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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 Form 10-Q [ X ]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004
 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 
  Delaware 
  38-3304096 
  24 Frank Lloyd Wright
Drive, Lobby L, 4th Floor  
  (734) 994-5505 
  Not Applicable 
  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 [X] 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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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV Index to Form 10-Q Item No.
    
    
    
    PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Balance Sheets, June 30, 2004 and December 31, 2003
    
    
    3Statement of Operations for the three and six months ended June 30, 2004 and 2003
    
    
    4Statement of Changes
in Partners Capital for the six months ended June 30, 2004
    
    
    5Statement of Cash Flows for the six months ended June 30, 2004 and 2003
    
    
    6Notes to Financial Statements
    
    
    79Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    1013Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    13I Item 4.
    
    Controls and Procedures
    
    
    14PART II
    
    OTHER INFORMATIONOther Information
    
    
    1415SIGNATURES
    
    
    
    
    16CERTIFICATION Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
    
    
    17Certification Pursuant to Section 302Certification Pursuant to Section 906
  2




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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV 
 PART I  FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS Captec Franchise Capital Partners L.P. IV 
 Balance Sheets
 June 30,
    
    December 31,2004
    
    2003(Unaudited)AssetsCash and cash equivalents
    
    $
    1,631,552
    
    
    $
    694,742Restricted cash
    
    
    277,010
    
    
    
    233,390Investment in leases:Operating leases, net
    
    
    26,130,233
    
    
    
    29,667,981Financing leases, net
    
    
    1,434,984
    
    
    
    1,579,536Impaired financing leases, net
    
    
    15,000
    
    
    
    15,000Accounts receivable
    
    
    130,838
    
    
    
    300,189Unbilled rent, net
    
    
    1,171,875
    
    
    
    1,446,046Deferred financing costs, net
    
    
    257,507
    
    
    
    309,259Total assets
    
    $
    31,048,999
    
    
    $
    34,246,143Liabilities and Partners CapitalLiabilities:Notes payable
    
    $
    13,773,573
    
    
    $
    14,948,390Accounts payable and accrued expenses
    
    
    107,381
    
    
    
    160,513Due to related parties
    
    
    11,895
    
    
    
    11,109Total liabilities
    
    
    13,892,849
    
    
    
    15,120,012Partners capital:Limited partners capital accounts
    
    
    17,163,618
    
    
    
    19,138,676General partners capital account
    
    
    (7,468
    )
    
    
    (12,545
    )Total partners capital
    
    
    17,156,150
    
    
    
    19,126,131Total liabilities and partners capital
    
    $
    31,048,999
    
    
    $
    34,246,143
 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
  Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Operating revenue:Rental income
    
    
    681,411
    
    
    $
    766,459
    
    
    
    1,374,739
    
    
    $
    1,499,317Finance income
    
    
    37,389
    
    
    
    52,180
    
    
    
    76,659
    
    
    
    110,463Total operating revenue
    
    
    718,800
    
    
    
    818,639
    
    
    
    1,451,398
    
    
    
    1,609,780Operating costs and expenses:Interest expense
    
    
    288,079
    
    
    
    305,643
    
    
    
    582,885
    
    
    
    599,677Depreciation
    
    
    112,598
    
    
    
    112,598
    
    
    
    225,193
    
    
    
    219,419General and administrative
    
    
    181,287
    
    
    
    31,340
    
    
    
    303,326
    
    
    
    64,070Total operating costs and expenses
    
    
    581,964
    
    
    
    449,581
    
    
    
    1,111,404
    
    
    
    883,166Income from operations
    
    
    136,836
    
    
    
    369,058
    
    
    
    339,994
    
    
    
    726,614Other (expense) income:Gain on sale of equipment
    
    
    8,040
    
    
    
    275
    
    
    
    8,040
    
    
    
    20,116Interest and other income
    
    
    4,881
    
    
    
    20,083
    
    
    
    5,049
    
    
    
    302Total other (expense) income
    
    
    12,921
    
    
    
    20,358
    
    
    
    13,089
    
    
    
    20,418Income from continuing operations
    
    
    149,757
    
    
    
