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

                                    FORM 10-K

(Mark One)

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

                   For the fiscal year ended December 31, 1997

                                       OR

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

                        For the transition period from to


                         Commission file number 0-17549

                            CNL INCOME FUND IV, LTD.
             (Exact name of registrant as specified in its charter)

                      Florida                             59-2854435
          (State or other jurisdiction of   (I.R.S. Employer Identification No.)
          incorporation or organization)

                              400 East South Street
                             Orlando, Florida 32801
          (Address of principal executive offices, including zip code)

       Registrant's telephone number, including area code: (407) 422-1574

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

                 Title of each class:      Name of exchange on which registered:
                         None                         Not Applicable

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

              Units of limited partnership interest ($500 per Unit)
                                (Title of class)

         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 such filing
requirements for the past 90 days: Yes X No

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

         Aggregate market value of the voting stock held by nonaffiliates of the
registrant:   The  registrant   registered  an  offering  of  units  of  limited
partnership  interest  (the  "Units") on Form S-11 under the  Securities  Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $500 per Unit.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None


<PAGE>



                                     PART I


Item 1.  Business

         CNL Income Fund IV, Ltd. (the  "Registrant" or the  "Partnership") is a
limited  partnership  which was  organized  pursuant to the laws of the State of
Florida on November 18, 1987. The general partners of the Partnership are Robert
A.  Bourne,  James  M.  Seneff,  Jr.  and  CNL  Realty  Corporation,  a  Florida
corporation (the "General Partners").  Beginning on May 6, 1988, the Partnership
offered  for  sale up to  $30,000,000  in  limited  partnership  interests  (the
"Units") (60,000 Units at $500 per Unit) pursuant to a registration statement on
Form S-11 under the Securities Act of 1933, as amended.  The offering terminated
on  December  30,  1988,  as of which  date the  maximum  offering  proceeds  of
$30,000,000   had  been  received  from  investors  who  were  admitted  to  the
Partnership as limited partners (the "Limited Partners").

         The  Partnership  was organized to acquire both newly  constructed  and
existing  restaurant  properties,  as well as properties upon which  restaurants
were to be  constructed  (the  "Properties"),  which  are  leased  primarily  to
operators  of  selected   national  and  regional   fast-food  and  family-style
restaurant  chains (the  "Restaurant  Chains").  Net proceeds to the Partnership
from its  offering of Units,  after  deduction  of  organizational  and offering
expenses,  totalled  $26,550,000,  and  were  used  to  acquire  40  Properties,
including  interests  in five  Properties  owned by joint  ventures in which the
Partnership  is a  co-venturer.  During the year ended  December 31,  1994,  the
Partnership sold its Property in York, Pennsylvania, and reinvested the majority
of the net sales proceeds in two Checkers  Properties,  consisting of only land,
located in Miami,  Florida,  and Douglasville,  Georgia. The remaining net sales
proceeds were used to meet other working capital needs of the  Partnership.  The
lessee  of the  two  Properties  consisting  of only  land  owns  the  buildings
currently on the land and has the right,  if not in default under the lease,  to
remove the  buildings  from the land at the end of the lease  terms.  During the
year ended  December 31, 1995,  the  Partnership  sold its Property in Hastings,
Michigan,  and during  1996,  reinvested  the net sales  proceeds  in a Property
located in Clinton,  North Carolina,  with affiliates of the General Partners as
tenants-in-common.   Also,   during  the  year  ended  December  31,  1996,  the
Partnership sold its Property in Tampa,  Florida, and reinvested the majority of
the net sales proceeds in a Boston Market in Richmond, Virginia. During the year
ended  December 31, 1997,  the  Partnership  sold its Property in  Douglasville,
Georgia.  As a result of the above  transactions,  as of December 31, 1997,  the
Partnership owned 40 Properties, including interests in five Properties owned by
joint ventures in which the  Partnership is a co-venturer and one Property owned
with affiliates as tenants-in-common.  Generally, the Properties are leased on a
triple-net  basis with the lessees  responsible for all repairs and maintenance,
property taxes, insurance and utilities.

         The  Partnership  will hold its Properties  until the General  Partners
determine that the sale or other  disposition of the Properties is  advantageous
in view of the Partnership's investment objectives.  In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation,  net cash flow and  federal  income  tax  considerations.  Certain
lessees also have been granted options to purchase Properties,  generally at the
Property's  then fair market  value after a specified  portion of the lease term
has elapsed.  In general,  the General Partners plan to seek the sale of some of
the  Properties  commencing  seven  to 15 years  after  their  acquisition.  The
Partnership  has no  obligation  to sell all or any portion of a Property at any
particular  time,  except as may be required  under  property  or joint  venture
purchase options granted to certain lessees.

Leases

         Although there are variations in the specific terms of the leases,  the
following  is  a  summarized   description  of  the  general  structure  of  the
Partnership's  leases. The leases of the Properties owned by the Partnership and
joint  ventures in which the  Partnership  is a co-venturer  provide for initial
terms,  ranging from five to 20 years (the average  being 18 years),  and expire
between 2003 and 2014. Generally, the leases are on a triple-net basis, with the
lessees responsible for all repairs and maintenance,  property taxes,  insurance
and  utilities.  The leases of the  Properties  provide for minimum  base annual
rental payments  (payable in monthly  installments)  ranging from  approximately
$18,100 to $135,800. Generally, the leases provide for percentage rent, based on
sales in excess of a specified amount, to be paid annually. In addition, some of
the leases provide that commencing in the sixth lease year the

                                        1

<PAGE>



percentage  rent will be an amount equal to the greater of the  percentage  rent
calculated  under the lease  formula or a  specified  percentage  (ranging  from
one-half to two percent) of the purchase price.

         Generally,  the  leases  of the  Properties  provide  for  two or  four
five-year  renewal  options  subject  to the same  terms and  conditions  as the
initial  lease.  Certain  lessees  also have been  granted  options to  purchase
Properties at the  Property's  then fair market value,  or pursuant to a formula
based on the original  cost of the  Property,  after a specified  portion of the
lease term has  elapsed.  Additionally,  certain  leases  provide  the lessee an
option  to  purchase  up to a 49  percent  interest  in the  Property,  after  a
specified  portion of the lease term has elapsed,  at an option  purchase  price
similar to those described above,  multiplied by the percentage  interest in the
Property with respect to which the option is being exercised.

         The leases also  generally  provide that, in the event the  Partnership
wishes to sell the Property  subject to the lease,  the  Partnership  must first
offer the  lessee  the right to  purchase  the  Property  on the same  terms and
conditions,  and for the same  price,  as any offer  which the  Partnership  has
received for the sale of the Property.

         In September  1994,  the tenant of the  Property in Leesburg,  Florida,
ceased operations of the restaurant business located at the Property. Currently,
the  Partnership  is not  receiving  rental  payments  for this  Property and is
seeking a replacement tenant.

         In June 1997, the Partnership  terminated the leases with the tenant of
the  Properties  in  Portland  and  Winchester,   Indiana.  In  July  1997,  the
Partnership  entered  into  new  leases  for  the  Properties  in  Portland  and
Winchester,  Indiana,  with a new tenant to  operate  the  Properties  as Arby's
restaurants.  In October 1997, the tenant of the Property in Palm Bay,  Florida,
vacated the Property. In February 1998, the Partnership entered into a new lease
for this Property with a new tenant.  The lease terms for these  Properties  are
substantially the same as the  Partnership's  other leases as described above in
the first three paragraphs of this section.

Major Tenants

         During 1997, two lessees of the Partnership,  Shoney's,  Inc. and Tampa
Foods, L. P., each contributed more than ten percent of the Partnership's  total
rental income (including the Partnership's  share of the rental income from five
Properties  owned by joint  ventures and one Property  owned with  affiliates as
tenants-in-common). As of December 31, 1997, Shoney's, Inc. was the lessee under
leases  relating to six  restaurants and Tampa Foods, L. P. was the lessee under
leases relating to two restaurants. It is anticipated that, based on the minimum
rental  payments  required  by the  leases,  Shoney's,  Inc.  will  continue  to
contribute  more than ten percent of the  Partnership's  total rental  income in
1998 and  subsequent  years.  In addition,  four  Restaurant  Chains,  Shoney's,
Denny's,  Wendy's Old Fashioned Hamburger Restaurants ("Wendy's") and Taco Bell,
each  accounted  for more than ten  percent of the  Partnership's  total  rental
income in 1997 (including the Partnership's share of the rental income from five
Properties  owned by joint  ventures and one Property  owned with  affiliates as
tenants-in-common).  In  subsequent  years,  it is  anticipated  that these four
Restaurant Chains each will continue to account for more than ten percent of the
total rental income to which the  Partnership is entitled under the terms of the
leases.  Any failure of these  lessees or  Restaurant  Chains  could  materially
affect the Partnership's income. No single tenant or group of affiliated tenants
lease Properties with an aggregate  carrying value,  excluding  acquisition fees
and certain acquisition expenses, in excess of 20 percent of the total assets of
the Partnership.

Joint Venture Arrangements

         The   Partnership   has  entered  into  five  separate   joint  venture
arrangements,  Holland Joint  Venture,  Titusville  Joint  Venture,  Cocoa Joint
Venture,  Auburn Joint  Venture and  Kingsville  Real Estate Joint  Venture,  to
purchase and hold five  Properties  through such joint  ventures.  The remaining
interests in these joint  ventures  are held by  affiliates  of the  Partnership
which have the same general partners.

         Each joint venture  arrangement  provides for the  Partnership  and its
joint venture  partners to share in all costs and benefits  associated  with the
joint venture in accordance with their  respective  percentage  interests in the
joint venture.  The Partnership and its joint venture  partners are also jointly
and severally  liable for all debts,  obligations  and other  liabilities of the
joint venture.


                                        2

<PAGE>



         Each joint venture has an initial term of  approximately 20 to 30 years
and, after the expiration of the initial term,  continues in existence from year
to year unless  terminated at the option of either joint venturer or by an event
of  dissolution.  Events of dissolution  include the  bankruptcy,  insolvency or
termination  of any  joint  venturer,  sale of the  Property  owned by the joint
venture and mutual agreement of the Partnership and its joint venture partner to
dissolve the joint venture.

         The Partnership shares management control of each joint venture equally
with affiliates of the General Partners.  The joint venture agreements  restrict
each venturer's  ability to sell,  transfer or assign its joint venture interest
without  first  offering it for sale to its joint venture  partner,  either upon
such terms and  conditions  as to which the venturers may agree or, in the event
the venturers cannot agree, on the same terms and conditions as any offer from a
third party to purchase such joint venture interest.

         Net cash flow from  operations  of Holland  Joint  Venture,  Titusville
Joint  Venture,  Cocoa Joint Venture,  Auburn Joint Venture and Kingsville  Real
Estate Joint  Venture is  distributed  51.0%,  26.6%,  57.0%,  96.1% and 68.87%,
respectively,  to the  Partnership and the balance is distributed to each of the
other joint  venture  partners.  Any  liquidation  proceeds,  after paying joint
venture debts and liabilities and funding  reserves for contingent  liabilities,
will be distributed  first to the joint venture  partners with positive  capital
account  balances in proportion to such balances until such balances equal zero,
and thereafter in proportion to each joint venture partner's percentage interest
in the joint venture.

         In addition to the above joint venture agreements, in January 1996, the
Partnership  entered  into an  agreement  to hold a Golden  Corral  Property  as
tenants-in-common  with  affiliates  of  the  General  Partners.  The  agreement
provides  for the  Partnership  and the  affiliates  to share in the profits and
losses of the Property in proportion to each co-venturer's  percentage interest.
The Partnership owns a 53.68% interest in this Property.

Certain Management Services

         CNL Income Fund Advisors,  Inc., an affiliate of the General  Partners,
provided  certain  services  relating to management of the  Partnership  and its
Properties  pursuant to a  management  agreement  with the  Partnership  through
September 30, 1995.  Under this  agreement,  CNL Income Fund Advisors,  Inc. was
responsible for collecting  rental  payments,  inspecting the Properties and the
tenants'  books and records,  assisting the  Partnership in responding to tenant
inquiries and notices and providing  information  to the  Partnership  about the
status of the leases and the  Properties.  CNL Income Fund  Advisors,  Inc. also
assisted the General Partners in negotiating the leases. For these services, the
Partnership had agreed to pay CNL Income Fund Advisors, Inc. an annual fee equal
to one percent of the sum of gross rental revenues from Properties  wholly owned
by the Partnership plus the  Partnership's  allocable share of gross revenues of
joint ventures in which the  Partnership is a co-venturer,  but not in excess of
competitive fees for comparable services.  Under the management  agreement,  the
management  fee is  subordinated  to  receipt  by  the  Limited  Partners  of an
aggregate,  ten  percent,  cumulative,  noncompounded  annual  return  on  their
adjusted  capital  contributions  (the "10%  Preferred  Return"),  calculated in
accordance   with  the   Partnership's   limited   partnership   agreement  (the
"Partnership Agreement").

         Effective October 1, 1995, CNL Income Fund Advisors,  Inc. assigned its
rights  in,  and its  obligations  under,  the  management  agreement  with  the
Partnership  to CNL Fund  Advisors,  Inc. All of the terms and conditions of the
management agreement,  including the payment of fees, as described above, remain
unchanged.

         The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.

Competition

         The fast-food and family-style  restaurant business is characterized by
intense  competition.  The restaurants on the Partnership's  Properties  compete
with  independently  owned  restaurants,  restaurants which are part of local or
regional chains, and restaurants in other well-known national chains,  including
those offering different types of food and service.


                                        3

<PAGE>



         At the time the Partnership elects to dispose of its Properties,  other
than as a result of the exercise of tenant options to purchase  Properties,  the
Partnership  will be in  competition  with other  persons and entities to locate
purchasers for its Properties.

Employees

         The  Partnership   has  no  employees.   The  officers  of  CNL  Realty
Corporation  and the officers and employees of CNL Fund Advisors,  Inc.  perform
certain  services for the  Partnership.  In addition,  the General Partners have
available to them the  resources  and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates,  who may
also perform certain services for the Partnership.


