<PAGE>
                           AMERICAN INCOME PARTNERS IV


                American Income Partners IV-D Limited Partnership

                Annual Report to the Partners, December 31, 1996


<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                     INDEX TO ANNUAL REPORT TO THE PARTNERS

                                                                            PAGE

SELECTED FINANCIAL DATA                                                        2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                                          3-5

FINANCIAL STATEMENTS:

   Report of Independent Auditors                                              6

   Statement of Financial Position at December 31, 1995                        7

   Statement of Changes in Net Assets in Liquidation for the Period
   October 1, 1996 to December 31, 1996                                        8

   Statement of Operations for the Period January 1, 1996 to
   September 30, 1996 and for the Years Ended December 31, 1995
   and 1994                                                                    9

   Statement of Changes in Partners' Capital for the Period
   January 1, 1996 to September 30, 1996 and for the Years Ended
   December 31, 1995 and 1994                                                 10

   Statement of Cash Flows for the Period January 1, 1996 to
   September 30, 1996 and for the Years Ended December 31, 1995
   and 1994                                                                   11

   Notes to the Financial Statements                                       12-20

ADDITIONAL FINANCIAL INFORMATION:

   Schedule of Excess (Deficiency) of Total Cash Generated to
   Cost of Equipment Disposed                                                 22

   Statement of Cash and Distributable Cash from Operations,
   Sales and Refinancings                                                     23

   Schedule of Costs Reimbursed to the Managing General Partner
   and its Affiliates as Required by Section 10.4 of the Amended
   and Restated Agreement and Certificate of Limited Partnership              24


<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                             SELECTED FINANCIAL DATA

The following data should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations and the financial
statements. The discussion of the 1996 results, presented below, incorporates
the nine month operating period ended September 30, 1996 and the three month
liquidation period ended December 31, 1996.

For each of the five years in the period ended December 31, 1996:

<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS            1996         1995         1994         1993          1992

<S>                          <C>          <C>          <C>          <C>           <C>        
Lease revenue                $ 1,793,666  $ 2,693,294  $ 3,796,618  $ 4,835,623   $ 5,697,559

Net income (loss) before
extraordinary item           $   821,023  $ 1,811,605  $ 1,044,147  $(2,962,151)  $(1,148,843)

Extraordinary item                  --           --           --      2,713,427          --
                             -----------  -----------  -----------  -----------   -----------

Net income (loss)            $   821,023  $ 1,811,605  $ 1,044,147  $  (248,724)  $(1,148,843)

Per Unit:
   Net income (loss) before
   extraordinary item        $      0.75  $      1.65  $      0.95  $     (2.70)  $     (1.05)

   Extraordinary item               --           --           --           2.47          --
                             -----------  -----------  -----------  -----------   -----------

   Net income (loss)         $      0.75  $      1.65  $      0.95  $     (0.23)  $     (1.05)

   Cash distributions        $      5.22  $      2.50  $      2.50  $      2.50   $      2.75

FINANCIAL POSITION

Total assets                        --    $ 8,488,286  $10,333,211  $13,233,144   $21,375,739

Total long-term obligations         --    $ 2,095,524  $ 2,997,584  $ 4,177,880   $ 8,952,432

Partners' capital                   --    $ 5,645,999  $ 6,576,668  $ 8,274,795   $11,265,793
</TABLE>


                                       2
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR
          ENDED DECEMBER 31, 1995 AND THE YEAR ENDED DECEMBER 31, 1995
                  COMPARED TO THE YEAR ENDED DECEMBER 31, 1994

Results of Operations and Liquidity and Capital Resources

American Income Partners IV-D Limited Partnership (the Partnership) was
established in 1989 as a direct-participation equipment leasing program. The
Partnership's principal purpose was (i) to acquire and lease a diversified
portfolio of capital equipment to third-party lessees and (ii) to distribute the
net cash flow realized from the Partnership's business operations to its
Partners. The Partnership was capitalized with equity contributions of
$27,148,525 from its Recognized Owners and $1,000 from its Managing General
Partner. Following its inception, the Partnership acquired a diversified pool of
capital equipment at an aggregate cost of $44,016,096, a significant portion of
which was financed by third-party banks or other institutional lenders. On
September 30, 1996, the Partnership sold substantially all of its assets and
thereafter wound up its operations. The Partnership was dissolved on December
31, 1996.

Organized as a limited-life entity, the Partnership was anticipated to be
dissolved within approximately seven years of its formation. A significant
portion of the Partnership's equipment assets, representing 67% of its original
equipment portfolio, was sold in the ordinary course of business prior to
September 30, 1996. On September 30, 1996, the remainder of the Partnership's
equipment portfolio was sold to RSL Finance Limited Partnership II (the Buyer).
Accordingly, the financial statements accompanying this discussion were prepared
using the liquidation basis of accounting for the period October 1, 1996 through
December 31, 1996. The Statement of Changes in Net Assets in Liquidation
reflects the liquidation of assets during that period.

A comparison of current and prior years' financial results is not presented
because it is not considered meaningful due the dissolution of the Partnership
and the liquidation of its assets.