    389,416
    
    
    
    353,083
    
    
    
    747,032Discontinued Operations:Net gain on sale of properties
    
    
    17,811
    
    
    
    
    
    
    
    261,545
    
    
    
    Income from discontinued operations, net
    
    
    36,076
    
    
    
    73,865
    
    
    
    102,107
    
    
    
    147,730Debt Retirement Costs
    
    
    
    
    
    
    
    
    
    
    (209,010
    )
    
    
    Income from discontinued operations
    
    
    53,887
    
    
    
    73,865
    
    
    
    154,642
    
    
    
    147,730Net income
    
    $
    203,644
    
    
    $
    463,281
    
    
    $
    507,725
    
    
    $
    894,762Net income allocable to general partner
    
    $
    2,036
    
    
    $
    4,633
    
    
    $
    5,077
    
    
    $
    8,948Net income allocable to limited partners
    
    $
    201,607
    
    
    $
    458,648
    
    
    $
    502,648
    
    
    $
    885,814Net income per limited partnership unit
from continuing operations
    
    
    5.12
    
    
    
    13.19
    
    
    
    12.03
    
    
    
    25.25Net income per limited partnership unit
from discontinued operations
    
    
    1.84
    
    
    
    2.50
    
    
    
    5.27
    
    
    
    4.99Net income per limited partnership unit
    
    $
    6.96
    
    
    $
    15.69
    
    
    $
    17.30
    
    
    $
    30.24Weighted average number of limited partnership
units outstanding
    
    
    28,975
    
    
    
    29,232
    
    
    
    29,065
    
    
    
    29,286
 The accompanying notes are an integral part of the financial statements. 4




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Captec Franchise Capital Partners L.P. IV 
 Statements of Changes in Partners Capital
   Limited
    
    Limited
    
    General
    
    TotalPartners
    
    Partners
    
    Partners
    
    PartnersUnits
    
    Accounts
    
    Account
    
    CapitalBalance, December 31, 2003
    
    
    29,155
    
    
    $
    19,138,676
    
    
    $
    (12,545
    )
    
    $
    19,126,131Distributions  ($80.96 per weighted average
limited partnership unit)
    
    
    
    
    
    
    (2,352,990
    )
    
    
    
    
    
    
    (2,352,990
    )Repurchase of limited partnership units
    
    
    (180
    )
    
    
    (124,716
    )
    
    
    
    
    
    
    (124,716
    )Net income
    
    
    
    
    
    
    502,648
    
    
    
    5,077
    
    
    
    507,725Balance, June 30, 2004
    
    
    28,975
    
    
    $
    17,163,618
    
    
    $
    (7,468
    )
    
    $
    17,156,150
 The accompanying notes are an integral part of the financial statements. 5




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Captec Franchise Capital Partners L.P. IV 
 Statements of Cash Flows
   2004
    
    2003Cash flows from operating activities:Net Income
    
    $
    507,725
    
    
    $
    894,762Adjustments to net income:Depreciation
    
    
    247,915
    
    
    
    250,262Amortization of debt issuance costs
    
    
    51,752
    
    
    
    40,516Gain on sale of equipment
    
    
    (8,040
    )
    
    
    (20,116
    )Gain on sale of real estate
    
    
    (261,545
    )
    
    
    Increase in unbilled rent
    
    
    (23,288
    )
    
    
    (75,506
    )Decrease (increase) in accounts receivable
    
    
    169,351
    
    
    
    (139,931
    )(Decrease) increase in accounts payable and accrued expenses
    
    
    (53,132
    )
    
    
    61,598Decrease in due to related parties
    
    
    786
    
    
    
    9,493(Increase) decrease in restricted cash
    
    
    (43,620
    )
    
    
    673Net cash provided by operating activities
    
    
    587,904
    
    
    
    1,021,751Cash flows from investing activities:Purchase and construction cost of properties
subject to operating leases
    
    
    
    
    
    
    (1,155,000
    )Proceeds from sale of equipment
    
    
    40,200
    
    
    
    88,368Proceeds from sale of real estate
    
    
    3,848,836Principal collections on financing leases
    
    
    112,393
    
    
    