Item 2.  Properties

         As of December 31, 1997,  the  Partnership  owned,  either  directly or
through joint venture  arrangements,  40 Properties located in 14 states and the
District  of  Columbia.  Reference  is made to the  Schedule  of Real Estate and
Accumulated  Depreciation filed with this report for a listing of the Properties
and their respective costs,  including  acquisition fees and certain acquisition
expenses.

Description of Properties

         Land. The Partnership's  Property sites range from approximately 14,100
to 98,800  square  feet  depending  upon  building  size and  local  demographic
factors.  Sites  purchased  by  the  Partnership  are  in  locations  zoned  for
commercial use which have been reviewed for traffic patterns and volume.

         Buildings.  Each of the Properties owned by the Partnership  includes a
building that is one of a Restaurant  Chain's  approved  designs.  However,  the
building located on one Checkers Property is owned by the tenant, while the land
parcel is owned by the Partnership.  The buildings generally are rectangular and
are constructed  from various  combinations of stucco,  steel,  wood,  brick and
tile. The sizes of buildings owned by the Partnership  range from  approximately
800 to 6,800 square feet.  All  buildings on  Properties  are  freestanding  and
surrounded by paved  parking  areas.  Buildings  are suitable for  conversion to
various uses, although modifications may be required prior to use for other than
restaurant operations.

         Generally,  a  lessee  is  required,  under  the  terms  of  its  lease
agreement,  to make such capital  expenditures as may be reasonably necessary to
refurbish  buildings,  premises,  signs and  equipment  so as to comply with the
lessee's  obligations,  if applicable,  under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.

         Leases  with Major  Tenants.  The terms of each of the leases  with the
Partnership's  major  tenants as of December  31,  1997 (see Item 1.  Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.

         Tampa Foods, L.P. leases two Wendy's  restaurants.  The initial term of
each  lease is 20 years  (expiring  in 2008) and  average  minimum  base rent is
approximately $105,500 (ranging from approximately $98,600 to $112,500).

         Shoney's,  Inc.  leases four Shoney's  restaurants  and two Captain D's
restaurants.  The initial term of each lease is 20 years  (expiring in 2008) and
average minimum base rent is approximately  $65,100 (ranging from  approximately
$41,000 to $81,300).

         The General Partners consider the Properties to be well-maintained  and
sufficient for the Partnership's operations.


Item 3.  Legal Proceedings


                                        4

<PAGE>



         Neither the  Partnership,  nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties,  is a party to, or
subject to, any material pending legal proceedings.




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

         Not applicable.



                                     PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

         As of March 13, 1998,  there were 2,917 holders of record of the Units.
There is no public trading market for the Units,  and it is not anticipated that
a public  market for the Units will develop.  Limited  Partners who wish to sell
their  Units  may  offer  the  Units  for  sale  pursuant  to the  Partnership's
distribution  reinvestment  plan (the "Plan"),  and Limited Partners who wish to
have their  distributions  used to acquire additional Units (to the extent Units
are  available  for  purchase),  may do so  pursuant  to such Plan.  The General
Partners  have the right to prohibit  transfer of Units.  The price paid for any
Unit  transferred  pursuant to the Plan has been $475 per Unit.  The price to be
paid for any Unit  transferred  other  than  pursuant  to the Plan is subject to
negotiation by the purchaser and the selling  Limited  Partner.  The Partnership
will not redeem or repurchase Units.

         The following table reflects,  for each calendar quarter, the high, low
and average  sales prices for transfers of Units during 1997 and 1996 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>

                                                      1997 (1)                          1996 (1)
                                        ----------------------------------      ----------------------
<S> <C>
                                            High       Low      Average        High       Low      Average
         First Quarter                       $500      $425        $467         $475      $385        $432
         Second Quarter                       500       410         461          500       380         467
         Third Quarter                        465       420         437          420       387         400
         Fourth Quarter                       475       450         470          500       397         464
</TABLE>

(1)      A total of 647 and 845 Units were  transferred  other than  pursuant to
         the Plan for the years ended December 31, 1997 and 1996, respectively.

         The capital  contribution  per Unit was $500.  All cash  available  for
distribution  will be distributed to the partners  pursuant to the provisions of
the Partnership Agreement.

         For each of the years ended December 31, 1997 and 1996, the Partnership
declared cash distributions of $2,760,000 to the Limited Partners. Distributions
of $690,000  were  declared at the close of each of the  Partnership's  calendar
quarters  during 1997 and 1996 to the  Limited  Partners.  The General  Partners
expect to distribute  some or all of the net sales proceeds from the sale of the
Property in Fort Myers, Florida, to the Limited Partners. In deciding whether to
sell  Properties,  the General  Partners will consider factors such as potential
capital appreciation, net cash flow, and federal income tax considerations.  The
reduced number of Properties for which the Partnership receives rental payments,
as well as ongoing operations, is expected to reduce the Partnership's revenues.
The decrease in Partnership revenues,  combined with the fact that a significant
portion of the Partnership's expenses are fixed in nature, is expected to result
in a decrease in cash  distributions  to the Limited  Partners  during 1998.  No
amounts  distributed to partners for the years ended December 31, 1997 and 1996,
are  required  to be or have  been  treated  by the  Partnership  as a return of
capital  for  purposes of  calculating  the  Limited  Partners'  return on their
adjusted capital  contributions.  No distributions have been made to the General
Partners to date.

                                        5

<PAGE>




         The  Partnership  intends to  continue  to make  distributions  of cash
available  for  distribution  to the  Limited  Partners  on a  quarterly  basis,
although  the  General  Partners,  in their  sole  discretion,  may elect to pay
distributions monthly.


Item 6.  Selected Financial Data
<TABLE>
<CAPTION>

                                   1997             1996              1995             1994              1993
                               ------------     ------------      ------------     ------------      --------
<S> <C>
Year ended December 31:
    Revenues (1)                $ 2,531,385      $ 2,820,295       $ 2,871,572      $ 2,865,770       $ 2,933,727
    Net income (2)                1,720,668        2,347,167         2,210,339        2,310,524         2,263,745
    Cash distributions
       declared                   2,760,000        2,760,000         2,760,000        2,760,000         2,760,000
    Net income per Unit (2)           28.42            38.75             36.48            38.13             37.35
    Cash distributions
       declared per Unit              46.00            46.00             46.00            46.00             46.00

At December 31:
    Total assets                $23,309,888      $23,730,892       $24,057,829      $24,598,179       $25,195,579
    Partners' capital            22,152,299       22,897,631        23,288,164       23,837,825        24,287,301
</TABLE>

    (1) Revenues include equity in earnings of joint ventures.

    (2)  Net income for the year ended December 31,1997,  includes $6,652 from a
         loss on the sale of land and $70,337  for a provision  for loss on land
         and building.  Net income for the years ended  December 31, 1996,  1995
         and 1994, includes $221,390, $128,547 and $128,592,  respectively, from
         gains on the sale of land and buildings.

         The above selected  financial  data should be read in conjunction  with
the financial statements and related notes contained in Item 8 hereof.


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

         The  Partnership  was  organized on November  18, 1987,  to acquire for
cash,  either  directly  or  through  joint  venture  arrangements,  both  newly
constructed  and  existing  restaurant  Properties,  as well as land upon  which
restaurant  Properties  were to be  constructed,  which are leased  primarily to
operators  of  selected   national  and  regional   fast-food  and  family-style
Restaurant Chains.  Substantially all of the leases are triple-net leases,  with
the lessees  generally  responsible  for all repairs and  maintenance,  property
taxes,  insurance and utilities.  As of December 31, 1997, the Partnership owned
40 Properties, either directly or indirectly through joint venture arrangements.

Liquidity and Capital Resources

         The  Partnership's  primary  source  of  capital  for the  years  ended
December 31, 1997, 1996 and 1995, was cash from operations  (which includes cash
received from tenants,  distributions from joint ventures and interest received,
less cash paid for expenses).  Cash from operations was  $2,417,972,  $2,713,964
and  $2,670,393  for  the  years  ended  December  31,  1997,   1996  and  1995,
respectively.  The  decrease in cash from  operations  for 1997,  as compared to
1996, and the increase in cash from operations for 1996, as compared to 1995, is
primarily a result of changes in income and expenses as described in "Results of
Operations"  below and changes in the Partnership's  working capital.  Cash from
operations  during the years ended  December 31, 1997,  1996 and 1995,  was also
affected by the following:

         In October 1992, the  Partnership  accepted a promissory  note from the
former tenant of the Property in Maywood, Illinois, for $175,000 for amounts due
relating to past due rents and real estate taxes and other expenses

                                        6

<PAGE>



the Partnership had incurred as a result of the former tenant's having defaulted
under the terms of the lease. The note was non-interest  bearing and was payable
in 36 monthly  installments of $2,500 through  September 1995, and thereafter in
eight  monthly  installments  of  $10,000,  with the  balance due and payable on
February 20, 1996. The Partnership discounted the note to a principal balance of
$138,094  using an interest rate of ten percent.  During 1995, the former tenant
defaulted  under the terms of the note.  Because of the  financial  difficulties
that  the  former  tenant  was  experiencing,  the  Partnership  established  an
allowance  for  doubtful  accounts for the full amount of unpaid  principal  and
interest of $111,031 relating to this note; therefore,  no amounts were included
in  receivables  at December  31,  1996.  During 1997,  the  Partnership  ceased
collection  efforts  for this  note and  wrote  off the  related  allowance  for
doubtful accounts.

         Other  sources and uses of capital  included the  following  during the
years ended December 31, 1997, 1996 and 1995.

         In December  1995,  the  Partnership  sold its  Property  in  Hastings,
Michigan, for $520,000 and received net sales proceeds of $518,650, resulting in
a  gain  of  $128,547  for  financial  reporting  purposes.  This  Property  was
originally  acquired  by the  Partnership  in  August  1988  and  had a cost  of
approximately $419,600, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold the Property for approximately $99,100
in excess of its original purchase price.

         In January 1996, the  Partnership  reinvested the net sales proceeds it
received  from the 1995 sale of the Property in Hastings,  Michigan,  along with
additional  funds,  in a  Golden  Corral  Property  located  in  Clinton,  North
Carolina,  with  affiliates  of the General  Partners as  tenants-in-common.  In
connection  therewith,  the  Partnership  and  its  affiliates  entered  into an
agreement  whereby each  co-venturer will share in the profits and losses of the
Property in proportion to its applicable percentage interest. As of December 31,
1997, the Partnership owned a 53.68% interest in this Property.

         In September 1996, the Partnership sold its Property in Tampa, Florida,
for $1,090,000  and received net sales  proceeds of  $1,049,550,  resulting in a
gain of $221,390 for financial reporting purposes.  This Property was originally
acquired by the  Partnership  in December  1988 and had a cost of  approximately
$832,800,  excluding  acquisition fees and miscellaneous  acquisition  expenses;
therefore,  the  Partnership  sold the  Property for  approximately  $216,800 in
excess of its  original  purchase  price.  In  December  1996,  the  Partnership
reinvested the majority of the net sales  proceeds in a Boston Market  Property,
located in Richmond,  Virginia. The remaining net sales proceeds will be used to
meet other working capital needs of the Partnership.

         In June 1997, the Partnership  terminated the leases with the tenant of
the Properties in Portland and Winchester, Indiana. In connection therewith, the
Partnership  accepted a promissory  note from the former  tenant for $32,343 for
amounts  relating to past due real estate taxes the Partnership had accrued as a
result of the former tenant's financial difficulties. The promissory note, which
is  uncollateralized,  bears interest at a rate of ten percent per annum, and is
being  collected in 36 monthly  installments.  Receivables  at December 31, 1997
include $7,106 of such amounts.

         In  July  1997,  the  Partnership  entered  into  new  leases  for  the
Properties in Portland and Winchester, Indiana, with a new tenant to operate the
Properties as Arby's  restaurants.  In  connection  therewith,  the  Partnership
agreed to fund up to  $125,000  in  renovation  costs for each  Property.  As of
December 31, 1997, such renovations had been completed.

         In November 1997, the  Partnership  sold its Property in  Douglasville,
Georgia  to a third  party for  $402,000  and  received  net sales  proceeds  of
$378,149  (net of $2,546 which  represents  amounts due to the former tenant for
prorated  rent).  This Property was  originally  acquired by the  Partnership in
December 1994 and had a cost of approximately  $363,800,  excluding  acquisition
fees and miscellaneous acquisition expenses; therefore, the Partnership sold the
Property for approximately $16,900 in excess of its original purchase price. Due
to the fact that the Partnership had recognized  accrued rental income since the
inception of the lease relating to the  straight-lining of future scheduled rent
increases in accordance  with  generally  accepted  accounting  principles,  the
Partnership  wrote off the  cumulative  balance of such accrued rental income at
the  time of the  sale of  this  Property,  resulting  in a loss of  $6,652  for
financial reporting purposes. Due to the fact that the straight-lining of future
rent increases over the term of the lease is a non-cash  accounting  adjustment,
the write off of these amounts is a loss for financial statement

                                        7

<PAGE>



purposes  only.  The net sales  proceeds will be used to pay  liabilities of the
Partnership,  including quarterly  distributions to the Limited Partners, and to
fund the renovation costs described  above. The Partnership  anticipates that it
will distribute amounts sufficient to enable the Limited Partners to pay federal
and state income  taxes,  if any (at a level  reasonably  assumed by the General
Partners), resulting from the sale.

         In March  1998,  the  Partnership  sold  its  Property  in Fort  Myers,
Florida,  to an  unrelated  third  party,  for  $842,100  and received net sales
proceeds  of  $794,690,  resulting  in a  gain  of  approximately  $251,100  for
financial reporting purposes.  The Partnership intends to distribute some or all
of the net sales  proceeds  to the Limited  Partners.  The  remaining  net sales
proceeds, if any, will be used for other Partnership purposes.

         The General  Partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
the operations of the Partnership.  During the years ended December 31, 1997 and
1996, the Partnership  received $294,000 and $22,300,  respectively,  in capital
contributions  from  the  corporate  General  Partner  in  connection  with  the
operations of the Partnership.  No such  contributions  were received during the
year ended December 31, 1995.