Prior to its dissolution, the Partnership's principal sources of revenue
consisted of rental income from equipment leases and sales proceeds generated
from the disposition of its equipment assets. Rental income was used first to
extinguish indebtedness and second to pay the Partnership's management fees and
operating expenses. Net cash flow from all sources, after satisfaction of debt
service, management fees and operating expenses, was used to pay cash
distributions to the Partners. Over its lifetime, the Partnership paid aggregate
cash distributions of $25,061,653. In accordance with the Partnership's Amended
and Restated Agreement and Certificate of Limited Partnership, the Partnership's
Recognized Owners were paid 99% of such cash distributions, or $24,811,036
($22.85 per unit) and the General Partners were paid 1% of such distributions,
or $250,617. At December 31, 1996, the Partnership had a contingency reserve
balance of $741,148. These funds will be used to satisfy any expenses of the
Partnership which may arise after its dissolution date. To the extent that these
funds are not utilized for such purposes, they will be paid to the Partners
according to their respective allocation percentages, 99%, or $733,737,
representing $0.68 per unit, to the Recognized Owners and 1%, or $7,411, to the
General Partners.


                                       3
<PAGE>

During the second quarter of 1996, the Partnership engaged an investment adviser
to solicit potential buyers for the Partnership's remaining equipment assets and
associated lease contracts. The remarketing effort was undertaken jointly by 15
individual equipment leasing programs, consisting of the Partnership and 14
affiliated partnerships (the Other Affected Partnerships). Thirteen of the
programs, including the Partnership, sold all of their equipment assets (the
Liquidated Programs); and two programs sold only their proportionate ownership
interests in certain assets owned jointly with one or more of the Liquidated
Programs (collectively, the Sale Assets). Substantially all of the Partnership's
equipment assets of material value represented partial ownership interests
whereby the Partnership owned less than a 100% interest in the equipment it
sold. The remaining interests in such assets were owned by one or more of the
Other Affected Partnerships.

On September 30, 1996, the Partnership and each of the Other Affected
Partnerships executed individual purchase and sale agreements with the Buyer for
all of the Sale Assets, except for one McDonnell Douglas MD-82 aircraft leased
to Northwest Airlines, Inc. (the NWA Aircraft), hereafter the Sales Assets, as
Revised. The Partnership, which had no interest in the NWA Aircraft, sold all of
its remaining equipment, having a net book value of $5,374,043, to the Buyer for
$5,102,996. In aggregate, the Partnership and the Other Affected Partnerships
realized $32,997,000, prior to transaction costs, for all of the Sale Assets, as
Revised. The amounts allocated to the Partnership and to each of the Other
Affected Partnerships were determined based upon an apportionment of the sales
price among all equipment comprising the Sale Assets, as Revised according to
each asset's estimated re-sale value, as determined by an independent appraiser.
For financial reporting purposes, the Partnership recognized a net loss of
$271,047 in connection with this sale. In addition, the Partnership recognized a
net gain of $153,995 during the nine months ended September 30, 1996 from the
sale of other equipment which had a net book value of $15,342 for financial
reporting purposes at the date of sale.

For the year ended December 31, 1996, the Partnership recognized lease revenue
of $1,793,666. In addition, the Partnership earned interest income from
temporary cash investments. Operating expenses consisted principally of
administrative charges, professional service costs, such as legal and accounting
fees, as well as printing, distribution, and remarketing expenses, including
equipment storage and repairs and maintenance costs. Operating costs for 1996
include all identified costs anticipated to be incurred in connection with the
Partnership's wind-up and dissolution.

On October 10, 1996, the Managing General Partner entered into a Cross
Partnership Agreement (the Agreement) with the general partners of certain of
the Other Affected Partnerships participating in the sale transaction described
above. Pursuant to the Agreement, the Partnership and each of the other
partnerships agreed to set aside a contingency reserve for future liabilities.
The Agreement provides that obligations of any individual partnership which are
not associated with the sale transaction will directly reduce that partnership's
reserve balance, whereas costs pertaining to the sale transaction will be
allocated against the reserve balances of the Partnership and each of the other
partnerships on a proportionate basis. If the reserve balance of the Partnership
is depleted to zero, the reserve balances contributed by the other partnerships
will be debited on a proportionate basis to cover the deficit. If the reserve
balances of any one of the other partnerships is depleted to zero, the reserve
balance of the Partnership and any other partnerships having a positive reserve
balance shall be debited on a proportionate basis to cover the deficit. Upon
termination of the Agreement, any remaining monies will be distributed to the
partners of those partnerships with positive reserve balances. At December 31,
1996, the Partnership had a contingency reserve balance of $741,148. To the
extent that this contingency reserve is not necessary to satisfy any unforeseen
liabilities of the Partnership, it will be remitted to the Partners.


                                       4
<PAGE>

The dissolution of the Partnership was recorded at the Office of the Secretary
of State of the Commonwealth of Massachusetts on December 31, 1996. The
Partnership's business operations were concluded on that date. Immediately
following the filing of the Partnership's 1996 Form 10-K, the Managing General
Partner of the Partnership will file Form 15, Certification and Notice of
Termination of Registration under Section 12(g) of the Securities Exchange Act
of 1934 or Suspension of Duty to File Reports Under Sections 13 and 15(d) of the
Securities Exchange Act of 1934, with the United States Securities and Exchange
Commission.