    473,149Net cash provided by (used in) investing activities
    
    
    4,001,429
    
    
    
    (593,483
    )Cash flows from financing activities:Proceeds from issuance of notes payable
    
    
    
    
    
    
    920,000Debt issuance costs
    
    
    
    
    
    
    (12,276
    )Repayments of notes payable
    
    
    (1,174,817
    )
    
    
    (161,358
    )Repurchase of limited partnership units
    
    
    (124,716
    )
    
    
    (79,555
    )Distributions to limited partners
    
    
    (2,352,990
    )
    
    
    (1,500,000
    )Net cash used in financing activities
    
    
    (3,652,523
    )
    
    
    (833,189
    )Net increase (decrease) in cash and cash equivalents
    
    
    936,810
    
    
    
    (404,921
    )Cash and cash equivalents, beginning of period
    
    
    694,742
    
    
    
    1,132,891Cash and cash equivalents, end of period
    
    $
    1,631,552
    
    
    $
    727,970
 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 organized 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 franchised fast food and family style
restaurants, as well as other national and regional retail chains. The initial general partners of the Partnership were Captec Franchise
Capital Corporation IV (the Corporation), a wholly-owned subsidiary of
Captec Financial Group, Inc. (Captec), an affiliate, and Patrick L.
Beach, the Chairman of the Board of Directors, President and Chief
Executive Officer of the Corporation and Captec. In August 1998, Captec
Net Lease Realty, Inc. (Captec Net Lease), an affiliate, acquired the
General Partnership interest of the Partnership. In December 2001, Captec
Net Lease merged with and into Commercial Net Lease Realty, Inc.
(Commercial Net Lease). In connection with the merger, Commercial Net
Lease agreed to sell and assign its General Partnership interest in the
Partnership to GP4 Asset Acquisition, LLC (GP4 Asset Acquisition),
which is wholly-owned by Mr. Beach and is an affiliate of Captec.
Effective January 15, 2002, the limited partners consented to the
transfer of the General Partnership interest. On September 11, 2003, the
Partnerships secured lender consented to the transfer of the general
partnership interest to GP4 Asset Acquisition. Upon receipt of the
secured lenders consent, the general partnership interest was
immediately transferred to GP4 Asset Acquisition. Therefore, as of
September 11, 2003, GP4 Asset Acquisition became the general partner of
the Partnership. The Partnership commenced a public offering (the Offering) of up to
30,000 limited partnership units (the Units), priced at $1,000 per
Unit, registered under the Securities Act of 1933, as amended, by means
of a Registration Statement filed on Form S-11, which was declared
effective by the Securities and Exchange Commission on December 23, 1996.
The Partnership accepted subscriptions for the minimum number of Units on
March 5, 1997 and immediately commenced operations. The Offering was
fully subscribed in December 1998. Since 1999, 1,025 Units have been
repurchased by the Partnership pursuant to the terms of the Repurchase
Plan set forth in the Partnerships December 23, 1996 prospectus with
respect to the Offering. At June 30, 2004, the Partnership had 28,975
Units issued and outstanding. The principal investment objectives of the Partnership are: (i)
preservation and protection of capital; (ii) distribution of cash flow
generated by the Partnerships leases; (iii) capital appreciation of
Partnership properties; (iv) generation of increased income and
protection against inflation through escalation of base rents or
participation in gross revenues of tenants of Partnership properties; and
(v) deferred taxation of cash distributions to the limited partners. Allocation of profits, losses and cash distributions from operations and
cash distributions from sale or refinancing activities 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. Net income per limited partnership interest is calculated using the
weighted average number of limited partnership Units outstanding during
the period and the limited partners allocable share of the net income. Distributions per limited partnership Unit are calculated using the
actual distributions disbursed during the period and the weighted average
number of limited partnership Units outstanding during the period. Actual
individual limited partner distributions may vary from this calculation
as 7