         None of the Properties  owned by the  Partnership or the joint ventures
in which the  Partnership  owns an interest is or may be  encumbered.  Under its
Partnership  Agreement,  the  Partnership  is prohibited  from borrowing for any
purpose;  provided,  however,  that the General Partners or their affiliates are
entitled to reimbursement,  at cost, for actual expenses incurred by the General
Partners or their  affiliates  on behalf of the  Partnership.  Affiliates of the
General Partners from time to time incur certain operating expenses on behalf of
the  Partnership  for which the  Partnership  reimburses the affiliates  without
interest.

         Currently,  rental income from the Partnership's Properties is invested
in money market accounts or other short-term,  highly liquid investments pending
the  Partnership's  use of such  funds to pay  Partnership  expenses  or to make
distributions  to the  partners.  At December  31,  1997,  the  Partnership  had
$876,452  invested in such  short-term  investments,  as compared to $554,593 at
December 31, 1996. The increase in the amount invested in short-term investments
is primarily a result of the receipt of net sales  proceeds from the sale of the
Property in Douglasville,  Georgia, during 1997. The funds remaining at December
31, 1997, will be used for the payment of distributions  and other  liabilities,
as described above.

         During  1997,  1996  and  1995,  affiliates  of the  General  Partners,
incurred  on  behalf  of  the  Partnership   $85,702,   $114,409  and  $101,876,
respectively,  for certain operating expenses. As of December 31, 1997 and 1996,
the Partnership owed $88,854 and $67,153,  respectively,  to affiliates for such
amounts and accounting and  administrative  services.  Amounts  payable to other
parties,  including  distributions payable,  increased to $1,068,735 at December
31, 1997,  from $766,108 at December 31, 1996.  The increase in  liabilities  at
December  31,  1997,  is  primarily  the  result  of  the  Partnership  accruing
renovation  costs during 1997 for the  Properties  in Portland  and  Winchester,
Indiana,  in  connection  with the new  leases  entered  into in July  1997.  In
addition, the increase in liabilities is due to the Partnership accruing current
real estate taxes for its Property in Palm Bay, Florida, during 1997, due to the
fact that the tenant  vacated the Property in October  1997.  In  addition,  the
increase  in  liabilities  is due to an  increase  in rents  paid in  advance at
December 31, 1997.  Total  liabilities  at December 31, 1997, to the extent they
exceed cash and cash  equivalents at December 31, 1997, will be paid from future
cash  from  operations  and,  in the event the  General  Partners  elect to make
additional contributions, from future General Partner contributions.

         Based primarily on current and anticipated future cash from operations,
and for  the  years  ended  December  31,  1997  and  1996,  additional  capital
contributions  received  from the General  Partners,  the  Partnership  declared
distributions  to the Limited Partners of $2,760,000 for each of the years ended
December 31, 1997, 1996 and 1995. This represents  distributions of $46 per Unit
for each of the years  ended  December  31,  1997,  1996 and 1995.  The  General
Partners  expect to  distribute  some or all of the net sales  proceeds from the
sale of the  Property  in Fort  Myers,  Florida,  to the  Limited  Partners.  In
deciding whether to sell Properties,  the General Partners will consider factors
such as potential  capital  appreciation,  net cash flow, and federal income tax
considerations.  The  reduced  number of  Properties  for which the  Partnership
receives rental payments,  as well as ongoing operations,  is expected to reduce
the Partnership's revenues. The decrease in Partnership revenues,  combined with
the fact that a significant  portion of the Partnership's  expenses are fixed in
nature, is expected to result in a decrease in cash distributions to the Limited
Partners during 1998. No amounts distributed or to be distributed to the Limited
Partners for the years

                                        8

<PAGE>



ended December 31, 1997,  1996 and 1995, are required to be or have been treated
by the  Partnership  as a return of capital  for  purposes  of  calculating  the
Limited   Partners'  return  on  their  adjusted  capital   contributions.   The
Partnership  intends to continue to make  distributions  of cash  available  for
distribution to the Limited Partners on a quarterly basis.

         The General Partners believe that the Properties are adequately covered
by  insurance.  In  addition,  the General  Partners  have  obtained  contingent
liability and property coverage for the Partnership.  This insurance is intended
to reduce the Partnership's  exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.

         The Partnership's  investment strategy of acquiring Properties for cash
and  leasing  them under  triple-net  leases to  operators  who  generally  meet
specified financial  standards  minimizes the Partnership's  operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.

         Due to low  operating  expenses  and  ongoing  cash flow,  the  General
Partners do not believe that  working  capital  reserves  are  necessary at this
time.  In  addition,  because the leases for the  Partnership's  Properties  are
generally on a triple-net  basis, it is not anticipated that a permanent reserve
for  maintenance  and repairs will be  established  at this time. To the extent,
however,  that the Partnership  has  insufficient  funds for such purposes,  the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.

Results of Operations

         During  1995,  the  Partnership   owned  and  leased  36  wholly  owned
Properties  (including  one  Property in Hastings,  Michigan,  which was sold in
December 1995),  during 1996, the  Partnership  owned and leased 36 wholly owned
Properties  (including  one  Property  in  Tampa,  Florida,  which  was  sold in
September  1996) and during  1997,  the  Partnership  owned and leased 35 wholly
owned  Properties  (including one Property in Douglasville,  Georgia,  which was
sold in November 1997). In addition, during 1997, 1996 and 1995, the Partnership
was a co-venturer in five separate joint ventures that each owned and leased one
Property.  During  1997 and 1996,  the  Partnership  also  owned and  leased one
Property with  affiliates  as  tenants-in-common.  As of December 31, 1997,  the
Partnership  owned,  either directly or through joint venture  arrangements,  40
Properties, which are, in general, subject to long-term,  triple-net leases. The
leases of the Properties provide for minimum base annual rental amounts (payable
in monthly installments) ranging from $18,100 to $135,800. Generally, the leases
provide for percentage rent based on sales in excess of a specified amount to be
paid annually.  In addition,  some of the leases provide that, commencing in the
sixth lease year the  percentage  rent will be an amount equal to the greater of
the percentage rent calculated under the lease formula or a specified percentage
(ranging  from  one-half to two  percent)  of the  purchase  price.  For further
description of the Partnership's  leases and Properties,  see Item 1. Business -
Leases and Item 2.
Properties, respectively.

         During  the  years  ended  December  31,  1997,   1996  and  1995,  the
Partnership  earned  $2,189,386,  $2,397,691 and  $2,510,406,  respectively,  in
rental  income from  operating  leases and earned  income from direct  financing
leases  from its wholly  owned  Properties  described  above.  Rental and earned
income  decreased  during  1997,  as  compared  to  1996,  as a  result  of  the
Partnership   establishing   an  allowance  for  doubtful   accounts   totalling
approximately  $128,200 during 1997, for rental amounts relating to the Property
located  in Palm Bay,  Florida,  due to  financial  difficulties  the tenant was
experiencing.  The tenant vacated the Property in October 1997. The  Partnership
has  negotiated a settlement  agreement  with the former  tenant's  guarantor to
collect some of the amounts due to the Partnership  from the former tenant.  The
Partnership  will  recognize  such amounts as income if  collected.  In February
1998,  the  Partnership  entered  into a new lease  with a new  tenant  for this
Property.

         In addition,  rental and earned income decreased  approximately $76,300
and $29,300 during the years ended 1997 and 1996,  respectively,  as a result of
the sale of the Property in Tampa,  Florida,  in September 1996. The decrease in
rental  income for 1997 is  partially  offset by an  increase  of  approximately
$118,300 in rental  income  attributable  to the  reinvestment  of the net sales
proceeds in a Property in Richmond, Virginia, in December 1996.

         In addition,  the decrease in rental and earned  income during 1997 and
1996,  each as compared to the previous year, is partially  attributable  to the
Partnership increasing its allowance for doubtful accounts by

                                        9

<PAGE>



approximately  $57,000 and  $28,500,  respectively,  for rental  income  amounts
relating to the Hardee's Properties located in Portland and Winchester, Indiana,
which are leased by the same tenant,  due to financial  difficulties  the tenant
was  experiencing.  Rental and earned  income also  decreased  by  approximately
$86,200  during 1997 due to the fact that the  Partnership  terminated the lease
with the former tenant of the Properties in Portland and Winchester, Indiana, in
June 1997, as described above in "Liquidity and Capital  Resources." The General
Partners have agreed that they will cease collection  efforts on past due rental
amounts once the former  tenant of these  Properties  pays all amounts due under
the promissory note for past due real estate taxes described above in "Liquidity
and Capital  Resources."  The decrease in rental and earned  income for 1997, as
compared to 1996, was slightly offset by an increase of approximately $20,200 in
rental  income  from the new tenant of this  Property  who began  operating  the
Property after it was renovated into an Arby's Property.

         The decrease in rental and earned  income  during 1996,  as compared to
1995,  is primarily  attributable  to a decrease of  approximately  $53,100 as a
result of the sale of the Property in Hastings, Michigan, in December 1995.

         For the years ended December 31, 1997,  1996 and 1995, the  Partnership
earned $117,031, $97,318 and $94,101,  respectively, in contingent rental income
from the  Partnership's  wholly owned  Properties.  The  increase in  contingent
rental  income in 1997,  as compared to 1996,  is primarily  attributable  to an
increase in gross sales for certain  restaurant  Properties whose leases require
the payment of contingent rental income.

         In addition,  for the years ended December 31, 1997, 1996 and 1995, the
Partnership earned $189,747, $277,431 and $245,778,  respectively,  attributable
to  net  income  earned  by  joint  ventures  in  which  the  Partnership  is  a
co-venturer.  The decrease in net income earned by these joint  ventures  during
1997, as compared to 1996, is partially  attributable  to the fact that,  during
July 1997,  the  operator of the  Property  owned by  Titusville  Joint  Venture
vacated the Property and ceased operations. In conjunction therewith, Titusville
Joint Venture (in which the Partnership owns a 26.6% interest in the profits and
losses of the joint venture)  established an allowance for doubtful  accounts of
approximately  $27,000  during 1997. No such  allowance was  established  during
1996.  In  addition,  the joint  venture  recorded  real  estate tax  expense of
approximately  $16,600  during  1997.  No such real estate  taxes were  incurred
during 1996.  The joint  venture  intends to pursue  collection of these amounts
from the former tenant and will  recognize  such amounts as income if collected.
In addition, during 1997, the joint venture established an allowance for loss on
land and building for its Property in  Titusville,  Florida,  for  approximately
$147,000.  The  allowance  represents  the  difference  between  the  Property's
carrying value at December 31, 1997, and the property  manager's estimate of the
net realizable value of the Property.  In addition,  the joint venture wrote off
unamortized  lease  costs of  $23,500  in 1997 due to the  tenant  vacating  the
Property.  Titusville  Joint Venture is currently  seeking  either a replacement
tenant or purchaser for this Property.

         Net income  earned by joint  ventures  also  decreased  during 1997, as
compared  to 1996,  due to the  Property  in Clinton,  North  Carolina,  held as
tenants-in-common,  adjusting  estimated  contingent  rental amounts  accrued at
December 31, 1996, to actual  amounts  during the year ended  December 31, 1997.
The increase in net income earned by joint ventures  during 1996, as compared to
1995,  is  primarily  attributable  to  the  fact  that  in  January  1996,  the
Partnership  reinvested  the net sales  proceeds  it  received  from the sale in
December  1995 of the  Property in  Hastings,  Michigan,  along with  additional
funds, in a Golden Corral Property in Clinton,  North Carolina,  with affiliates
as tenants-in-common, as described above in "Liquidity and Capital Resources."

         During the years  ended  December  31,  1997,  1996 and 1995 two of the
Partnership's  lessees,  Shoney's,  Inc. and Tampa Foods, L.P., each contributed
more than ten percent of the  Partnership's  total rental income  (including the
Partnership's  share of the rental  income from five  Properties  owned by joint
ventures and one Property  owned with  affiliates  as  tenant-in-common).  As of
December 31, 1997,  Shoney's,  Inc. was the lessee under leases  relating to six
restaurants  and Tampa Foods L.P. was the lessee  under  leases  relating to two
restaurants.  It is  anticipated  that,  based on the  minimum  rental  payments
required by the leases, Shoney's, Inc. will continue to contribute more than ten
percent of the  Partnership's  total rental  income  during 1998 and  subsequent
years. In addition, three Restaurant Chains,  Shoney's,  Denny's and Wendy's Old
Fashioned Hamburger Restaurants, each accounted for more than ten percent of the
Partnership's  total  rental  income  in  1997,  1996 and  1995  (including  the
Partnership's  share of the rental  income from five  Properties  owned by joint
ventures and one Property owned with  affiliates as  tenants-in-common).  During
the year  ended  December  31,  1997,  another of the  Partnership's  restaurant
chains,  Taco Bell,  accounted for more than ten percent of total rental income.
In subsequent  years, it is anticipated  that these four Restaurant  Chains each
will continue to account for more than ten percent of the total rental income to
which the

                                       10

<PAGE>



Partnership  is  entitled  under the terms of the  leases.  Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income.

         Operating expenses,  including  depreciation and amortization  expense,
were $733,728, $694,518 and $789,780 for the years ended December 31, 1997, 1996
and 1995, respectively. The increase in operating expenses for 1997, as compared
to 1996,  was  partially  due to the fact  that  during  1997,  the  Partnership
expensed approximately $25,400 in current and past due real estate taxes for the
Property in Palm Bay, Florida due to the tenant vacating the Property in October
1997.  The Property was  re-leased and the new tenant is  responsible  for these
expenses  beginning in December  1997.  In  addition,  the increase in operating
expenses during 1997 was partially due to the fact that the Partnership recorded
bad debt expense of $12,794 during 1997,  relating to the Properties  located in
Portland  and  Winchester,  Indiana,  for past due rental  income  amounts.  The
Partnership does not intend to continue to pursue the collection of such amounts
unless the former tenant defaults under the promissory  note, as described above
in "Liquidity and Capital Resources."

