SECURITIES. None.                              
|       
|       
|       
|       
|       
|ITEM 3. |  | DEFAULTS UPON SENIOR SECURITIES. None.                    
|       
|       
|       
|       
|       
|ITEM 4. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.

ITEM 5.    OTHER INFORMATION.Captec Net Lease Realty, Inc. (CRRR), the
general partner of Captec Franchise Capital Partners L.P. IV (the
Partnership), has entered into a definitive merger agreement with Commercial
Net Lease Realty, Inc. (NYSE: NNN). The proposed merger is expected to close
in the fourth quarter of 2001. In connection with the merger, CRRR
has agreed to sell its general partnership interest in the partnership
to a wholly-owned subsidiary of CRC Acquisition LLC which is a
Michigan liability company of which Patrick L. Beach, the
Chairman of the Board of Directors and President and Chief Executive
Officer of CRRR, is the sole member. This will insure continuity of
the management of the Partnership following the acquisition of CRRR
by CNL pursuant to the merger.

In recognition of the above facts and to facilitate the transaction, an
affiliate of Mr. Beach will purchase, immediately after the closing of the
merger, certain non-real estate assets of CRRR and assume liabilities
associated with those assets. The assets to be purchased by Mr. Beach include
the general partners interest in the Partnership.

In order to complete this transition, the limited partners will need to consent
to the transfer of the general partner interest to the affiliate of Mr. Beach.
A proxy statement regarding this consent will be filed with the Securities and
Exchange Commission. Once declared effective, the proxy statement will be
mailed to all limited partners.

12



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##### Table of Contents



CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART II  OTHER INFORMATION

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K.

| |  | 
| |  | 

| | (a) |  | The following exhibits are included herein or incorporated by reference:
| | --- |  | ------------------------------------------------------------------------

|       |  |                                                                                                                                                                                                                                                                                             
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Exhibit                                                                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                             
|      
|4      |  | Agreement of Limited Partnership of Registrant. (Incorporated by reference
from Exhibit B of the final Prospectus dated December 23,
1996, as supplemented and filed with the Securities and
Exchange Commission, SEC File No. 333-9371)                                                    
|      
|      
|      
|      
|      
|4.1    |  | Amended Agreement of Limited Partnership of Registrant.
(Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-K for the year ended December 31,
1998)                                                                                                         
|      
|      
|      
|      
|      
|10.1   |  | Promissory Note dated December 17, 1998 between Registrant
and National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrants Form 10-K for the year
ended December 31, 1998)                                                                     
|      
|      
|      
|      
|      
|10.2   |  | Promissory Note dated June 30, 1999 between Registrant and
National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrants Form 10-Q for the quarter
ended June 30, 1999)                                                                          
|      
|      
|      
|      
|      
|99.1   |  | Pages 35-42 of the final Prospectus dated December 23, 1997
as supplemented. (Incorporated by reference from the final
Prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) promulgated under the Securities Act of
1933, as amended. SEC File No. 333-9371)



| | (b) |  | Reports on Form 8-K:
| | --- |  | --------------------



| |                                                                             
| | ----------------------------------------------------------------------------
| | There were no reports filed on Form 8-K for the quarter ended June 30, 2001.

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



| |       |                                          
| | ----- | -----------------------------------------
| | By:   | Captec Net Lease Realty, Inc.            
|
|
|
|
| |       | Managing General Partner of              
|
|
|
|
| |       | Captec Franchise Capital Partners L.P. IV
|
|
|
|
|
| | By:   | /s/ W. Ross Martin                       
| |       |                                          
|
| |       | W. Ross Martin                           
|
|
|
|
| |       | Executive Vice President,                
|
|
|
|
| |       | Chief Financial Officer                  
|
|
|
|
|
| | Date: | August 14, 2001                          

14