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a result of a variety of factors including: (i) actual distributions are
computed based on quarterly operating results and outstanding limited
partnership units, which are disbursed in the subsequent quarter; (ii)
certain limited partners have elected to receive monthly distributions
versus quarterly distributions which creates timing differences between
comparative calculations, and (iii) the calculation ignores the timing of
repurchases. The balance sheet of the Partnership as of June 30, 2004, the statements
of operations and cash flows for the periods ending June 30, 2004 and
June 30, 2003 and the statements of changes in partners capital for the
period ending June 30, 2004 have not been audited. In the opinion of
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, 2003 filed with the United States
Securities and Exchange Commission on March 28, 2004. 2. LAND AND BUILDING SUBJECT TO OPERATING LEASES: The net investment in operating leases as of June 30, 2004 is comprised
of the following: Land
    
    $
    10,261,125Building and improvements
    
    
    17,979,56428,240,689Less accumulated depreciation
    
    
    (2,110,456
    )Total
    
    $
    26,130,233
 3. NET INVESTMENT IN FINANCING LEASES: The net investment in financing leases as of June 30, 2004 is comprised
of the following: Minimum lease payments to be received
    
    $
    2,304,348Less unearned income
    
    
    (869,364
    )Net investment in financing leases
    
    $
    1,434,984
 4. NOTES PAYABLE: In December 1998, the Partnership entered into a $6.4 million term note.
The note has a 10-year term, is collateralized by certain properties
which have a carrying value of approximately $11.7 million 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 has a 10-year term, is collateralized by certain
properties subject to operating leases which have a carrying value of
approximately $3.4 million, and bears interest at a rate of 8.5% per
annum. In March 2004 the partnership defeased approximately $466,000 of
this note payable with proceeds from the sale of the Capital Foods
property. In October 2000, the Partnership assumed a $3.75 million term note,
collaterized by a certain property which has a carrying value of
approximately $4.7 million. The note has a 10-year term, and bears
interest at a rate of 8.35% per annum. 8




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In November 2001, the Partnership entered into an additional $1.5 million
term note for a 2-year term. In 2003, the notes original term was extended by an additional 2 years. The note is collateralized by certain
properties subject to operating leases and bears interest at a rate of
prime plus 2% per annum. Proceeds from this note were used to repay
approximately $700,000 of short-term borrowings and to provide working
capital intended to be used to fund Unit repurchases and potential
property acquisitions. In April 2003, the Partnership entered into an $862,500 term note. The
note has a 5-year term, is collaterized by a certain property subject to
an operating lease which has a carrying value of $1.1 million, and bears
interest at a rate of 6.25%, per annum. In April 2003, the Partnership entered into a $57,500 unsecured revolving
note. The note has a 2-year term and bears interest at a variable rate
equivalent to the Wall Street Journal (WSJ) prime rate plus 1/2%. The
interest rate is adjusted monthly for changes in the WSJ prime rate. In June 2004, the Partnership sold one of the two properties, subject to
an operating lease, that secured a $1.5 million note. Using proceeds
from the sale, the note was paid down to $874,000.
The remaining note is secured by a
certain property subject to an operating lease which has a carrying value
of $1.5 million, and bears interest a rate of prime plus 2% per annum. Debt issuance costs of $646,349 were incurred in connection with the
issuance of the notes, and are being amortized over the life of the notes
to interest expense using the straight-line method, which is not
materially different than the interest rate method. 5. EARNINGS FROM DISCONTINUED OPERATIONS: In accordance with SFAS No. 144, Accounting for Impairment or Disposal
of Long-Lived Assets, the Company has classified the operations of the
properties sold during six months ended June 30, 2004 as discontinued
operations. Accordingly, the results of operations related to the
properties have been reclassified to earnings from discontinued
operations. Discontinued operations reflect the sale of three properties
that were triggered by the tenants exercise of purchase option clauses
in the lease agreements. The properties were sold for net cash proceeds
of approximately $3.9 million, resulting in a gain of approximately
$262,000. There were approximately $209,000 in debt retirement costs
associated with the disposition of the Capital Food property. Expenses
include an allocation of interest expense based on the prorated share of
the outstanding debt. The following is a summary of earnings from
discontinued operations: Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Revenues:Operating lease rents
    