         The decrease in  operating  expenses in 1996,  as compared to 1995,  is
primarily  a result  of the fact  that the  Partnership's  former  tenant of the
Property in Maywood, Illinois,  defaulted under the terms of its promissory note
with the Partnership,  as described above in "Liquidity and Capital  Resources,"
and the  Partnership  recorded  bad debt  expense of  $102,431  relating to this
Property  during  1995.  The  decrease in operating  expenses  during  1996,  as
compared  to 1995,  was  partially  offset  by an  increase  in  accounting  and
administrative  expenses  associated  with  operating  the  Partnership  and its
Properties  and an  increase  in  insurance  expense as a result of the  General
Partners'  obtaining   contingent   liability  and  property  coverage  for  the
Partnership beginning in May 1995.

         As the result of the former tenant of the Maywood  Property  defaulting
under the terms of its lease,  the  Partnership  re-leased this Property  during
1993, to two new operators  subject to two separate  leases.  In connection with
one of the two new leases for the Property in Maywood, Illinois, the Partnership
is responsible  for the  proportionate  share of real estate taxes and insurance
expense.  In addition,  during 1997, 1996 and 1995, the  Partnership  paid for a
portion of the real estate taxes that are the responsibility of the other tenant
of the Maywood Property,  due to a shortage of amounts collected from the tenant
for the payment of their  proportionate share of real estate taxes. In addition,
as a  result  of  the  former  tenant  of the  Property  in  Leesburg,  Florida,
defaulting  under the  terms of its  lease,  the  Partnership  incurred  certain
expenses,  such as real estate taxes, insurance and maintenance expense relating
to this  Property  during  1997,  1996 and 1995.  The  Partnership  is currently
seeking a replacement tenant for the Property in Leesburg,  Florida, and expects
to incur  these  expenses  until such time as a new lease is  executed  for this
Property.

         As a result of the sale of the Property in  Douglasville,  Georgia,  in
November  1997,  the  Partnership  recognized  a loss  for  financial  reporting
purposes of $6,652 for the year ended  December  31,  1997.  In  addition,  as a
result of the sale of the Property in Tampa,  Florida, in September 1996 and the
sale of the Property in Hastings,  Michigan,  in December 1995, the  Partnership
recognized gains for financial reporting purposes of $221,390 and $128,547,  for
the years ended December 31, 1996 and 1995, respectively.

         During 1997, the Partnership  established an allowance for loss on land
and building in the amount of $70,337 for financial  reporting  purposes for the
Property in Leesburg,  Florida.  The allowance represents the difference between
the  Property's  carrying  value at December 31,  1997,  and the  estimated  net
realizable value for this Property based on an anticipated sales price.

         The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on their computer  package  software.
The  hardware and  built-in  software  are  believed to be year 2000  compliant.
Accordingly, the General Partners do not expect this matter to materially impact
how the  Partnership  conducts  business  nor its  current or future  results of
operations or financial position.

         The  Partnership's  leases as of December  31,  1997,  are, in general,
triple-net  leases and  contain  provisions  that the General  Partners  believe
mitigate  the adverse  effect of  inflation.  Such  provisions  include  clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified  level and/or  automatic  increases in base rent at specified  times
during the term of the lease.  Management  expects that  increases in restaurant
sales  volumes  due to  inflation  and real  sales  growth  should  result in an
increase in rental income over time.  Continued inflation also may cause capital
appreciation of the  Partnership's  Properties.  Inflation and changing  prices,
however,

                                       11

<PAGE>



also may have an adverse impact on the sales of the restaurants and on potential
capital appreciation of the Properties.


Item 8.   Financial Statements and Supplementary Data

                                       12

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                                    CONTENTS








                                                        Page

Report of Independent Accountants                        14

Financial Statements:

  Balance Sheets                                         15

  Statements of Income                                   16

  Statements of Partners' Capital                        17

  Statements of Cash Flows                               18

  Notes to Financial Statements                          20

                                       13

<PAGE>








                        Report of Independent Accountants




To the Partners
CNL Income Fund IV, Ltd.


We have audited the financial  statements and financial  statement  schedules of
CNL Income Fund IV, Ltd. (a Florida limited partnership) listed in Item 14(a) of
this Form 10-K. These financial statements and financial statement schedules are
the  responsibility of the Partnership's  management.  Our  responsibility is to
express  an  opinion  on these  financial  statements  and  financial  statement
schedules 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.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of CNL Income Fund IV, Ltd. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended  December 31, 1997 in conformity
with generally accepted accounting principles.  In addition, in our opinion, the
financial  statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.



/s/ Coopers & Lybrand, L.L.P.
----------------------------------


Orlando, Florida
January 26, 1998

                                       14

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                                 BALANCE SHEETS


                                                         December 31,
           ASSETS                                 1997               1996
           ------                              -----------        ----------

Land and buildings on operating
  leases, less accumulated
  depreciation and allowance
  for loss on land and building                $18,097,997        $18,737,516
Net investment in direct
  financing leases                               1,269,389          1,303,604
Investment in joint ventures                     2,708,012          2,783,738
Cash and cash equivalents                          876,452            554,593
Receivables, less allowance for
  doubtful accounts of $295,580
  and $156,933                                      37,669             62,561
Prepaid expenses                                    11,115             10,935
Lease costs, less accumulated
  amortization of $17,956 and
  $15,458                                           21,588              8,486
Accrued rental income                              287,466            269,359
Other assets                                           200                100
                                               -----------        -----------

                                               $23,309,888        $23,730,892
                                               ===========        ===========


LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                               $     8,576        $    10,831
Accrued construction costs
  payable                                          250,000                 -
Accrued and escrowed real
  estate taxes payable                              65,176             32,729
Distributions payable                              690,000            690,000
Due to related parties                              93,854             67,153
Rents paid in advance and
  deposits                                          49,983             32,548
                                               -----------        -----------
    Total liabilities                            1,157,589            833,261

Partners' capital                               22,152,299         22,897,631
                                               -----------        -----------

                                               $23,309,888        $23,730,892
                                               ===========        ===========









                 See accompanying notes to financial statements.

                                       15

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                               Year Ended December 31,
                                                                   1997                1996               1995
                                                                ----------          ----------         -------
<S> <C>
Revenues:
  Rental income from operating
    leases                                                      $2,058,703          $2,263,677         $2,373,386
  Earned income from direct
    financing leases                                               130,683             134,014            137,020
  Contingent rental income                                         117,031              97,318             94,101
  Interest and other income                                         35,221              47,855             21,287
                                                                ----------          ----------         ----------
                                                                 2,341,638           2,542,864          2,625,794
                                                                ----------          ----------         ----------

Expenses:
  General operating and
    administrative                                                 149,808             161,714            140,374
  Professional services                                             33,439              29,289             31,287
  Bad debt expense                                                  12,794                  -             102,431
  Real estate taxes                                                 65,316              37,589             37,745
  State and other taxes                                             16,476              21,694             19,006
  Depreciation and amortization                                    455,895             444,232            458,937
                                                                ----------          ----------         ----------
                                                                   733,728             694,518            789,780
                                                                ----------          ----------         ----------

Income Before Equity in Earnings
  of Joint Ventures, Gain (Loss)
  on Sale of Land and Buildings
  and Provision for Loss on Land
  and Building                                                   1,607,910           1,848,346          1,836,014

Equity in Earnings of Joint
  Ventures                                                         189,747             277,431            245,778

Gain (Loss) on Sale of Land and
  Buildings                                                         (6,652)            221,390            128,547

Provision for Loss on Land and
  Building                                                         (70,337)                 -                  -
                                                                ----------          ----------         ---------

Net Income                                                      $1,720,668          $2,347,167         $2,210,339
                                                                ==========          ==========         ==========

Allocation of Net Income:
  General partners                                              $   15,697          $   22,219         $   21,590
  Limited partners                                               1,704,971           2,324,948          2,188,749
                                                                ----------          ----------         ----------

                                                                $1,720,668          $2,347,167         $2,210,339
                                                                ==========          ==========         ==========

Net Income Per Limited Partner
  Unit                                                          $    28.42          $    38.75         $    36.48
                                                                ==========          ==========         ==========

Weighted Average Number of
  Limited Partner Units
  Outstanding                                                       60,000              60,000             60,000
                                                                ==========          ==========         ==========

</TABLE>

                 See accompanying notes to financial statements.

                                       16

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                         STATEMENTS OF PARTNERS' CAPITAL

                  Years Ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>


                                  General Partners                        Limited Partners
                                            Accumu-                                      Accumu-
                                 Contri-     lated         Contri-         Distri-        lated      Syndication
                                 butions    Earnings       butions         butions       Earnings       Costs          Total
                                 --------   --------     -----------    ------------   -----------   -----------    --------
<S> <C>
Balance, December 31, 1994       $241,504   $139,044     $30,000,000    $(16,927,963)  $13,825,240   $(3,440,000)   $23,837,825

  Distributions to limited
    partners ($46 per
    limited partner unit)              -          -               -       (2,760,000)           -             -      (2,760,000)
  Net income                           -      21,590              -               -      2,188,749            -       2,210,339
                                 --------   --------     -----------    ------------   -----------   -----------    -----------

Balance, December 31, 1995        241,504    160,634      30,000,000     (19,687,963)   16,013,989    (3,440,000)    23,288,164

  Contributions from
    general partners               22,300         -               -               -             -             -          22,300
  Distributions to limited
    partners ($46 per
    limited partner unit)              -          -               -       (2,760,000)           -             -      (2,760,000)
  Net income                           -      22,219              -               -      2,324,948            -       2,347,167
                                 --------   --------     -----------    ------------   -----------   -----------    -----------

Balance, December 31, 1996        263,804    182,853      30,000,000     (22,447,963)   18,338,937    (3,440,000)    22,897,631

  Contributions from
    general partners              294,000         -               -               -             -             -         294,000
  Distributions to limited
    partners ($46 per
    limited partner unit)              -          -               -       (2,760,000)           -             -      (2,760,000)
  Net income                           -      15,697              -               -      1,704,971            -       1,720,668
                                 --------   --------     -----------    ------------   -----------   -----------    -----------

Balance, December 31, 1997       $557,804   $198,550     $30,000,000    $(25,207,963)  $20,043,908   $(3,440,000)   $22,152,299
                                 ========   ========     ===========    ============   ===========   ===========    ===========
</TABLE>




                 See accompanying notes to financial statements.

                                       17

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                             Year Ended December 31,
                                                                  1997                1996               1995
                                                               -----------         -----------        -------
<S> <C>
Increase (Decrease) in Cash and
  Cash Equivalents:

    Cash Flows from Operating
      Activities:
        Cash received from tenants                             $ 2,345,612         $ 2,588,248        $ 2,586,716
        Distributions from joint
          ventures                                                 265,473             305,866            271,006
        Cash paid for expenses                                    (211,213)           (206,059)          (205,759)
        Interest received                                           18,100              25,909             18,430
                                                               -----------         -----------        -----------
            Net cash provided by
              operating activities                               2,417,972           2,713,964          2,670,393
                                                               -----------         -----------        -----------

    Cash Flows from Investing
      Activities:
        Proceeds from sale of
          land and building                                        378,149           1,049,550            518,650
        Additions to land and
          buildings on operating
          leases                                                        -           (1,035,516)            (1,628)
        Investment in joint venture                                     -             (437,489)                -
        Decrease (increase) in
          restricted cash                                               -              518,150           (518,150)
        Payment of lease costs                                     (17,384)             (2,230)            (1,800)
        Other                                                        9,122                  -                  -
                                                               -----------         -----------        ----------
            Net cash provided by
              (used in) investing
              activities                                           369,887              92,465             (2,928)
                                                               -----------         -----------        -----------

    Cash Flows from Financing
      Activities:
        Reimbursement of acqui-
          sition costs paid by
          related parties on
          behalf of the Partner-
          ship                                                          -                   -              (1,175)
        Contributions from General
          Partners                                                 294,000              22,300                 -
        Distributions to limited
          partners                                              (2,760,000)         (2,760,000)        (2,760,000)
                                                               -----------         -----------        -----------
            Net cash used in
              financing activities                              (2,466,000)         (2,737,700)        (2,761,175)
                                                               -----------         -----------        -----------

Net Increase (Decrease) in Cash
  and Cash Equivalents                                             321,859              68,729            (93,710)

Cash and Cash Equivalents at
  Beginning of Year                                                554,593             485,864            579,574
                                                               -----------         -----------        -----------

Cash and Cash Equivalents at End
  of Year                                                      $   876,452         $   554,593        $   485,864
                                                               ===========         ===========        ===========
</TABLE>





                 See accompanying notes to financial statements.

                                       18

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                      STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>

                                                                             Year Ended December 31,
                                                                  1997                1996               1995
                                                               -----------         -----------        -------
<S> <C>
Reconciliation of Net Income to
  Net Cash Provided by Operating
  Activities:

    Net income                                                 $ 1,720,668         $ 2,347,167        $ 2,210,339
                                                               -----------         -----------        -----------
    Adjustments to reconcile net
      income to net cash provided
      by operating activities:
        Depreciation                                               453,397             442,065            455,543
        Amortization                                                 2,498               2,167              3,394
        Equity in earnings of
          joint ventures, net
          of distributions                                          75,726              28,435             25,228
        Loss (gain) on sale of
         land and buildings                                          6,652            (221,390)          (128,547)
        Provision for loss on
          land and building                                         70,337                  -                  -
        Decrease in receivables                                     18,216              41,531             93,451
        Increase in prepaid
          expenses                                                    (180)             (1,202)            (1,747)
        Decrease in net invest-
          ment in direct finan-
          cing leases                                               34,215              30,885             27,879
        Increase in accrued rental
          income                                                   (39,669)            (21,520)           (22,921)
        Increase (decrease) in
          accounts payable and
          accrued expenses                                          31,976              11,162             (3,532)
        Increase in due to related
          parties                                                   26,701              39,987             27,166
        Increase (decrease) in
          rents paid in advance
          and deposits                                              17,435              14,677            (15,860)
                                                               -----------         -----------        -----------
            Total adjustments                                      697,304             366,797            460,054
                                                               -----------         -----------        -----------

Net Cash Provided by Operating
  Activities                                                   $ 2,417,972         $ 2,713,964        $ 2,670,393
                                                               ===========         ===========        ===========

Supplemental Schedule of Non-Cash
  Financing Activities:

    Distributions declared
      and unpaid at December 31                                $   690,000         $   690,000        $   690,000
                                                               ===========         ===========        ===========


</TABLE>


                 See accompanying notes to financial statements.