                                       5
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Partners of American Income Partners IV-D Limited Partnership:

We have audited the accompanying statement of financial position of American
Income Partners IV-D Limited Partnership as of December 31, 1995, and the
related statements of operations, changes in partners' capital and cash flows
for each of the two years ended December 31, 1995 and for the period from
January 1, 1996 to September 30, 1996. In addition, we have audited the
statement of changes in net assets in liquidation for the period from October 1,
1996 to December 31, 1996. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As described in Note 1 to the financial statements, the Managing General Partner
of American Income Partners IV-D Limited Partnership approved a plan of
liquidation on September 30, 1996, and the Partnership commenced liquidation
shortly thereafter. As a result, the Partnership has changed its basis of
accounting for periods subsequent to September 30, 1996 from the going-concern
basis to a liquidation basis. The liquidation was completed and the Partnership
was dissolved on December 31, 1996.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Income Partners IV-D
Limited Partnership as of December 31, 1995, the results of its operations and
its cash flows for each of the two years ended December 31, 1995, and for the
period from January 1, 1996 to September 30, 1996, and the changes in its net
assets in liquidation for the period from October 1, 1996 to December 31, 1996,
in conformity with generally accepted accounting principles applied on the bases
described in the preceding paragraph.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Additional Financial Information
identified in the Index to Annual Report to the Partners is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.


                                                       ERNST & YOUNG LLP

Boston, Massachusetts
March 7, 1997


                                       6
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                         STATEMENT OF FINANCIAL POSITION
                                DECEMBER 31, 1995

                                     ASSETS

ASSETS:
   Cash and cash equivalents                                        $ 2,000,212
   Rents receivable, net of allowance
     for doubtful accounts of $75,000                                   291,960
   Accounts receivable--affiliate                                       213,685
   Equipment at cost, net of accumulated
     depreciation of $10,767,778                                      5,982,429
                                                                    -----------
         Total assets                                               $ 8,488,286
                                                                    ===========

                       LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
   Notes payable                                                    $ 2,095,524
   Accrued interest                                                      29,643
   Accrued liabilities                                                   20,000
   Deferred rental income                                                11,551
   Cash distributions payable to partners                               685,569
                                                                    -----------
         Total liabilities                                            2,842,287
                                                                    -----------
PARTNERS' CAPITAL (DEFICIT):
   General Partners                                                    (182,186)
   Limited Partnership Interests
     (1,085,941 Units, initial
     purchase price of $25 each)                                      5,828,185
                                                                    -----------
         Total partners' capital                                      5,645,999
                                                                    -----------
         Total liabilities and partners' capital                    $ 8,488,286
                                                                    ===========

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


                                       7
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
               FOR THE PERIOD OCTOBER 1, 1996 TO DECEMBER 31, 1996

INTEREST INCOME                                                       $  12,377

OPERATING EXPENSES--AFFILIATE                                           (19,411)

LIQUIDATING DISTRIBUTION                                               (741,148)
                                                                      ----------
NET DECREASE IN NET ASSETS IN LIQUIDATION DURING THE PERIOD            (748,182)

NET ASSETS IN LIQUIDATION, BEGINNING OF PERIOD                          748,182
                                                                      ---------
NET ASSETS IN LIQUIDATION, END OF PERIOD                              $    --
                                                                      =========

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


                                       8
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                             STATEMENT OF OPERATIONS
              FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 30, 1996
               AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994

                                         FOR THE PERIOD
                                         JANUARY 1, 1996   FOR THE YEARS ENDED
                                        TO  SEPTEMBER 30,      DECEMBER 31,
                                              1996          1995         1994

INCOME:
   Lease revenue                          $ 1,793,666   $ 2,693,294  $ 3,796,618
   Interest income                             68,083       121,300       84,159
   Gain (loss) on sale of equipment          (117,052)      803,927      733,270
                                          -----------   -----------  -----------
         Total income                       1,744,697     3,618,521    4,614,047
                                          -----------   -----------  -----------
EXPENSES:
   Depreciation and amortization              593,044     1,270,771    3,065,031
   Interest expense                            66,961       252,048      213,668
   Equipment management fees--affiliate        89,683       134,665      189,831
   Operating expenses--affiliate              166,952       149,432      101,370
                                          -----------   -----------  -----------
         Total expenses                       916,640     1,806,916    3,569,900
                                          -----------   -----------  -----------
NET INCOME                                $   828,057   $ 1,811,605  $ 1,044,147
                                          ===========   ===========  ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT   $      0.75   $      1.65  $      0.95
                                          ===========   ===========  ===========
CASH DISTRIBUTIONS DECLARED PER
LIMITED PARTNERSHIP UNIT                  $      5.22   $      2.50  $      2.50
                                          ===========   ===========  ===========

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


                                       9
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                    STATEMENT OF CHANGES IN PARTNERS' CAPITAL
              FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 30, 1996
               AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
                                   GENERAL
                                   PARTNERS       RECOGNIZED OWNERS
                                    AMOUNT        UNITS      AMOUNT         TOTAL

<S>                             <C>             <C>        <C>           <C>        
BALANCE, DECEMBER 31, 1993      $  (155,897)    1,085,941  $ 8,430,692   $ 8,274,795

   Net income--1994                  10,441          --      1,033,706     1,044,147

   Cash distributions declared      (27,423)         --     (2,714,851)   (2,742,274)
                                -----------   -----------  -----------   -----------

BALANCE, DECEMBER 31, 1994         (172,879)    1,085,941    6,749,547     6,576,668

   Net income--1995                  18,116          --      1,793,489     1,811,605

   Cash distributions declared      (27,423)         --     (2,714,851)   (2,742,274)
                                -----------   -----------  -----------   -----------

BALANCE, DECEMBER 31, 1995         (182,186)    1,085,941    5,828,185     5,645,999

   Net income for the period
   January 1, 1996 to
   September 30, 1996                 8,281          --        819,776       828,057