    $
    53,096
    
    
    $
    108,096
    
    
    $
    151,922
    
    
    $
    216,191Expenses:Interest expense
    
    
    7,847
    
    
    
    17,728
    
    
    
    25,575
    
    
    
    35,456Provision for depreciation
    
    
    8,642
    
    
    
    15,422
    
    
    
    22,721
    
    
    
    30,843Management Fees
    
    
    531
    
    
    
    1,081
    
    
    
    1,519
    
    
    
    2,162Income from discontinued operation, net
    
    $
    36,076
    
    
    $
    73,865
    
    
    $
    102,107
    
    
    $
    147,730
 6. CHANGE IN ESTIMATE The
Partnership holds vacant two properties, for which it is actively
seeking new tenants. The leases on these properties (for which rental
payments were over eighteen months past due), along with the rights
to pursue remedies against the tenant and all Guarantors, were
terminated as the Partnership entered into a Settlement Agreement
with the former tenants and Guarantors. Under that Settlement
Agreement, the Partnership received $100,000 as full and final payment
from all parties involved. The remaining receivable of $125,000 associated
with these leases was written off as bad debt expense in the current
quarter. 9




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS When used in this discussion, words such as intends, anticipates,
expects, will, could, estimate, and similar expressions are
intended to identify forward-looking statements. Forward-looking
statements are subject to certain risks and uncertainties, which could
cause actual results to differ materially from those described herein.
Such risks and uncertainties, some of which are beyond the Partnerships
control, include, but are not limited to, the following: (i) the
possibility that tenants and lessees may default in making rent payments,
(ii) the risk of fire or other casualty interrupting cash flow from a
property, (iii) the inability to enter into leases at the assumed rental
rates, (iv) unexpected expenses, and (v) the inability to sell properties
at anticipated prices and/or times. Any statements contained in this
report or any document incorporated herein by reference that are not
statements of historical fact may be deemed to be forward-looking
statements. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this report. The
Partnership disclaims, except as may be required by law, any obligations
to update or release revisions to these forward-looking statements to
reflect events or circumstances after the date of this report or to
reflect the occurrence of unanticipated events. RESULTS OF OPERATIONS Three Months Ended June 30, 2004.During the three months ended June
30, 2004, total operating revenue decreased 12.2% to approximately
$719,000 compared to approximately $819,000 for the three months ended
June 30, 2003. Rental revenue from operating leases for the three months
ended June 30, 2004 decreased 11.1% to approximately $681,000 compared to
approximately $766,000 for the prior year period, primarily due to the
vacant properties. Earned income from financing leases for the three
months ended June 30, 2004 decreased 28.3% to approximately $37,000
compared to approximately $52,000 for the three months ended June 30,
2003 due to the amortization of principal balances and the disposition of
an equipment lease in April 2004. Operating expenses totaled approximately $582,000 for the three months
ended June 30, 2004, compared to approximately $450,000 for the three
months ended June 30, 2003. The increase is primarily due to increased
general and administrative expenses as a result of increased property
taxes (on vacant properties), increased professional fees, and bad debt
expense of $125,000 relating to two leases for which rental payments had
been delinquent for 18 months, partially offset by decreases in
depreciation and interest expense due to the sale of the three properties in
2004. The Partnership has entered into a Settlement Agreement with the
guarantors which resulted in the collection of $100,000 as full and
final Settlement on the two delinquent real estate leases. The
Partnership is actively
seeking to re-tenant these properties. Other income for three months ended June 30, 2004 was approximately
$13,000 due to a gain on the disposition of an equipment lease in June
2004 of approximately $8,000 and late charge income of approximately
$5,000. Other income for three months ended June 30, 2003 was
approximately $20,000 due to a gain on the disposition of an equipment
lease in April 2003. As a result of the foregoing, the Partnerships net income from
continuing operations decreased 61.5% to approximately $150,000 for the
three months ended June 30, 2004, as compared to $389,000 for the three
months ended June 30, 2003 Discontinued operations reflect the sale of three properties pursuant to
purchase option clauses in the lease agreements. One of the three
properties was sold in the second quarter of 2004 for net cash proceeds of approximately $1.8 million,
 resulting in a gain of approximately
$18,000. As a result of the foregoing, the Partnerships net income decreased
56.0% to approximately $204,000 for the three months ended June 30, 2004,
compared to approximately $463,000 for the three months ended June 30,
2003. 10