                                       19

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 1997, 1996 and 1995


1.       Significant Accounting Policies:

         Organization  and Nature of Business - CNL Income  Fund IV,  Ltd.  (the
         "Partnership") is a Florida limited  partnership that was organized for
         the purpose of acquiring both newly constructed and existing restaurant
         properties,  as well as properties  upon which  restaurants  were to be
         constructed,  which are leased  primarily  to operators of national and
         regional fast-food and family-style restaurant chains.

         The general partners of the Partnership are CNL Realty Corporation (the
         "Corporate  General  Partner"),  James M.  Seneff,  Jr.  and  Robert A.
         Bourne.  Mr. Seneff and Mr. Bourne are also 50 percent  shareholders of
         the Corporate General Partner. The general partners have responsibility
         for managing the day-to-day operations of the Partnership.

         Real  Estate  and  Lease  Accounting  -  The  Partnership  records  the
         acquisition of land and buildings at cost,  including  acquisition  and
         closing costs. Land and buildings are leased to unrelated third parties
         on a triple-net basis, whereby the tenant is generally  responsible for
         all operating  expenses  relating to the property,  including  property
         taxes, insurance, maintenance and repairs. The leases are accounted for
         using  either the  direct  financing  or the  operating  methods.  Such
         methods are described below:

                  Direct  financing  method - The leases accounted for using the
                  direct  financing  method are recorded at their net investment
                  (which at the inception of the lease generally  represents the
                  cost of the asset) (Note 4).  Unearned  income is deferred and
                  amortized  to income  over the lease  terms so as to produce a
                  constant  periodic  rate of  return on the  Partnership's  net
                  investment in the leases.

                  Operating  method - Land and  building  leases  accounted  for
                  using the  operating  method are recorded at cost,  revenue is
                  recognized as rentals are earned and  depreciation  is charged
                  to operations as incurred.  Buildings are  depreciated  on the
                  straight-line  method over their estimated  useful lives of 30
                  years.  When  scheduled  rentals  vary  during the lease term,
                  income is recognized on a straight-line basis so as to produce
                  a constant periodic rent over the lease term commencing on the
                  date the property is placed in service.

                                       20

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


1.       Significant Accounting Policies - Continued:

                  Accrued  rental  income  represents  the  aggregate  amount of
                  income  recognized  on a  straight-line  basis  in  excess  of
                  scheduled rental payments to date.

         When  the  properties  are  sold,  the  related  cost  and  accumulated
         depreciation  for operating  leases and the net  investment  for direct
         financing leases,  plus any accrued rental income, are removed from the
         accounts and gains or losses from sales are  reflected  in income.  The
         general  partners of the Partnership  review  properties for impairment
         whenever events or changes in circumstances  indicate that the carrying
         amount of the assets may not be  recoverable  through  operations.  The
         general partners  determine whether an impairment in value has occurred
         by comparing the estimated future  undiscounted  cash flows,  including
         the  residual  value of the  property,  with the  carrying  cost of the
         individual  property.  If an impairment  is  indicated,  the assets are
         adjusted to their fair value.  Although the general  partners have made
         their best estimate of these factors based on current conditions, it is
         reasonably  possible  that  changes  could occur in the near term which
         could adversely affect the general partners' estimate of net cash flows
         expected to be  generated  from its  properties  and the need for asset
         impairment write-downs.

         When the  collection  of amounts  recorded as rental or other income is
         considered  to be  doubtful,  an  adjustment  is made to  increase  the
         allowance for doubtful accounts,  which is netted against  receivables,
         and to decrease rental or other income or increase bad debt expense for
         the  current  period,  although  the  Partnership  continues  to pursue
         collection of such amounts.  If amounts are subsequently  determined to
         be  uncollectible,  the  corresponding  receivable  and  allowance  for
         doubtful accounts are decreased accordingly.

         Investment in Joint Ventures - The Partnership's investments in Holland
         Joint Venture,  Titusville Joint Venture,  Cocoa Joint Venture,  Auburn
         Joint Venture,  Kingsville  Real Estate Joint Venture and a property in
         Clinton, North Carolina,  held as tenants-in-common,  are accounted for
         using the equity  method  since the  Partnership  shares  control  with
         affiliates which have the same general partners.

                                       21

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


1.       Significant Accounting Policies - Continued:

         Cash and Cash Equivalents - The Partnership considers all highly liquid
         investments  with a maturity of three months or less when  purchased to
         be cash  equivalents.  Cash  and cash  equivalents  consist  of  demand
         deposits at commercial  banks and money market funds (some of which are
         backed by government  securities).  Cash equivalents are stated at cost
         plus accrued interest, which approximates market value.

         Cash  accounts  maintained  on  behalf  of the  Partnership  in  demand
         deposits  at  commercial  banks  and  money  market  funds  may  exceed
         federally insured levels;  however, the Partnership has not experienced
         any losses in such  accounts.  The  Partnership  limits  investment  of
         temporary cash investments to financial  institutions  with high credit
         standing;  therefore, the Partnership believes it is not exposed to any
         significant credit risk on cash and cash equivalents.

         Lease Costs - Brokerage fees associated with negotiating new leases are
         amortized  over the terms of the new  leases  using  the  straight-line
         method.

         Income Taxes - Under  Section 701 of the  Internal  Revenue  Code,  all
         income,  expenses and tax credit items flow through to the partners for
         tax  purposes.  Therefore,  no  provision  for federal  income taxes is
         provided in the accompanying  financial statements.  The Partnership is
         subject to certain state taxes on its income and property.

         Additionally,  for tax  purposes,  syndication  costs are  included  in
         Partnership equity and in the basis of each partner's  investment.  For
         financial  reporting  purposes,  syndication  costs are netted  against
         partners' capital and represent a reduction of Partnership equity and a
         reduction in the basis of each partner's investment.

         Use of Estimates - The general  partners of the Partnership have made a
         number of estimates and assumptions relating to the reporting of assets
         and liabilities and the disclosure of contingent assets and liabilities
         to prepare these  financial  statements in  conformity  with  generally
         accepted  accounting  principles.  The more significant areas requiring
         the use of  management  estimates  relate to the allowance for doubtful
         accounts  and future  cash flows  associated  with  long-lived  assets.
         Actual results could differ from those estimates.



                                       22

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


2.       Leases:

         The  Partnership  leases its land or land and  buildings  primarily  to
         operators  of  national  and  regional   fast-food   and   family-style
         restaurants.  The  leases are  accounted  for under the  provisions  of
         Statement of Financial  Accounting  Standards No. 13,  "Accounting  for
         Leases." The leases  generally  are  classified  as  operating  leases;
         however,  some leases have been classified as direct financing  leases.
         For the leases  classified  as direct  financing  leases,  the building
         portions of the property  leases are accounted for as direct  financing
         leases  while the land  portion of one of these  leases is an operating
         lease.  Substantially all leases are for 15 to 20 years and provide for
         minimum and contingent rentals. In addition,  the tenant generally pays
         all property taxes and  assessments,  fully  maintains the interior and
         exterior of the  building  and carries  insurance  coverage  for public
         liability,  property  damage,  fire and  extended  coverage.  The lease
         options  generally  allow  tenants  to renew the leases for two or four
         successive  five-year  periods subject to the same terms and conditions
         as the initial lease. Most leases also allow the tenant to purchase the
         property  at fair market  value after a specified  portion of the lease
         has elapsed.

3.       Land and Buildings on Operating Leases:

         Land and  buildings on operating  leases  consisted of the following at
         December 31:

                                                 1997              1996
                                              -----------       -------

                  Land                        $ 8,328,572       $ 8,694,357
                  Buildings                    13,684,194        13,434,194
                                              -----------       -----------
                                               22,012,766        22,128,551
                  Less accumulated
                    depreciation               (3,844,432)       (3,391,035)
                                              -----------       -----------
                                               18,168,334        18,737,516
                  Less allowance for
                    loss on land and
                    building                      (70,337)               -
                                              -----------       ----------

                                              $18,097,997       $18,737,516
                                              ===========       ===========




                                       23

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


3.       Land and Buildings on Operating Leases - Continued:

         In September 1996, the Partnership sold its Property in Tampa, Florida,
         for 1,090,000 and received net sales proceeds of $1,049,550,  resulting
         in a gain of $221,390 for financial reporting  purposes.  This Property
         was originally  acquired by the  Partnership in December 1988 and had a
         cost  of  approximately   $832,800,   excluding  acquisition  fees  and
         miscellaneous acquisition expenses; therefore, the Partnership sold the
         Property for approximately  $216,800 in excess of its original purchase
         price.  In December  1996,  the  Partnership  reinvested  approximately
         $1,026,200 in a Boston Market property located in Richmond, Virginia.

         In  July  1997,  the  Partnership  entered  into  new  leases  for  the
         properties in Portland and  Winchester,  Indiana,  with a new tenant to
         operate the properties as Arby's restaurants.  In connection therewith,
         the  Partnership   incurred  $125,000  in  renovation  costs  for  each
         property.

         In November 1997, the  Partnership  sold its property in  Douglasville,
         Georgia to an unrelated third party for $402,000 and received net sales
         proceeds of $378,149 (net of $2,546 which represents amounts due to the
         former tenant for prorated rent). This property was originally acquired
         by the  Partnership  in December  1994 and had a cost of  approximately
         $363,800,  excluding  acquisition  fees and  miscellaneous  acquisition
         expenses;   therefore,   the   Partnership   sold  the   property   for
         approximately  $16,900 in excess of its original purchase price. Due to
         the fact that the  Partnership  had  recognized  accrued  rental income
         since the  inception of the lease  relating to the  straight-lining  of
         future  scheduled rent increases in accordance with generally  accepted
         accounting principles, the Partnership wrote off the cumulative balance
         of such accrued rental income at the time of the sale of this property,
         resulting in a loss of $6,652 for financial reporting purposes.  Due to
         the fact that the  straight-lining  of future rent  increases  over the
         term of the lease is a non-cash accounting adjustment, the write off of
         these amounts is a loss for financial statement purposes only.

         At December 31, 1997, the Partnership established an allowance for loss
         on land and building in the amount of $70,337 for  financial  reporting
         purposes  for  the  property  in  Leesburg,   Florida.   The  allowance
         represents  the  difference  between the  property's  carrying value at
         December  31,  1997  and the  estimated  net  realizable  value of this
         property based on an anticipated sales price.

                                       24

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


3.       Land and Buildings on Operating Leases - Continued:

         Some leases provide for escalating  guaranteed minimum rents throughout
         the  lease  terms.  Income  from  these  scheduled  rent  increases  is
         recognized on a straight-line  basis over the terms of the leases.  For
         the years ended  December  31,  1997,  1996 and 1995,  the  Partnership
         recognized $39,669, $21,520 and $22,921,  respectively,  of such rental
         income.

         The following is a schedule of the future  minimum lease payments to be
         received on noncancellable operating leases at December 31, 1997:

                  1998                              $ 1,996,330
                  1999                                2,007,362
                  2000                                2,009,453
                  2001                                1,979,003
                  2002                                1,983,101
                  Thereafter                         12,867,319
                                                    -----------

                                                    $22,842,568

         Since  lease  renewal  periods  are  exercisable  at the  option of the
         tenant, the above table only presents future minimum lease payments due
         during  the  initial  lease  terms.  In  addition,  this table does not
         include any amounts for future contingent rentals which may be received
         on the leases based on a percentage of the tenant's gross sales.

4.       Net Investment in Direct Financing Leases:

         The  following  lists the  components  of the net  investment in direct
         financing leases at December 31:

                                                        1997            1996
                                                    -----------     -----------
                  Minimum lease payments
                    receivable                      $ 1,825,690     $ 1,990,589
                  Estimated residual values             527,829         527,829
                  Less unearned income               (1,084,130)     (1,214,814)
                                                    -----------     -----------

                  Net investment in direct
                    financing leases                $ 1,269,389     $ 1,303,604
                                                    ===========     ===========


                                       25

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


4.       Net Investment in Direct Financing Leases - Continued:

         The  following  is a schedule of future  minimum  lease  payments to be
         received on direct financing leases at December 31, 1997:

                  1998                          $  164,899
                  1999                             164,899
                  2000                             164,899
                  2001                             164,899
                  2002                             164,899
                  Thereafter                     1,001,195
                                                ----------

                                                $1,825,690

         The above table does not include  future  minimum  lease  payments  for
         renewal  periods or for contingent  rental payments that may become due
         in future periods (see Note 3).

5.       Investment in Joint Ventures:

         The Partnership has a 51 percent,  a 26.6%, a 57 percent, a 96.1% and a
         68.87%  interest in the profits  and losses of Holland  Joint  Venture,
         Titusville Joint Venture, Cocoa Joint Venture, Auburn Joint Venture and
         Kingsville Real Estate Joint
         Venture, respectively.

         In January 1996, the Partnership acquired a property in Clinton,  North
         Carolina, as tenants-in-common with affiliates of the general partners.
         The Partnership  accounts for its investment in this property using the
         equity method since the Partnership shares control with affiliates, and
         amounts  relating to its investment are included in investment in joint
         ventures.  As of December  31,  1997,  the  Partnership  owned a 53.68%
         interest in this property.

         The remaining  interests in these joint ventures are held by affiliates
         of the Partnership which have the same general partners.  Holland Joint
         Venture,  Titusville Joint Venture,  Cocoa Joint Venture,  Auburn Joint
         Venture,  Kingsville  Real Estate Joint Venture and the Partnership and
         affiliates, as tenants-in-common, each own and lease one property to an
         operator of national fast-food or family-style restaurants.