   Cash distributions declared      (57,259)         --     (5,668,615)   (5,725,874)
                                -----------   -----------  -----------   -----------

BALANCE, SEPTEMBER 30, 1996     $  (231,164)    1,085,941  $   979,346   $   748,182
                                ===========   ===========  ===========   ===========
</TABLE>

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


                                       10
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                             STATEMENT OF CASH FLOWS
              FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 30, 1996
               AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
                                                     FOR THE PERIOD
                                                     JANUARY 1, 1996   FOR THE YEARS ENDED
                                                    TO  SEPTEMBER 30,      DECEMBER 31,
                                                          1996          1995         1994
<S>                                                   <C>           <C>           <C>        
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
   Net income                                         $   828,057   $ 1,811,605   $ 1,044,147
   Adjustments to reconcile net income
   to cash from operating activities-
     Depreciation and amortization                        593,044     1,270,771     3,065,031
     Decrease in allowance for doubtful accounts          (75,000)         --            --
     (Gain) loss on sale of equipment                     117,052      (803,927)     (733,270)
   Changes in assets and liabilities-
       Decrease (increase) in-
         Rents receivable                                 366,960           438       336,416
         Due from Buyer                                   (69,581)         --            --
         Accounts receivable--affiliate                   (33,889)       46,137        (9,063)
       Increase (decrease) in-
         Accrued interest                                 (28,850)      (11,167)        4,529
         Accrued liabilities                               78,414         4,500         1,500
         Accrued liabilities--affiliate                    19,913        (4,459)          725
         Deferred rental income                           (11,551)       (1,070)      (28,264)
                                                      -----------   -----------   -----------
            Net cash from operating activities          1,784,569     2,312,828     3,681,751
                                                      -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from equipment sales                          169,337       890,599     1,311,973
                                                      -----------   -----------   -----------
            Net cash from investing activities            169,337       890,599     1,311,973
                                                      -----------   -----------   -----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
   Principal payments--notes payable                   (1,871,041)     (902,060)   (1,772,796)
   Distributions paid                                  (2,056,707)   (2,742,274)   (2,742,274)
                                                      -----------   -----------   -----------
            Net cash used in financing activities      (3,927,748)   (3,644,334)   (4,515,070)
                                                      -----------   -----------   -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (1,973,842)     (440,907)      478,654

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD          2,000,212     2,441,119     1,962,465
                                                      -----------   -----------   -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD              $    26,370   $ 2,000,212   $ 2,441,119
                                                      ===========   ===========   ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the period for interest           $    95,811   $   263,215   $   209,139
                                                      ===========   ===========   ===========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING 
ACTIVITIES: 

   As discussed in Notes 1 and 4, the
   Partnership entered into a sale
   transaction to dispose of its equipment
   portfolio. This transaction was closed on
   September 30, 1996. The Partnership
   received net sales proceeds of $5,102,996,
   a portion of which was subsequently used
   to repay outstanding principal and
   interest of $224,483 and $793,
   respectively. The remainder, $4,877,720,
   was deposited into an escrow account and
   transferred to the Partnership on October
   3, 1996.

   In 1994, the Partnership capitalized
   $592,500 of refurbishment costs incurred
   to upgrade certain equipment, all of which
   was financed by a third-party lender. 

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


                                       11
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                        NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

(1)    ORGANIZATION AND PARTNERSHIP MATTERS

       Organization

       The Partnership was organized as a limited partnership under the
       Massachusetts Uniform Limited Partnership Act (the Uniform Act) on March
       30, 1989, for the purpose of acquiring and leasing to third parties a
       diversified portfolio of capital equipment. Partners' capital initially
       consisted of contributions of $1,000 from the Managing General Partner
       (AFG Leasing IV Incorporated) and $100 from the Initial Limited Partner
       (AFG Assignor Corporation). On July 6, 1989, the Partnership issued
       1,085,941 units, representing assignments of limited partnership
       interests (the Units) to 1,982 investors. Unitholders and Limited
       Partners (other than the Initial Limited Partner) are collectively
       referred to as Recognized Owners. On December 31, 1996, the General
       Partners of the Partnership caused the Partnership's Amended and Restated
       Agreement and Certificate of Limited Partnership (the Restated Agreement,
       as amended) to be canceled by filing a Certificate of Cancellation with
       the Massachusetts Secretary under the Uniform Act. Accordingly, the
       Partnership was dissolved on December 31, 1996.

       The Partnership originally had three General Partners: AFG Leasing IV
       Incorporated, a Massachusetts corporation established in 1987 and a
       wholly-owned subsidiary of American Finance Group (AFG), a Massachusetts
       general partnership, which subsequently became Equis Financial Group
       Limited Partnership (collectively referred to herein as AFG), Daniel J.
       Roggemann and Geoffrey A. MacDonald (collectively the General Partners).
       Mr. Roggemann subsequently elected to withdraw as an Individual General
       Partner. AFG Leasing IV Incorporated is also the general partner or
       managing general partner of certain affiliated partnerships sponsored by
       AFG.

       Significant operations commenced July 7, 1989 when the Partnership made
       its initial equipment purchase. Pursuant to the Restated Agreement, as
       amended, Distributable Cash From Operations and Distributable Cash From
       Sales or Refinancings were allocated 99% to the Recognized Owners and 1%
       to the General Partners.