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Six Months Ended June 30, 2004.During the six months ended June 30,
2004, total operating revenue decreased 9.8% to approximately $1,451,000
compared to approximately $1,610,000 for the six months ended June 30,
2003. Rental revenue from operating leases for the six months ended June
30, 2004 decreased 8.3% to approximately $1,375,000 compared to
approximately $1,499,000 for the six months ended June 30, 2003 due to
the vacant properties. Earned income from financing leases for the six
months ended June 30, 2004 decreased 30.6% to approximately $77,000
compared to approximately $110,000 for the six months ended June 30, 2003
due to the amortization of principal balances and disposition of an
equipment lease in April 2004. Operating expenses increased 25.8% to approximately $1,111,000 for the
six months ended June 30, 2004 compared to approximately $883,000 for the
six months ended June 30, 2003. The increase is primarily due to
increased general and administrative expenses as a result of increased
property taxes (on vacant properties), increased professional fees, and bad
debt expense of $125,000 relating to two leases for which rental payments
had been delinquent for 18 months, partially offset by decreases in
depreciation and interest expense due to the sale of the three properties in
2004. The Partnership has entered into a Settlement Agreement with the
guarantors which resulted in the collection of $100,000 as full and final settlement on the two delinquent real estate leases.  The Partnership is actively
seeking to re-tenant these properties. Other income for six months ended June 30, 2004 was approximately $13,000
due to a gain on the disposition of an equipment lease in June 2004 of
approximately $8,000 and late charge income of approximately $5,000.
Other income for six months ended June 30, 2003 was approximately $20,000
due to a gain on the disposition of an equipment lease in April 2003. As a result of the foregoing, the Partnerships net income from
continuing operations decreased 52.7% to approximately $353,000 for the
six months ended June 30, 2004, compared to $747,000 for the six months
ended June 30, 2003 Discontinued operations reflect the sale of three properties pursuant to
purchase option clauses in the lease agreements. The properties were
sold for net cash proceeds of approximately $3.9 million in 2004,
resulting in a gain of approximately $262,000. There were approximately
$209,000 in debt retirement costs associated with the disposition of one
of these properties. As a result of the foregoing, the Partnerships net income decreased
43.3% to approximately $508,000 for the six months ended June 30, 2004,
compared to approximately $895,000 for the six months ended June 30,
2003. The Partnership announced second quarter distributions of approximately
$1.6 million, of which approximately $1.4 million was distributed to
certain limited partners on July 15, 2004 and the remainder of which will
be distributed to limited partners electing to receive distributions on a
monthly basis. LIQUIDITY AND CAPITAL COMMITMENTS In December 1996, the Partnership commenced its offering of up to 30,000
Units. The offering reached final funding in December 1998 with
subscriptions for the entire 30,000 Units. Net proceeds after offering
expenses were approximately $26.1 million. In December 1998, the Partnership entered into a $6.4 million term note.
The Partnership entered into an additional $3.3 million term note in March
1999. Proceeds from the notes were used to acquire additional properties.
The notes have a ten-year term, are collateralized by certain properties
subject to operating leases, and bear interest at rates of 8.13% and 8.5%
per annum, respectively. In March 2004 the partnership defeased
approximately $466,000 of this note payable with proceeds from the sale of
a property. 11