                                       26

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


5.       Investment in Joint Ventures - Continued:

         The  following  presents  the  joint  ventures'   combined,   condensed
         financial information at December 31:

                                                  1997             1996
                                               ----------       -------
                  Land and buildings on
                    operating leases,
                    less accumulated
                    depreciation and
                    allowance for loss
                    on land and building       $3,338,372       $3,565,440
                  Net investment in
                    direct financing
                    leases                        842,633          859,667
                  Cash                             12,331           11,001
                  Receivables                      40,456           34,308
                  Accrued rental income           177,567          168,784
                  Other assets                      2,029           30,143
                  Liabilities                      16,283           10,724
                  Partners' capital             4,397,105        4,658,619
                  Revenues                        434,177          511,606
                  Net income                      126,271          411,884

         The Partnership  recognized  income  totalling  $189,747,  $277,431 and
         $245,778  for the  years  ended  December  31,  1997,  1996  and  1995,
         respectively, from these joint ventures.

6.       Receivables:

         In June 1997, the Partnership  terminated the leases with the tenant of
         the  properties  in Portland and  Winchester,  Indiana.  In  connection
         therewith,  the Partnership  accepted a promissory note from the former
         tenant for $32,343 for amounts  relating to past due real estate  taxes
         the  Partnership  had  accrued  as a  result  of  the  former  tenant's
         financial difficulties. The promissory note, which is uncollateralized,
         bears  interest  at a rate  of ten  percent  per  annum,  and is  being
         collected in 36 monthly installments.  Receivables at December 31, 1997
         included $7,106 of such amounts.



                                       27

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


7.       Allocations and Distributions:

         Generally, all net income and net losses of the Partnership,  excluding
         gains and losses from the sale of property, are allocated 99 percent to
         the  limited  partners  and  one  percent  to  the  general   partners.
         Distributions  of net  cash  flow are made 99  percent  to the  limited
         partners and one percent to the general  partners;  provided,  however,
         that the one percent of net cash flow to be  distributed to the general
         partners  is  subordinated  to receipt by the  limited  partners  of an
         aggregate,  ten percent,  cumulative,  noncompounded  annual  return on
         their adjusted capital contributions (the "10% Preferred Return").

         Generally,  net  sales  proceeds  from the sale of  properties,  to the
         extent  distributed,  will be distributed first to the limited partners
         in an  amount  sufficient  to  provide  them with  their 10%  Preferred
         Return,  plus the return of their adjusted capital  contributions.  The
         general   partners  will  then  receive,   to  the  extent   previously
         subordinated   and  unpaid,   a  one  percent  interest  in  all  prior
         distributions   of  net  cash  flow  and  a  return  of  their  capital
         contributions.  Any remaining  sales  proceeds will be  distributed  95
         percent  to the  limited  partners  and  five  percent  to the  general
         partners.  Any  gain  from  the  sale of a  property  is,  in  general,
         allocated in the same manner as net sales  proceeds are  distributable.
         Any loss from the sale of a property is, in general,  allocated  first,
         on a pro rata  basis,  to  partners  with  positive  balances  in their
         capital  accounts;  and thereafter,  95 percent to the limited partners
         and five percent to the general partners.

         During each of the years ended  December 31, 1997,  1996 and 1995,  the
         Partnership   declared   distributions   to  the  limited  partners  of
         $2,760,000.  No distributions have been made to the general partners to
         date.

                                       28

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


8.       Income Taxes:

         The following is a reconciliation of net income for financial reporting
         purposes to net income for federal  income tax  purposes  for the years
         ended December 31:
<TABLE>
<CAPTION>


                                                                1997             1996              1995
                                                             ----------       ----------        -------
<S> <C>
                  Net income for
                    financial reporting
                    purposes                                 $1,720,668       $2,347,167        $2,210,339

                  Depreciation for tax
                    reporting purposes
                    in excess of
                    depreciation for
                    financial reporting
                    purposes                                     (9,203)         (17,764)          (16,933)

                  Allowance for loss on
                    land and building                            70,337               -                 -

                  Direct financing
                    leases recorded as
                    operating leases for
                    tax reporting
                    purposes                                     34,215           30,885            27,879

                  Gain on sale of land and
                    buildings for financial
                    reporting purposes less
                    than (in excess of) gain
                    for tax reporting
                    purposes                                     44,918         (140,228)         (128,547)

                  Equity in earnings of joint
                    ventures for financial
                    reporting purposes in
                    excess of equity in
                    earnings of joint ventures
                    for tax reporting
                    purposes                                     51,115          (25,853)          (22,624)

                  Allowance for doubtful
                    accounts                                    138,647           (9,933)          122,022

                  Accrued rental income                         (39,669)         (21,520)          (22,921)

                  Rents paid in advance                           7,435           14,677           (15,860)
                                                             ----------       ----------        ----------

                  Net income for federal
                    income tax purposes                      $2,018,463       $2,177,431        $2,153,355
                                                             ==========       ==========        ==========
</TABLE>

                                       29

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


9.       Related Party Transactions:

         One of the individual general partners, James M. Seneff, Jr., is one of
         the principal  shareholders  of CNL Group,  Inc., the parent company of
         CNL Fund Advisors, Inc. The other individual general partner, Robert A.
         Bourne, served as president of CNL Fund Advisors,  Inc. through October
         1997. CNL Income Fund Advisors,  Inc. was a wholly owned  subsidiary of
         CNL Group,  Inc. until its merger,  effective January 1, 1996, with CNL
         Fund Advisors,  Inc. During the years ended December 31, 1997, 1996 and
         1995,  CNL Income  Fund  Advisors,  Inc.  and CNL Fund  Advisors,  Inc.
         (hereinafter   referred  to  collectively  as  the  "Affiliates")  each
         performed certain services for the Partnership, as described below.

         During  the years  ended  December  31,  1997,  1996 and 1995,  certain
         Affiliates acted as manager of the Partnership's properties pursuant to
         a management agreement with the Partnership.  In connection  therewith,
         the Partnership agreed to pay the Affiliates an annual,  noncumulative,
         subordinated management fee of one percent of the sum of gross revenues
         from properties  wholly owned by the Partnership and the  Partnership's
         allocable  share of gross  revenues  from  joint  ventures,  but not in
         excess of competitive fees for comparable services.  These fees will be
         incurred  and will be payable only after the limited  partners  receive
         their  10%  Preferred  Return.  Due to the  fact  that  these  fees are
         noncumulative,  if the  limited  partners  do  not  receive  their  10%
         Preferred Return in any particular year, no management fees will be due
         or payable for such year. As a result of such threshold,  no management
         fees were incurred  during the years ended December 31, 1997,  1996 and
         1995.

         Certain   Affiliates   are  also   entitled   to  receive  a  deferred,
         subordinated real estate  disposition fee, payable upon the sale of one
         or more  properties  based on the lesser of one-half  of a  competitive
         real  estate  commission  or  three  percent  of  the  sales  price  if
         Affiliates  provide a substantial amount of services in connection with
         the  sale.  However,  if the net sales  proceeds  are  reinvested  in a
         replacement  property,  no such real  estate  disposition  fees will be
         incurred  until  such  replacement  property  is sold and the net sales
         proceeds are  distributed.  The payment of the real estate  disposition
         fee

                                       30

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


9.       Related Party Transactions - Continued:

         is subordinated  to receipt by the limited  partners of their aggregate
         10% Preferred  Return,  plus their adjusted capital  contributions.  No
         deferred,  subordinated real estate disposition fees have been incurred
         since inception.

         During the years ended December 31, 1997, 1996 and 1995, the Affiliates
         provided accounting and administrative services to the Partnership on a
         day-to-day basis. The Partnership incurred $81,838, $85,899 and $79,776
         for the years ended December 31, 1997, 1996 and 1995, respectively, for
         such services.

         The due to related parties consisted of the following at December 31:
                                                          1997        1996
                                                        -------      -----

                  Due to Affiliates:
                    Expenditures incurred on
                      behalf of the Partnership         $48,126      $39,279
                    Accounting and administrative
                      services                           40,728       27,874
                    Other                                 5,000           -
                                                        -------      ------

                                                        $93,854      $67,153
                                                        =======      =======

10.      Concentration of Credit Risk:

         The  following  schedule  presents  total rental and earned income from
         individual  lessees,  each  representing  more than ten  percent of the
         Partnership's   total   rental  and  earned   income   (including   the
         Partnership's  share of total  rental  and  earned  income  from  joint
         ventures), for at least one of the years ended December 31:

                                           1997         1996        1995
                                         --------     --------    ------

                  Shoney's, Inc.         $427,238     $425,390    $423,124
                  Tampa Foods, L.P.       215,265      291,347     320,883

                                       31

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1997, 1996 and 1995


10.      Concentration of Credit Risk - Continued:

         In addition,  the following  schedule  presents total rental and earned
         income from individual  restaurant chains,  each representing more than
         ten  percent  of the  Partnership's  total  rental  and  earned  income
         (including  the  Partnership's  share of total rental and earned income
         from joint ventures) for at least one of the years ended December 31:

                                          1997        1996        1995
                                        --------    --------    ------

                  Shoney's              $557,303    $557,841    $559,710
                  Wendy's Old
                    Fashioned
                    Hamburger
                    Restaurants          432,585     499,305     525,948
                  Denny's                345,749     360,080     358,467
                  Taco Bell              262,909     251,314     251,273

         Although  the  Partnership's   properties  are  geographically  diverse
         throughout the United States and the  Partnership's  lessees  operate a
         variety of  restaurant  concepts,  default  by any of these  lessees or
         restaurant chains could significantly  impact the results of operations
         of the Partnership. However, the general partners believe that the risk
         of such a default is reduced due to the  essential or important  nature
         of these properties for the on-going operations of the lessees.



                                       32

<PAGE>



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

         None.


                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

         The General Partners of the Registrant are James M. Seneff, Jr., Robert
A.  Bourne  and CNL  Realty  Corporation,  a Florida  corporation.  The  General
Partners  manage  and  control  the  Partnership's   affairs  and  have  general
responsibility   and  the  ultimate  authority  in  all  matters  affecting  the
Partnership's  business.  The  Partnership  has  available  to it the  services,
personnel and experience of CNL Fund Advisors,  Inc., CNL Group,  Inc. and their
affiliates, all of which are affiliates of the General Partners.

         James M. Seneff, Jr., age 51, is a principal  stockholder of CNL Group,
Inc., a diversified  real estate company,  and has served as its Chairman of the
Board of Directors,  director and Chief Executive Officer since its formation in
1980.  CNL Group,  Inc.  is the  parent  company of CNL  Securities  Corp.,  CNL
Investment Company, CNL Fund Advisors,  Inc., CNL Real Estate Advisors, Inc. and
prior to its merger with CNL Fund Advisors, Inc., effective January 1, 1996, CNL
Income Fund Advisors, Inc. Mr. Seneff is Chief Executive Officer, and has been a
director and registered  principal of CNL Securities Corp.,  which served as the
managing dealer in the Partnership's  offering of Units,  since its formation in
1979.  Mr.  Seneff also has held the position of President and a director of CNL
Management  Company,  a registered  investment  advisor,  since its formation in
1976,  has served as Chief  Executive  Officer and  Chairman of the Board of CNL
Investment  Company,  and Chief  Executive  Officer and Chairman of the Board of
Commercial Net Lease Realty,  Inc. since 1992, has served as the Chairman of the
Board and the Chief  Executive  Officer of CNL Realty  Advisors,  Inc. since its
inception in 1991 through  December 31, 1997, at which time CNL Realty Advisors,
Inc.  merged with Commercial Net Lease Realty,  Inc.,  served as Chairman of the
Board and Chief  Executive  Officer of CNL Income Fund Advisors,  Inc. since its
inception in 1994 through December 31, 1995, has served as a director,  Chairman
of the Board and Chief  Executive  Officer of CNL Fund Advisors,  Inc. since its
inception in 1994,  and has held the position of Chief  Executive  Officer and a
director of CNL Institutional  Advisors,  Inc., a registered investment advisor,
since its inception in 1990.  In addition,  Mr. Seneff has served as a director,
Chairman of the Board and Chief  Executive  Officer of CNL  American  Properties
Fund,  Inc. since 1994, and has served as a director,  Chairman of the Board and
Chief Executive  Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors,  Inc. since January 1997. Mr. Seneff  previously served on
the Florida State  Commission on Ethics and is a former member and past Chairman
of the State of Florida  Investment  Advisory  Council,  which recommends to the
Florida  Board  of  Administration  investments  for  various  Florida  employee
retirement  funds.  The Florida  Board of  Administration,  Florida's  principal
investment advisory and money management agency, oversees the investment of more
than $60 billion of retirement funds.  Since 1971, Mr. Seneff has been active in
the  acquisition,  development  and  management  of real  estate  projects  and,
directly or through an  affiliated  entity,  has served as a general  partner or
joint  venturer in over 100 real  estate  ventures  involved  in the  financing,
acquisition,  construction and rental of office buildings,  apartment complexes,
restaurants,  hotels  and other  real  estate.  Included  in these  real  estate
ventures are approximately 65 privately offered real estate limited partnerships
in which Mr.  Seneff,  directly or through an affiliated  entity,  serves or has
served as a general partner. Also included are CNL Income Fund, Ltd., CNL Income
Fund II, Ltd.,  CNL Income Fund III,  Ltd.,  CNL Income Fund V, Ltd., CNL Income
Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL Income
Fund IX, Ltd.,  CNL Income Fund X, Ltd.,  CNL Income Fund XI,  Ltd.,  CNL Income
Fund XII,  Ltd.,  CNL Income Fund XIII,  Ltd.,  CNL Income Fund XIV,  Ltd.,  CNL
Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII,  Ltd. and
CNL Income Fund XVIII,  Ltd. (the "CNL Income Fund  Partnerships"),  public real
estate limited  partnerships with investment  objectives similar to those of the
Partnership,  in which  Mr.  Seneff  serves  as a general  partner.  Mr.  Seneff
received his degree in Business  Administration from Florida State University in
1968.