       Under the terms of a management agreement between the Partnership and
       AF/AIP Programs Limited Partnership and the terms of an identical
       management agreement between AF/AIP Programs Limited Partnership and AFG
       (collectively, the Management Agreement), management services were
       provided by AFG to the Partnership at fees which the Managing General
       Partner believed to be competitive for similar services. (Also see Note
       4.)


                                       12
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                        NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

                                   (Continued)

(1)    ORGANIZATION AND PARTNERSHIP MATTERS (Continued)

       Organization (Continued)

       Equis Financial Group Limited Partnership (Equis) is a Massachusetts
       partnership formerly known as American Finance Group (AFG). AFG was
       established in 1988 as a Massachusetts general partnership and succeeded
       American Finance Group, Inc., a Massachusetts corporation organized in
       1980. Equis and its subsidiaries (collectively, the Company) are engaged
       in various aspects of the equipment leasing business, including Equis'
       role as Equipment Manager or Advisor to the Partnership and several other
       Direct-Participation equipment leasing programs sponsored or co-sponsored
       by AFG (the Other Investment Programs). The Company arranges to broker or
       originate equipment leases, acts as remarketing agent and asset manager,
       and provides leasing support services, such as billing, collecting and
       asset tracking.

       The general partner of Equis, with a 1% controlling interest, is Equis
       Corporation, a Massachusetts corporation owned and controlled entirely by
       Gary D. Engle, its President and Chief Executive Officer. Equis
       Corporation also owns a controlling 1% general partner interest in Equis'
       99% limited partner, GDE Acquisition Limited Partnership (GDE LP). Equis
       Corporation and GDE LP were established in December 1994 by Mr. Engle for
       the sole purpose of acquiring the business of AFG.

       In January 1996, the Company sold certain assets of AFG relating
       primarily to the business of originating new leases, and the name
       "American Finance Group," and its acronym to a third party (the Buyer).
       AFG changed its name to Equis Financial Group Limited Partnership after
       the sale was concluded. Pursuant to terms of the sale agreements, Equis
       agreed not to compete with the Buyer's lease origination business for a
       period of five years; however, Equis is permitted to originate certain
       equipment leases, principally those involving noninvestment grade lessees
       and ocean-going vessels, which are not in competition with the Buyer. In
       addition, the sale agreements specifically reserved to Equis the rights
       to continue using the name American Finance Group and its acronym in
       connection with the Partnership and the Other Investment Programs and to
       continue managing all assets owned by the Partnership and the Other
       Investment Programs, including the right to satisfy all required
       equipment acquisitions utilizing either brokers or the Buyer. Geoffrey A.
       MacDonald, Chairman of Equis Corporation and Gary D. Engle agreed not to
       compete with the sold business on terms and conditions similar to those
       for the Company.


                                       13
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                        NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

                                   (Continued)

(1)    ORGANIZATION AND PARTNERSHIP MATTERS (Continued)

       Basis of Presentation

       On September 30, 1996, the Partnership sold all of its equipment assets
       for $5,102,996. The entire remarketing effort was undertaken jointly by
       15 individual equipment leasing programs, consisting of the Partnership
       and 14 affiliated partnerships, each of which individually executed
       separate purchase and sale agreements with RSL Finance Limited
       Partnership II (the Buyer) for all or a portion of their equipment assets
       (the Sale Assets). These proceeds were first used to repay the entire
       outstanding balance due under the notes payable and the associated
       interest of $224,483 and $793, respectively. (See Note 4.)

       On October 15, 1996, the Partnership paid a cash distribution of
       $4,354,736 of which $4,311,189 was paid to the Limited Partners and
       $43,547 was paid to the Managing General Partner. As discussed in Note 4,
       the Partnership had a contingency reserve of $741,148 at December 31,
       1996.

       The Managing General Partner approved a plan of liquidation on September
       30, 1996 and commenced liquidation on October 1, 1996. On December 31,
       1996, the Managing General Partner dissolved the Partnership in
       accordance with the Restated Agreement, as amended.

       The financial statements presented have been prepared on a going-concern
       basis through September 30, 1996. Due to the ultimate dissolution of the
       Partnership requiring liquidation and distribution of its net assets, the
       Partnership changed its basis of accounting from going-concern to
       liquidation basis effective October 1, 1996. Liquidation basis requires
       that statements be prepared based on anticipated liquidating values of
       assets and liabilities.

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       Statement of Cash Flows

       The Partnership considered liquid investment instruments purchased with a
       maturity of three months or less to be cash equivalents. From time to
       time, the Partnership invested excess cash with large institutional banks
       in reverse repurchase agreements with overnight maturities. Under the
       terms of the agreements, title to the underlying securities passed to the
       Partnership. The securities underlying the agreements were book entry
       securities.

       Revenue Recognition

       Rents were payable to the Partnership monthly, quarterly or semi-annually
       and no significant amounts were calculated on factors other than the
       passage of time. The leases were accounted for as operating


                                       14
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                        NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

                                   (Continued)

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

       Revenue Recognition (Continued)

       leases and were noncancellable. Rents received prior to their due dates
       were deferred. The Partnership's entire equipment portfolio was sold on
       September 30, 1996. No future rents are due.

       Revenue from major individual lessees which accounted for 10% or more of
       lease revenue during each of the past three years is as follows:

                                                  1996        1995        1994

Gearbulk Shipowning Ltd. (formerly Kristian
   Gerhard Jebsen Skipsrederi A/S)            $  707,138  $1,009,910  $1,005,818
Union Pacific Railroad Company                $  463,086  $  658,070  $  585,367
Ford Motor Company                            $  266,125        --          --

       Use of Estimates

       The preparation of the financial statements in conformity with generally
       accepted accounting principles requires the use of estimates and
       assumptions that affect the amounts reported in the financial statements
       and accompanying notes. Actual results could differ from those estimates.