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The Partnership purchased one net leased real estate property in October
2000 and assumed a $3.75 million term note in connection with the
acquisition. The note has a ten-year term and bears interest at a rate of
8.35% per annum. In November 2001, the Partnership entered into an additional $1.5 million
term note for a 2-year term. In 2003, the notes original term
was extended by an additional 2 years. The note is collateralized by certain
properties subject to operating leases and bears interest at a rate of
prime plus 2% per annum. Proceeds from this note were used to repay
approximately $700,000 of short-term borrowings and to provide working
capital intended to be used to fund Unit repurchases and potential
property acquisitions. In June 2004, the Partnership sold one of the two
properties, subject to an operating lease, that secured the $1.5 million
note. Using proceeds from the sale, the note was paid down to $874,000,
and the maturity date was extended an additional two years. The note is
secured by a certain property subject to an operating lease which has a
carrying value of $1.5 million, and bears interest a rate of prime plus 2%
per annum. In April 2003, the Partnership entered into an $862,500 term note. The
note has a 5-year term, is collaterized by a certain property subject to
an operating lease which has a carrying value of $1.1 million, and bears
an interest rate of 6.25%, per annum. In April 2003, the Partnership
entered into a $57,500 unsecured revolving note. The note has a 2-year
term and bears interest at a variable rate equivalent to the Wall Street
Journal (WSJ) prime rate plus 1/2%. The interest rate is adjusted monthly
for charges in the WSJ prime rate. Debt issuance costs of $646,349 were incurred in connection with the
issuance of the notes, and are being amortized over the life of the notes
to interest expense using the straight-line method, which is not
materially different than the interest rate method. As of June 30, 2004, the Partnership had a portfolio of 19 properties
located in 9 states, with a cost basis of $29.1 million, 6 performing
equipment leases with an original investment of $1.5 million and one
repossessed equipment package related to a defaulted equipment contract.
The remaining net investment in the Partnerships leased equipment is
$192,000, net of $1.3 million of aggregate principal collections on
financing leases during the life of those investments. Since inception,
the Partnership has received approximately $6.9 million of aggregate
principal collections on all of its financing lease investments (including
both active and terminated leases). During the quarter ending June 30,
2004, the partnership terminated the operating leases on two properties
for which rental payments had been delinquent for approximately 18 months.
Further, the Partnership entered into a Settlement Agreement with the
guarantors on these two leases. The Partnership is actively seeking to
re-tenant these properties, and one additional property that was vacated
in the fourth quarter of 2003. The General Partner does not believe
impairment exists on any of the vacant properties. The Partnership semi-annually considers written requests to repurchase
Units pursuant to the terms of the repurchase plan set forth in the
Partnerships prospectus with respect to the Offering. Since 1999, 1,025
Units have been repurchased by the Partnership pursuant to the terms of
the Repurchase Plan set forth in the Partnerships December 23, 1996
prospectus with respect to the Offering. At June 30, 2004, the Partnership
had 28,975 Units issued and outstanding. The Partnership expects to fund
any future Unit repurchases, if any, out of working capital reserves and
Net Sale or Refinancing Proceeds, but may also fund such repurchases out
of Cash Flow. The Partnership is not obligated to accept Unit repurchase
requests if the annualized Cash Flow for the three months prior to the
redemption period is less than 10% per annum of the Adjusted Investment
and/or if such repurchases would impair the capital of the Partnership. The Partnership expects that only limited amounts of liquid assets will be
required for existing properties since its property and equipment leases
require tenants and lessees to pay all taxes and assessments, maintenance
and repairs and insurance premiums, including casualty insurance, thereby
minimizing the Partnerships operating expenses and capital requirements.
The General Partner expects that the cash flow to be generated by the
Partnerships properties and equipment will provide adequate liquidity and
capital resources to pay operating expenses and provide distributions to
Limited Partners. 12




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Disclosure of Contractual Obligations Payment due by periodLess than
    