                                       33

<PAGE>



         Robert A.  Bourne,  age 50, is  President  and  Treasurer of CNL Group,
Inc., President,  a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, and prior to its merger with
CNL Fund Advisors,  Inc.,  effective  January 1, 1996, CNL Income Fund Advisors,
Inc., and Chief Investment Officer,  Vice Chairman of the Board of Directors,  a
director  and  Treasurer  of CNL  Institutional  Advisors,  Inc.,  a  registered
investment  advisor.  Mr.  Bourne  served  as  President  of  CNL  Institutional
Advisors,  Inc. from the date of its inception  through June 30, 1997 and served
as President of CNL Fund Advisors,  Inc. from the date of its inception  through
October 1997.  Mr. Bourne also has served as a director since 1992, as President
from July 1992 to February  1996, as Secretary and Treasurer  from February 1996
through  December 1997, and since February 1996,  served as Vice Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc. In addition,  Mr. Bourne
has served as a director  since its inception in 1991, as President from 1991 to
February  1996, as Secretary from February 1996 to July 1996, and since February
1996, served as Treasurer and Vice Chairman of CNL Realty Advisors, Inc. through
December  31,  1997,  at which  time  CNL  Realty  Advisors,  Inc.  merged  with
Commercial  Net Lease  Realty,  Inc.  In  addition,  Mr.  Bourne  has  served as
President and a director of CNL American  Properties  Fund, Inc. since 1994, and
has served as President and a director of CNL American  Realty Fund,  Inc. since
1996 and of CNL Real Estate  Advisors,  Inc. since January 1997. Upon graduation
from Florida State  University in 1970,  where he received a B.A. in Accounting,
with honors,  Mr.  Bourne  worked as a certified  public  accountant  and,  from
September  1971  through  December  1978,  was  employed  by  Coopers & Lybrand,
Certified  Public  Accountants,  where  he  held  the  position  of tax  manager
beginning in 1975.  From January 1979 until June 1982,  Mr. Bourne was a partner
in the  accounting  firm of Cross & Bourne  and from July 1982  through  January
1987, he was a partner in the accounting firm of Bourne & Rose, P.A.,  Certified
Public  Accountants.  Mr. Bourne,  who joined CNL Securities  Corp. in 1979, has
participated  as a general  partner or joint  venturer  in over 100 real  estate
ventures  involved in the  financing,  acquisition,  construction  and rental of
office  buildings,  apartment  complexes,  restaurants,  hotels  and other  real
estate.  Included in these real estate ventures are  approximately  64 privately
offered  real  estate  limited  partnerships  in which Mr.  Bourne,  directly or
through an affiliated  entity,  serves or has served as a general partner.  Also
included  are the CNL Income  Fund  Partnerships,  public  real  estate  limited
partnerships with investment objectives similar to those of the Partnership,  in
which Mr. Bourne serves as a general partner.

         CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida.  Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners.  CNL
Realty  Corporation  was organized to serve as the corporate  general partner of
real estate limited partnerships,  such as the Partnership,  organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.

         CNL  Fund  Advisors,  Inc.  provides  certain  management  services  in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation  organized  in 1994 under the laws of the State of Florida,  and its
principal  office is located at 400 East South Street,  Orlando,  Florida 32801.
CNL Fund  Advisors,  Inc. is a wholly  owned  subsidiary  of CNL Group,  Inc., a
diversified  real  estate  company,   and  was  organized  to  perform  property
acquisition, property management and other services.

         CNL  Group,  Inc.,  which is the parent  company of CNL Fund  Advisors,
Inc.,  was organized in 1980 under the laws of the State of Florida.  CNL Group,
Inc. is a diversified  real estate  company which  provides a wide range of real
estate,  development  and  financial  services to companies in the United States
through the  activities  of its  subsidiaries.  These  activities  are primarily
focused  on the  franchised  restaurant  and  hospitality  industries.  James M.
Seneff,  Jr., an individual General Partner of the Partnership,  is the Chairman
of the Board,  Chief Executive  Officer,  and a director of CNL Group,  Inc. Mr.
Seneff and his wife own all of the outstanding shares of CNL Group, Inc.

         The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or  subsidiaries  in the discretion of the Boards of Directors of
those companies,  but, except as specifically indicated, do not serve as members
of the Boards of Directors of those  entities.  The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.



                                       34

<PAGE>



         Curtis B. McWilliams,  age 42, joined CNL Fund Advisors,  Inc. in April
1997 and  currently  serves  as  President  of CNL Fund  Advisors,  Inc.  and as
Executive Vice President of CNL American Properties Fund, Inc. In addition,  Mr.
McWilliams  serves  as  Executive  Vice  President  of CNL  Group,  Inc.  and as
President of CNL Financial Services,  Inc. and certain other subsidiaries of CNL
Group,  Inc. From September 1983 through March 1997, Mr. McWilliams was employed
by Merrill  Lynch.  From  January  1991 to August  1996,  Mr.  McWilliams  was a
managing director in the corporate  banking group of Merrill Lynch's  investment
banking division.  During this time, he was a senior  relationship  manager with
Merrill  Lynch and as such was  responsible  for a number of the  firm's  larger
clients.  From February 1990 to February  1993, he also served as co-head of one
of the  Industrial  Banking  Groups within Merrill  Lynch's  investment  banking
division and had administrative responsibility for a group of bankers and client
relationships, including the firm's transportation group. From September 1996 to
March  1997,  Mr.  McWilliams  served as  Chairman  of Merrill  Lynch's  Private
Advisory Services. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton  University  in 1977 and a Masters of Business  Administration  with a
concentration in finance from the University of Chicago in 1983.

         John T. Walker,  age 39, is the Chief  Operating  Officer and Executive
Vice President of CNL Fund Advisors, Inc. and CNL American Properties Fund, Inc.
and serves as Executive Vice President of CNL American Realty Fund, Inc. and CNL
Real Estate  Advisors,  Inc. From May 1992 to May 1994,  he was  Executive  Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable  television  network  which was  subsequently  acquired by Gaylord
Entertainment, where he was responsible for overall financial and administrative
management  and planning.  From January 1990 through April 1992,  Mr. Walker was
Chief Financial  Officer of the First Baptist Church in Orlando,  Florida.  From
April 1984 through  December  1989, he was a partner in the  accounting  firm of
Chastang,  Ferrell & Walker,  P.A.,  where he was the partner in charge of audit
and  consulting  services,  and  from  1981 to  1984,  Mr.  Walker  was a Senior
Consultant/Audit Senior at Price Waterhouse.  Mr. Walker is a Cum Laude graduate
of Wake Forest  University with a B.S. in Accountancy and is a certified  public
accountant.

         Lynn E. Rose,  age 49, a  certified  public  accountant,  has served as
Chief  Financial  Officer of CNL Group,  Inc. since December 1993, has served as
Secretary of CNL Group,  Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until  December  1993. In addition,  Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She has
served as Chief Operating Officer, Vice President and Secretary of CNL Corporate
Services,  Inc. since November 1994. Ms. Rose also has served as Chief Financial
Officer and Secretary of CNL Institutional Advisors, Inc. since its inception in
1990, served as a director and Secretary of CNL Realty Advisors,  Inc. since its
inception in 1991 through  December 31, 1997, at which time CNL Realty Advisors,
Inc.  merged with  Commercial  Net Lease Realty,  Inc.,  Treasurer of CNL Realty
Advisors, Inc. from 1991 to February 1996, Secretary and Treasurer of Commercial
Net Lease Realty, Inc. from 1992 to February 1996,  Secretary of CNL Income Fund
Advisors,  Inc.  since its inception in 1994 to December  1995,  and a director,
Secretary and Treasurer of CNL Fund Advisors,  Inc. since 1994 and has served as
a director,  Secretary and  Treasurer of CNL Real Estate  Advisors,  Inc.  since
January  1997.  Ms.  Rose also has  served as  Secretary  and  Treasurer  of CNL
American  Properties  Fund,  Inc.  since 1994,  and has served as Secretary  and
Treasurer of CNL American  Realty Fund, Inc. since 1996. Ms. Rose also currently
serves as Secretary  for  approximately  50  additional  corporations.  Ms. Rose
oversees the management information services, administration,  legal compliance,
accounting,   tenant  compliance,  and  reporting  for  over  300  corporations,
partnerships,  and joint ventures.  Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose,  P.A.,  Certified
Public  Accountants.  Ms. Rose holds a B.A. in Sociology  from the University of
Central Florida. She was licensed as a certified public accountant in 1979.



                                       35

<PAGE>



         Jeanne A. Wall,  age 39, has served as Chief  Operating  Officer of CNL
Investment  Company and of CNL  Securities  Corp.  since  November  1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984,  Ms. Wall joined CNL  Securities  Corp.  In 1985,  Ms. Wall became Vice
President of CNL Securities Corp., in 1987, she became Senior Vice President and
in July 1997, she became  Executive  Vice  President of CNL Securities  Corp. In
this  capacity,  Ms. Wall serves as national  marketing  and sales  director and
oversees  the  national  marketing  plan  for the CNL  investment  programs.  In
addition, Ms. Wall oversees product development,  partnership administration and
investor  services for  programs  offered  through  participating  brokers,  and
corporate  communications for CNL Group, Inc. and Affiliates.  Ms. Wall also has
served  as  Senior  Vice  President  of  CNL  Institutional  Advisors,  Inc.,  a
registered  investment  advisor,  from 1990 to 1993,  as Vice  President  of CNL
Realty  Advisors,  Inc.  since  its  inception  in 1991  through  1997,  as Vice
President of  Commercial  Net Lease  Realty,  Inc.  from 1992 through  1997,  as
Executive Vice President of CNL Fund Advisors, Inc. since 1994, and as Executive
Vice President of CNL American  Properties  Fund,  Inc. since 1994. In addition,
Ms. Wall has served as Executive  Vice  President  of CNL Real Estate  Advisors,
Inc. since January 1997 and as Executive  Vice President of CNL American  Realty
Fund,  Inc.  since 1996. Ms. Wall holds a B.A. in Business  Administration  from
Linfield College and is a registered  principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program Association
and on the Direct  Participation  Program committee for the National Association
of Securities Dealers (NASD).

         Steven D. Shackelford, age 34, has served as Chief Financial Officer of
CNL Fund Advisors,  Inc. since September 1996 and as Chief Financial  Officer of
CNL American  Properties  Fund, Inc. since January 1997. From March 1995 to July
1996, he was a senior manager in the national office of Price  Waterhouse  where
he was responsible  for advising  foreign clients seeking to raise capital and a
public listing in the United  States.  From August 1992 to March 1995, he served
as a manager in the Price  Waterhouse,  Paris,  France  office  serving  several
multinational  clients. Mr. Shackelford was an audit staff and audit senior from
1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr. Shackelford
received  a  B.A.  in  Accounting,  with  honors,  and  a  Masters  of  Business
Administration   from  Florida  State  University  and  is  a  certified  public
accountant.


Item 11.  Executive Compensation

         Other than as  described in Item 13, the  Partnership  has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates.  There are no compensatory plans or arrangements  regarding
termination of employment or change of control.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         As of March 13,  1998,  no person was known to the  Registrant  to be a
beneficial owner of more than five percent of the Units.

         The following  table sets forth,  as of March 13, 1998,  the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>


                 Title of Class                      Name of Partner                     Percent of Class
<S> <C>
         General Partnership Interests               James M. Seneff, Jr.                       45%
                                                     Robert A. Bourne                           45%
                                                     CNL Realty Corporation                     10%
                                                                                               ----
                                                                                               100%
</TABLE>

         Neither the General  Partners,  nor any of their  affiliates,  owns any
interest in the  Registrant  except as noted  above.  There are no  arrangements
which at a subsequent date may result in a change in control of the Registrant.


                                       36

<PAGE>



Item 13.  Certain Relationships and Related Transactions

         The  table  below   summarizes  the  types,   recipients,   methods  of
computation and amounts of compensation,  fees and distributions paid or payable
by the  Partnership  to the General  Partners and their  affiliates for the year
ended  December 31, 1997,  exclusive of any  distributions  to which the General
Partners or their  affiliates  may be entitled by reason of their  purchase  and
ownership of Units.
<TABLE>
<CAPTION>

==========================================================================================================================
                Type of                                                                       Amount Incurred
             Compensation                               Method of                              For the Year
             and Recipient                             Computation                        Ended December 31, 1997
<S> <C>
Reimbursement  to affiliates for         Operating  expenses are  reimbursed      Operating expenses incurred on
operating expenses                       at the lower of cost or 90  percent      behalf of the Partnership:
                                         of the prevailing rate at which          $85,702
                                         comparable services could have
                                         been obtained in the same                Accounting and administrative
                                         geographic area.  Affiliates of the      services:  $81,838
                                         General Partners from time to
                                         time incur certain operating
                                         expenses on behalf of the
                                         Partnership for which the
                                         Partnership  reimburses the
                                         affiliates without interest.

Annual, subordinated manage-             One percent of the sum of gross             $ - 0 -
ment fee to affiliates                   operating revenues from
                                         Properties    wholly   owned   by   the
                                         Partnership  plus  the   Partner-ship's
                                         allocable  share of gross  revenues  of
                                         joint ventures in which the Partnership
                                         is  a  co-venturer,   subordinated   to
                                         certain  minimum returns to the Limited
                                         Partners.  The  management fee will not
                                         exceed  competitive fees for comparable
                                         services.  Due to the fact  that  these
                                         fees are non-cumulative, if the Limited
                                         Partners  do  not  receive   their  10%
                                         Preferred   Return  in  any  particular
                                         year, no management fees will be due or
                                         payable for such year.
==========================================================================================================================

</TABLE>


                                       37

<PAGE>


<TABLE>
<CAPTION>


==========================================================================================================================
                Type of                                                                       Amount Incurred
             Compensation                               Method of                              For the Year
             and Recipient                             Computation                        Ended December 31, 1997
<S> <C>
Deferred, subordinated real estate       A deferred, subordinated real               $ - 0 -
disposition fee payable to               estate disposition fee, payable
affiliates                               upon sale of one or more
                                         Properties,  in an amount  equal to the
                                         lesser of (i) one-half of a competitive
                                         real estate  commission,  or (ii) three
                                         percent  of the  sales  price  of  such
                                         Property or Properties. Payment of such
                                         fee shall be made only if affiliates of
                                         the   General    Partners   provide   a
                                         substantial   amount  of   services  in
                                         connection  with the sale of a Property
                                         or Properties and shall be subordinated
                                         to  certain   minimum  returns  to  the
                                         Limited Partners.  However,  if the net
                                         sales  proceeds  are  reinvested  in  a
                                         replacement   property,  no  such  real
                                         estate disposition fee will be incurred
                                         until such replacement property is sold
                                         and  the   net   sales   proceeds   are
                                         distributed.