       Equipment on Lease

       All equipment was acquired from AFG, one of its affiliates, including
       other equipment leasing programs sponsored by AFG, or from third-party
       sellers. Equipment cost represented asset base price plus acquisition
       fees and was determined in accordance with the Restated Agreement, as
       amended, and certain regulatory guidelines. Asset base price was affected
       by the relationship of the seller to the Partnership as summarized
       herein. Where the seller of the equipment was AFG or an affiliate, asset
       base price was the lower of (i) the actual price paid for the equipment
       by AFG or the affiliate plus all actual costs accrued by AFG or the
       affiliate while carrying the equipment less the amount of all rents
       earned by AFG or the affiliate prior to selling the equipment or (ii)
       fair market value as determined by the Managing General Partner in its
       best judgment, including all liens and encumbrances on the equipment and
       other actual expenses. Where the seller of the equipment was a third
       party who did not manufacture the equipment, asset base price was the
       lower of (i) the price invoiced by the third party or (ii) fair market
       value as determined by the Managing General Partner. Where the seller of
       the equipment was a third party who also manufactured the equipment,
       asset base price was the manufacturer's invoice price, which price was
       considered to be representative of fair market value.


                                       15
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                        NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

                                   (Continued)

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

       Depreciation

       The Partnership's depreciation policy was intended to allocated the cost
       of equipment over the period during which it produced economic benefit.
       The principal period of economic benefit was considered to correspond to
       each asset's primary lease term, which term generally represented the
       period of greatest revenue potential for each asset. Accordingly, to the
       extent that an asset was held on primary lease term, the Partnership
       depreciated the difference between (i) the cost of the asset and (ii) the
       estimated residual value of the asset on a straight-line basis over such
       term. For purposes of this policy, estimated residual values represented
       estimates of equipment values at the date of primary lease expiration. To
       the extent that an asset was held beyond its primary lease term, the
       Partnership continued to depreciate the remaining net book value of the
       asset on a straight-line basis over the asset's remaining economic life.

       Accrued Liabilities--Affiliate

       Unpaid operating expenses paid by AFG on behalf of the Partnership were
       reported as Accrued Liabilities--Affiliate. (See Note 4.)

       Allocation of Profits and Losses

       For financial statement purposes, net income or loss was allocated to
       each Partner according to their respective ownership percentages (99% to
       the Recognized Owners and 1% to the General Partners). See Note 5
       concerning allocation of income or loss for income tax purposes.

       Net Income and Cash Distributions Per Unit

       Net income and cash distributions per Unit were based on 1,085,941 Units
       outstanding during each of the three years in the period ended December
       31, 1996, and computed after allocation of the General Partners' 1% share
       of net income and cash distributions.

       Provision for Income Taxes

       No provision or benefit from income taxes is included in the accompanying
       financial statements. The Partners are responsible for reporting their
       proportionate shares of the Partnership's taxable income or loss and
       other tax attributes on their tax returns.


                                       16
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                        NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

                                   (Continued)

(3)    EQUIPMENT

       At September 30, 1996, the Partnership disposed of its entire equipment
       portfolio.

       As equipment was sold to third parties, or otherwise disposed of, the
       Partnership recognized a gain or loss equal to the difference between the
       net book value of the equipment at the time of sale or disposition and
       the proceeds realized upon sale or disposition.

(4)    RELATED PARTY TRANSACTIONS

       All operating expenses incurred by the Partnership were paid by AFG on
       behalf of the Partnership and AFG was reimbursed at its actual cost for
       such expenditures. Fees and other costs incurred during each of the three
       years in the period ended December 31, 1996, which were paid or accrued
       by the Partnership to AFG or its Affiliates, are as follows:

                                                1996         1995         1994

Equipment management fees                     $ 89,683     $134,665     $189,831
Administrative charges                          33,382       21,000       12,000
Reimbursable operating expenses
   due to third parties                        152,981      128,432       89,370
                                              --------     --------     --------
         Total                                $276,046     $284,097     $291,201
                                              ========     ========     ========

       As provided under the terms of the Management Agreement, AFG was
       compensated for its services to the Partnership. Such services included
       all aspects of acquisition, management and sale of equipment. For
       acquisition services, AFG was compensated by an amount equal to 4.75% of
       Equipment Base Price paid by the Partnership. For management services,
       AFG was compensated by an amount equal to the lesser of (i) 5% of gross
       lease rental revenue earned by the Partnership or (ii) fees which the
       Managing General Partner reasonably believed to be competitive for
       similar services for similar equipment. Both of these fees were subject
       to certain limitations defined in the Management Agreement. As Payout was
       not achieved, AFG received no compensation for services connected to the
       sale of equipment under its subordinated remarketing agreement.

       Administrative charges represent amounts owed to AFG, pursuant to Section
       10.4 of the Restated Agreement, as amended, for persons employed by AFG
       who were engaged in providing administrative services to the Partnership.
       Reimbursable operating expenses due to third parties represent costs paid
       by AFG on behalf of the Partnership which were reimbursed to AFG.

       All equipment was purchased from AFG, one of its affiliates, including
       other equipment leasing programs sponsored by AFG, or from third-party
       sellers. The Partnership's Purchase Price was determined by the method
       described in Note 2.