    1-3
    
    3-5
    
    More than 5Contractual Obligations
    
    Total
    
    1 year
    
    years
    
    years
    
    yearsLong-term Debt
Obligation
    
    $
    13,773,573
    
    
    $
    411,005
    
    
    $
    3,595,231
    
    
    $
    9,032,897
    
    
    $
    734,440
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Credit risk relates to investment in leases and accounts receivable
balances and results from the possibility that a lessee defaults on its
contractual obligation to the Partnership. Both the ability of the lessees
to pay rent on a timely basis and the amount of the rent (which is the
Partnerships principal source of income) are affected by general economic
conditions. A default by a lessee or other premature termination of a
lease agreement will interrupt rental payments and Partnership cash flows
would be temporarily impacted. In such an instance, the General Partner
expects that it would find a substitute lessee, however, there can be no
assurances that the property or equipment could be leased on comparable or
acceptable terms. The Partnership monitors this risk by performing ongoing
credit evaluations of lessees and maintains allowances for potential
credit losses. The Partnership is exposed to interest rate risks, primarily as a result
of its long-term fixed rate debt used to finance its investments. The
Partnerships approach to interest rate risk management is to limit the
impact of interest rate changes on earnings and cash flows by matching
investments with long-term fixed rate borrowings to the extent possible.
A change in interest rates will not affect the interest expense associated
with the fixed rate debt. Changes in the interest rate environment upon
maturity of this fixed rate debt could have an effect on the Partnerships
future cash flows and earnings, depending on whether the debt is replaced
with other fixed rate debt, variable rate debt, or equity or repaid by the
sale of assets. Current Notes Payables mature in 2005 and in the years
2008 through 2010. 13




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES Mr. Beach, acting in his capacity as the principal executive officer of
GP4 Asset Acquisition, is ultimately responsible for the disclosure
controls and procedures of the Partnership. Disclosure controls and
procedures are established and maintained by the Partnership to ensure the
information required to be disclosed by the Partnership in the reports
that it files or submits pursuant to the Securities Exchange Act of 1934,
as amended (the Act), is recorded, processed, summarized and reported
within the time periods specified in the Commissions rules and forms. Mr.
Beach has evaluated the effectiveness of the Partnerships disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this report, and has determined that the Partnerships disclosure
controls and procedures effectively communicate the information required
to be disclosed by the Partnership in the reports it files or submits
under the Act in a manner that allows timely decisions regarding such
disclosure. There have been no significant changes in the Partnerships internal
controls or in other factors that could significantly affect these
controls subsequent to the evaluation date, including, but not limited to,
any corrective actions with regard to significant deficiencies and
material weaknesses. 
 PART II  OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS.None ITEM 2. CHANGES IN SECURITIES. USE OF PROCEEDS AND ISSUER PURCHASES OF
EQUITY SECURITIES. ISSUER PURCHASES OF EQUITY SECURITIES (d) MaximumNumber (or(c) Total Number of
    
    Approximate DollarUnits Purchased as
    
    Value) of Units thatPart of Publicly
    
    May Yet Be(a) Total Number of
    
    (b) Average Price
    
    Announced Plan or
    
    Purchased Under thePeriod
    
    Units Purchased
    
    Paid Per Unit
    
    Program
    
    Plans or ProgramsApril 1  30, 2004
    
    
    180
    
    
    $
    692.87
    
    
    
    180
    
    
    See note belowMay 1  31, 2004
    
    
    0
    
    
    
    0
    
    
    
    0June 1  30, 2004
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    180
    
    
    $
    692.87
    
    
    
    180
 Note: The purchases of Units detailed above were made pursuant to the terms of
the Repurchase Plan set forth in the Partnership prospectus with respect to the
Offering. In accordance with that Plan, a maximum of 2% of the outstanding
Units can be repurchased in any year. For 2004, a maximum of 403 Units may yet
be repurchased under the Plan, subject to the other terms and conditions
thereof. ITEM 3. DEFAULTS UPON SENIOR SECURITIES.None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.None. ITEM 5. OTHER INFORMATION.None 14




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##### Table of Contents



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.  (a)
    
    The following exhibits are included herein or incorporated by
reference: Number
    
    Exhibit4
    
    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 November 28, 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 March 31, 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 March 31, 1999)31
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section
of the Sarbanes-Oxley Act of 2002
  (b)
    
    Reports on Form 8-K: There were no reports filed on Form 8-K for the quarter ended June 30,
2004. 15




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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 Franchise Capital Partners L.P. IVGP4 Asset Acquisition, LLCIts ManagerBy:
    
    /s/ Patrick L. BeachPatrick L. BeachPresidentDate:
    
    August 12, 2004
 16




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EXHIBIT INDEX EXHIBIT NO.
    
    DESCRIPTIONEX-31
    
    Certification pursuant to Section
302 of the Sarbanes-Oxley Act of 2002EX-32
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002