                                       17
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                        NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

                                   (Continued)

(4)    RELATED PARTY TRANSACTIONS (Continued)

       All rents and proceeds from the sale of equipment were paid directly to
       either AFG or to a lender. AFG temporarily deposited collected funds in a
       separate interest-bearing escrow account prior to remittance to the
       Partnership.

       On August 18, 1995, Atlantic Acquisition Limited Partnership (AALP), a
       newly formed Massachusetts limited partnership owned and controlled by
       certain principals of AFG, commenced a voluntary cash Tender Offer (the
       Offer) for up to approximately 45% of the outstanding units of limited
       partner interest in this Partnership and 20 affiliated partnerships
       sponsored and managed by AFG. The Offer was subsequently amended and
       supplemented in order to provide additional disclosure to unitholders;
       increase the offer price; reduce the number of units sought to
       approximately 35% of the outstanding units; and extend the expiration
       date of the Offer to October 20, 1995. Following commencement of the
       Offer, certain legal actions were initiated by interested persons against
       AALP, each of the general partners (4 in total) of the 21 affected
       programs, and various other affiliates and related parties. One action, a
       class action brought in the United States District Court for the District
       of Massachusetts (the Court) on behalf of the unitholders (Recognized
       Owners), sought to enjoin the Offer and obtain unspecified monetary
       damages. A settlement of this litigation was approved by the Court on
       November 15, 1995. The Plaintiffs filed an appeal in this matter. On
       November 26, 1996, the United States Court of Appeals for the First
       Circuit handed down a decision affirming the Court's approval of the
       settlement. A second class action, brought in the Superior Court of the
       Commonwealth of Massachusetts (the Superior Court) seeking to enjoin the
       Offer, obtain unspecified monetary damages, and intervene in the first
       class action, was dismissed by the Superior Court. The Recognized Owners
       of the Partnership tendered 108,955 units or 10.03% of the total
       outstanding units of the Partnership to AALP. In September 1996, AALP
       sold these units to Equis for $518,793.

       The remarketing effort described in Note 1 was undertaken jointly by 15
       individual equipment leasing programs, consisting of the Partnership and
       14 affiliated partnerships (Other Affected Partnerships). Thirteen of the
       programs, including the Partnership, sold all of their equipment assets
       (the Liquidated Programs); and two programs sold only their proportionate
       ownership interests in certain assets owned jointly with one or more of
       the Liquidated Programs. Substantially all of the Partnership's equipment
       assets of material value represented partial ownership interests whereby
       the Partnership owned less than a 100% interest in the equipment it sold.
       The remaining interests in such assets were owned by one or more of the
       Other Affected Partnerships. Ultimately, the Sale Assets were sold for an
       aggregate adjusted sale price of approximately $32,997,000, of which the
       Partnership's proportionate share, net of associated costs, was
       determined to be $5,102,996. The Partnership's proportionate share in
       this transaction was net of certain third-party advisory fees incurred in
       connection with the equipment sale.


                                       18
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                        NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

                                   (Continued)

(4)    RELATED PARTY TRANSACTIONS (Continued)

       The Buyer is a limited partnership established to acquire the Sale Assets
       and has no direct affiliation with the Partnership, the Other Affected
       Partnerships, the General Partners or AFG. The sole general partner of
       the Buyer of the Partnership's equipment is RSL Holdings, Inc. (RSL). An
       affiliate of RSL purchased a significant limited partnership interest in
       a direct-participation equipment leasing program co-sponsored by AFG in
       1992. AFG acquired this interest in 1993 for cash and assumption of
       indebtedness. There have been no other business dealings between the
       Buyer and AFG and their affiliates.

       On October 10, 1996, the Managing General Partner entered into a Cross
       Partnership Agreement (the Agreement) with the general partners of
       certain of the Other Affected Partnerships participating in the sale
       transaction described above. Pursuant to the Agreement, the Partnership
       and each of the other partnerships agreed to set aside a contingency
       reserve for future liabilities. The Agreement provides that obligations
       of any individual partnership which are not associated with the sale
       transaction will directly reduce that partnership's reserve balance,
       whereas costs pertaining to the sale transaction will be allocated
       against the reserve balances of the Partnership and each of the other
       partnerships on a proportionate basis. If the reserve balance of the
       Partnership is depleted to zero, the reserve balances contributed by the
       other partnerships will be debited on a proportionate basis to cover the
       deficit. If the reserve balances of any one of the other partnerships is
       depleted to zero, the reserve balance of the Partnership and any other
       partnerships having a positive reserve balance shall be debited on a
       proportionate basis to cover the deficit. Upon termination of the
       Agreement, any remaining monies will be distributed to the partners of
       those partnerships with positive reserve balances. At December 31, 1996,
       the Partnership had a contingency reserve balance of $741,148. To the
       extent that this contingency reserve is not necessary to satisfy any
       unforeseen liabilities of the Partnership, it will be remitted to the
       Partners.

(5)    INCOME TAXES

       The Partnership was not a taxable entity for federal income tax purposes.
       Accordingly, no provision for income taxes was recorded in the accounts
       of the Partnership.

       For financial statement purposes, the Partnership allocated net income or
       loss to each class of partner according to their respective ownership
       percentages (99% to the Recognized Owners and 1% to the General
       Partners). This convention differed from the income or loss allocation
       requirements for income tax and Dissolution Event purposes as delineated
       in the Restated Agreement, as amended. For income tax purposes, the
       Partnership allocated net income or net loss in accordance with such
       agreement.


                                       19
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                        NOTES TO THE FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

                                   (Continued)

(5)    INCOME TAXES (Continued)

       The following is a reconciliation between net income reported for
       financial statement and federal income tax reporting purposes for the
       years ended December 31, 1996, 1995 and 1994:

                                             1996          1995          1994

Net income                              $   821,023   $ 1,811,605   $ 1,044,147
Financial statement depreciation
   in excess of (less than)
   tax depreciation                          14,677      (245,967)      968,007
Prepaid rental income                       (11,551)       (1,070)      (28,264)
Other                                       712,686      (172,959)      401,937
                                        -----------   -----------   -----------

Net income for federal
income tax reporting purposes           $ 1,536,835   $ 1,391,609   $ 2,385,827
                                        ===========   ===========   ===========

       The principal component of Other consists of the difference between tax
       gain on equipment disposals and the financial statement gain (loss) on
       equipment disposals.

       The following is a reconciliation between partners' capital reported for
       financial statement and federal income tax reporting purposes for the
       year ended December 31, 1995. A reconciliation for the year ended
       December 31, 1996 has not been presented, as partners' capital for
       financial statement and federal income tax reporting purposes is zero.

       Partners' capital                                         $ 5,645,999
       
       Add back selling commissions and organization
       and offering costs                                          3,184,952
       
       Financial statement distributions in excess
       of tax distributions                                            6,856
       
       Cumulative difference between federal income
       tax and financial statement income (loss)                    (722,051)
                                                                 -----------
       
       Partners' capital for federal income tax
       reporting purposes                                        $ 8,115,756
                                                                 ===========

       Financial statement distributions in excess of tax distributions and
       cumulative difference between federal income tax and financial statement
       income (loss) represent timing differences.


                                       20
<PAGE>

                        ADDITIONAL FINANCIAL INFORMATION


                                       21
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                  SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH
                     GENERATED TO COST OF EQUIPMENT DISPOSED
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

The Partnership classified all rents from leasing equipment as lease revenue.
Upon expiration of the primary lease terms, equipment was sold, rented on a
month-to-month basis or re-leased for a defined period under a new or extended
lease agreement. The proceeds generated from selling or re-leasing the
equipment, in addition to any month-to-month revenue, represented the total
residual value realized for each item of equipment. Therefore, the financial
statement gain or loss, which reflects the difference between the net book value
of the equipment at the time of sale or disposition and the proceeds realized
upon sale or disposition may not reflect the aggregate residual proceeds
realized by the Partnership for such equipment.

The following is a summary of cash excess associated with equipment dispositions
occurring during the years ended December 31, 1996, 1995 and 1994.

                                             1996          1995          1994
Rents earned prior to disposal
of equipment, net of
interest charges                         $17,304,177   $ 3,566,504   $ 5,521,585

Sale proceeds realized upon
disposition of equipment
                                           5,272,333       890,599     1,311,973
                                         -----------   -----------   -----------
Total cash generated from rents
and equipment sale proceeds               22,576,510     4,457,103     6,833,558

Original acquisition cost
of equipment disposed                     16,750,207     3,456,565     5,710,472
                                         -----------   -----------   -----------
Excess of total cash generated
to cost of equipment disposed            $ 5,826,303   $ 1,000,538   $ 1,123,086
                                         ===========   ===========   ===========


                                       22
<PAGE>

               AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

                    STATEMENT OF CASH AND DISTRIBUTABLE CASH
                    FROM OPERATIONS, SALES AND REFINANCINGS
                      FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
                                                                   SALES AND
                                                     OPERATIONS   REFINANCINGS      TOTAL

<S>                                                 <C>           <C>           <C>        
NET INCOME (LOSS)                                   $   938,075   $  (117,052)  $   821,023

ADD BACK:
   Depreciation                                         593,044          --         593,044
   Decrease in allowance for doubtful accounts          (75,000)         --        (75,000)
   Management fees                                       89,683          --          89,683
   Book value of disposed equipment                        --       5,389,385     5,389,385

LESS:
   Principal reduction of notes payable              (2,095,524)         --      (2,095,524)
                                                    -----------   -----------   -----------
      Cash from operations, sales and refinancings     (549,722)    5,272,333     4,722,611

LESS:
   Management fees                                      (89,683)         --         (89,683)
                                                    -----------   -----------   -----------
      Distributable cash from operations,
      sales and refinancings                           (639,405)    5,272,333     4,632,928

OTHER SOURCES AND USES OF CASH:
   Cash, beginning of year                            2,000,212          --       2,000,212
   Net change in receivables and accruals               519,451          --         519,451

LESS:
   Cash distributions paid                           (1,139,110)   (5,272,333)   (6,411,443)
   Liquidating distribution                            (741,148)         --        (741,148)
                                                    -----------   -----------   -----------
CASH, END OF YEAR                                   $      --     $      --     $      --
                                                    ===========   ===========   ===========
</TABLE>


                                       23
<PAGE>

                AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP

          SCHEDULE OF COSTS REIMBURSED TO THE MANAGING GENERAL PARTNER
          AND ITS AFFILIATES AS REQUIRED BY SECTION 10.4 OF THE AMENDED
          AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP

                                DECEMBER 31, 1996

For the year ended December 31, 1996, the Partnership reimbursed the Managing
General Partner and its Affiliates for the following costs:

       Operating expenses                             $ 181,906


                                       24