General Partners' deferred, sub-         A deferred, subordinated share              $ - 0 -
ordinated share of Partnership net       equal to one percent of
cash flow                                Partnership distributions of net
                                         cash flow, subordinated to certain
                                         minimum returns to the Limited
                                         Partners.

General Partners' deferred, sub-         A deferred, subordinated share              $ - 0 -
ordinated share of Partnership net       equal to five percent of
sales proceeds from a sale or            Partnership distributions of such
sales                                    net sales proceeds, subordinated to
                                         certain minimum returns to the
                                         Limited Partners.
==========================================================================================================================
</TABLE>



                                       38

<PAGE>



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this report.

         1.  Financial Statements

                  Report of Independent Accountants

                  Balance Sheets at December 31, 1997 and 1996

                  Statements  of Income for the years ended  December  31, 1997,
                  1996 and 1995

                  Statements of Partners'  Capital for the years ended  December
                  31, 1997, 1996 and 1995

                  Statements  of Cash  Flows for the years  ended  December  31,
                  1997, 1996 and 1995

                  Notes to Financial Statements

         2.  Financial Statement Schedules

                  Schedule         II - Valuation  and  Qualifying  Accounts for
                                   the years ended  December 31, 1997,  1996 and
                                   1995

                  Schedule  III - Real Estate and  Accumulated  Depreciation  at
                  December 31, 1997

                  Notes  to  Schedule   III  -  Real   Estate  and   Accumulated
                  Depreciation at December 31, 1997

                  All other Schedules are omitted as the required information is
                  inapplicable  or is presented in the  financial  statements or
                  notes thereto.

         3.   Exhibits

                  3.1      Certificate of Limited Partnership of CNL Income Fund
                           IV, Ltd.  (Included as Exhibit 3.1 in Amendment No. 1
                           to  Registration  Statement No. 33-20249 on Form S-11
                           and incorporated herein by reference.)

                  3.2      Amended and Restated  Agreement  and  Certificate  of
                           Limited  Partnership  of CNL  Income  Fund  IV,  Ltd.
                           (Included  as Exhibit 3.2 to Form 10-K filed with the
                           Securities and Exchange Commission on March 31, 1994,
                           and incorporated herein by reference.)

                  4.1      Certificate of Limited Partnership of CNL Income Fund
                           IV, Ltd.  (Included as Exhibit 3.1 in Amendment No. 1
                           to  Registration  Statement No. 33-20249 on Form S-11
                           and incorporated herein by reference.)

                  4.2      Amended and Restated  Agreement  and  Certificate  of
                           Limited  Partnership  of CNL  Income  Fund  IV,  Ltd.
                           (Included  as Exhibit 3.2 to Form 10-K filed with the
                           Securities and Exchange Commission on March 31, 1994,
                           and incorporated herein by reference.)

                                       39

<PAGE>



                  10.1     Property  Management  Agreement  (Included as Exhibit
                           10.1 to Form  10-K  filed  with  the  Securities  and
                           Exchange   Commission   on  March   31,   1994,   and
                           incorporated herein by reference.)

                  10.2     Assignment of Property Management  Agreement from CNL
                           Investment Company to CNL Income Fund Advisors,  Inc.
                           (Included as Exhibit 10.2 to Form 10-K filed with the
                           Securities and Exchange Commission on March 30, 1995,
                           and incorporated herein by reference.)

                  10.3     Assignment of Property Management  Agreement from CNL
                           Income Fund Advisors, Inc. to CNL Fund Advisors, Inc.
                           (Included as Exhibit 10.3 to Form 10-K filed with the
                           Securities and Exchange  Commission on April 1, 1996,
                           and incorporated herein by reference.)

                  27       Financial Data Schedule (Filed herewith.)

(b)      The  Registrant  filed no reports  on Form 8-K  during the period  from
         October 1, 1997 through December 31, 1997.

                                       40

<PAGE>



                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) 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,  on the 27th day of
March, 1998.

                                      CNL INCOME FUND IV, LTD.

                                      By:      CNL REALTY CORPORATION
                                               General Partner

                                               /s/ Robert A. Bourne
                                               ----------------------------
                                               ROBERT A. BOURNE, President


                                      By:      ROBERT A. BOURNE
                                               General Partner

                                               /s/ Robert A. Bourne
                                               ----------------------------
                                               ROBERT A. BOURNE


                                      By:      JAMES M. SENEFF, JR.
                                               General Partner

                                               /s/ James M. Seneff, Jr.
                                               ---------------------------
                                               JAMES M. SENEFF, JR.


<PAGE>



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

==========================================================================================================================
               Signature                                  Title                                    Date
<S> <C>
/s/ Robert A. Bourne                     President, Treasurer and Director                    March 27, 1998
-------------------------------------    (Principal Financial and
Robert A. Bourne                         Accounting  Officer)


/s/ James M. Seneff, Jr.                 Chief Executive Officer and                          March 27, 1998
-------------------------------------    Director (Principal Executive
James M. Seneff, Jr.                     Officer)


==========================================================================================================================
</TABLE>







<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                  Years Ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>


                                                                 Additions                      Deductions
                                      Balance at       Charged to        Charged to        Deemed                        Balance
                                       Beginning        Costs and          Other          Uncollec-     Collec-          at End
Year     Description                    of Year         Expenses          Accounts          tible         ted            of Year
----     -----------                  ----------       ----------        ----------       ---------     -------        ---------
<S> <C>

1995     Allowance for
           doubtful
           accounts (a)                 $ 44,844        $111,687          $ 24,138      (b) $ 13,803     $   -          $166,866
                                        ========        ========          ========          ========     ======         ========


1996     Allowance for
           doubtful
           accounts (a)                 $166,866        $     -           $ 38,389      (b) $ 48,322     $   -          $156,933
                                        ========        ========          ========          ========     ======         ========


1997     Allowance for
           doubtful
           accounts (a)                 $156,933        $     -           $258,818      (b) $112,624     $7,547         $295,580
                                        ========        ========          ========          ========     ======         ========
</TABLE>


         (a)  Deducted from receivables on the balance sheet.

         (b) Reduction of rental and other income.






                                       F-1

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 1997


<TABLE>
<CAPTION>

                                                                                            Costs Capitalized
                                                                                                Subsequent
                                                         Initial Cost                         To Acquisition
                                                                       Buildings
                                       Encum-                             and             Improve-      Carrying
                                      brances           Land          Improvements         ments         Costs
<S> <C>
Properties the Partnership
  has Invested in Under
  Operating Leases:
    Arby's Restaurants:
      Winchester, Indiana                  -         $  287,769         $       -        $  567,785     $     -
      Portland, Indiana                    -            187,928                 -           657,931           -

    Boston Market Restaurant:
      Richmond, Virginia                   -            504,169            522,025               -            -

    Captain D's Restaurants:
      Alexander City, Alabama              -            120,210            279,689               -            -
      Oak Ridge, Tennessee                 -            169,951            281,686               -            -

    Checkers Drive-In Restaurants:
      Miami, Florida                       -            174,336                 -                -            -

    Denny's Restaurants:
      Marion, Ohio                         -            135,407            334,665               -            -
      Dundee, Michigan                     -            251,650                 -           372,278           -
      Union Township, Ohio                 -            300,179            630,608               -            -

    Golden Corral Family
      Steakhouse Restaurants:
        Franklin, Indiana                  -            107,560            586,375               -            -
        Streator, Illinois                 -            161,616            650,934               -            -

    Jack in the Box Restaurant:
      San Antonio, Texas                   -            352,957                 -           368,702           -

    Pizza Hut Restaurants:
      Memphis, Texas                       -             26,510            231,874               -            -
      Carthage, Texas                      -             40,444            232,823               -            -
      Crystal City, Texas                  -              8,826            178,570               -            -
      Sequin, Texas                        -             63,708            184,279               -            -
      Washington, D.C.                     -            191,737                 -                -            -

    Perkins Restaurants:
      Leesburg, Florida (j)                -            409,840            282,290           89,112           -
      Palm Bay, Florida                    -            469,927            365,128          310,676           -

</TABLE>



<PAGE>









<TABLE>
<CAPTION>


                                                                                                                         Life
                                                                                                                       on Which
                   Gross Amount at Which Carried                                                                     Depreciation
                       at Close of Period (c)                                                                         in Latest
                            Buildings                                                  Date                             Income
                               and                                Accumulated         of Con-          Date          Statement is
           Land            Improvements           Total           Depreciation       struction       Acquired          Computed
        ----------         ------------        -----------        ------------       ---------       --------        ----------
<S> <C>




        $  287,769          $   567,785        $   855,554          $  136,114          1988           07/88            (b)
           187,928              657,931            845,859             147,321          1989           11/88            (b)


           504,169              522,025          1,026,194              17,449          1996           12/96            (b)


           120,210              279,689            399,899              84,137          1988           12/88            (b)
           169,951              281,686            451,637              84,763          1988           12/88            (b)


           174,336                   -             174,336                  (g)           -            06/94            (g)


           135,407              334,665            470,072              53,368          1989           10/88            (h)
           251,650              372,278            623,928             113,752          1988           10/88            (b)
           300,179              630,608            930,787             191,810          1987           11/88            (b)



           107,560              586,375            693,935             185,685          1988           06/88            (b)
           161,616              650,934            812,550             202,513          1988           08/88            (b)


           352,957              368,702            721,659             108,562          1989           11/88            (b)


            26,510              231,874            258,384              71,816          1985           09/88            (b)
            40,444              232,823            273,267              72,110          1981           09/88            (b)
             8,826              178,570            187,396              55,307          1981           09/88            (b)
            63,708              184,279            247,987              57,075          1974           09/88            (b)
           191,737               (f)               191,737                  -           1986           01/89            (d)


           409,840              371,402            781,242             110,905          1989           12/88            (b)
           469,927              675,804          1,145,731             201,803          1989           12/88            (b)

</TABLE>

                                       F-2

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

       SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED

                                December 31, 1997


<TABLE>
<CAPTION>

                                                                                            Costs Capitalized
                                                                                                 Subsequent
                                                           Initial Cost                       To Acquisition
                                                                       Buildings
                                        Encum-                             and             Improve-      Carrying
                                       brances           Land          Improvements         ments         Costs
<S> <C>
    Shoney's Restaurants:
      Alexander City, Alabama               -            202,438            428,406               -            -
      Topeka, Kansas                        -            292,407            465,321               -            -
      Brookhaven, Mississippi               -            312,574            452,601               -            -
      Auburn, Alabama                       -            363,432            426,123               -            -
      Tampa, Florida                        -            316,697                 -           894,659           -

    Taco Bell Restaurants:
      Edgewood, Maryland                    -            440,355                 -           523,478           -
      Naples, Florida                       -            141,188            236,224           57,565           -
      Ft. Myers, Florida                    -            232,853            332,911           68,928           -

    Wendy's Old Fashioned
      Hamburger Restaurants:
        Detroit, Michigan                   -            192,813            462,793               -            -
        Mechanicsville, Virginia            -            346,627            502,117               -            -
        Tampa, Florida                      -            530,456            432,958               -            -
        Tampa, Florida                      -            476,755            368,405               -            -

    Other Restaurant:
      Corpus Christi, Texas                 -            204,287                 -           460,803           -
      Maywood, Illinois (i)                 -            310,966                 -           443,472           -
                                                      ----------         ----------       ----------     -------

                                                      $8,328,572         $8,868,805       $4,815,389     $     -
                                                      ==========         ==========       ==========     =======
</TABLE>


<PAGE>










<TABLE>
<CAPTION>

                                                                                                                         Life
                                                                                                                       on Which
                   Gross Amount at Which Carried                                                                      Depreciation
                       at Close of Period (c)                                                                          in Latest
                            Buildings                                                  Date                             Income
                               and                                Accumulated         of Con-          Date          Statement is
           Land            Improvements           Total           Depreciation       struction       Acquired          Computed
        ----------         ------------        -----------        ------------       ---------       --------        ----------
<S> <C>

           202,438              428,406            630,844             128,874          1988           12/88            (b)
           292,407              465,321            757,728             140,021          1988           12/88            (b)
           312,574              452,601            765,175             136,194          1988           12/88            (b)
           363,432              426,123            789,555             128,226          1988           12/88            (b)
           316,697              894,659          1,211,356             253,487          1989           02/89            (b)


           440,355              523,478            963,833             154,862          1989           10/88            (b)
           141,188              293,789            434,977              85,377          1981           12/88            (b)
           232,853              401,839            634,692             117,229          1977           12/88            (b)



           192,813              462,793            655,606             141,408          1983           10/88            (b)
           346,627              502,117            848,744             152,030          1988           12/88            (b)
           530,456              432,958            963,414             129,974          1984           12/88            (b)
           476,755              368,405            845,160             110,596          1987           12/88            (b)


           204,287              460,803            665,090             140,463          1988           10/88            (b)
           310,966              443,472            754,438             131,201          1988           09/88            (b)
        ----------          -----------        -----------          ----------

        $8,328,572          $13,684,194        $22,012,766          $3,844,432
        ==========          ===========        ===========          ==========
</TABLE>

                                       F-3

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

       SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED

                                December 31, 1997

<TABLE>
<CAPTION>


                                                                                                                Costs Capitalized
                                                                                             Subsequent
                                                        Initial Cost                       To Acquisition
                                                                    Buildings
                                    Encum-                             and             Improve-      Carrying
                                   brances           Land          Improvements         ments         Costs
<S> <C>
Property of Joint Venture in
  Which the Partnership has a
  51% Interest and has Invested
  in Under an Operating Lease:
    Denny's Restaurant:
      Holland, Michigan                 -         $  295,987         $       -        $  780,451     $     -
                                                  ==========         ==========       ==========     =======

Property of Joint Venture in
  Which the Partnership has a
  26.6% Interest and has Invested
  in Under an Operating Lease:
    Po Folks Restaurant:
      Titusville, Florida (k)           -         $  271,350         $       -        $  750,985     $     -
                                                  ==========         ==========       ==========     =======

Property of Joint  Venture in
  Which the Partnership has a
  57% Interest and has Invested
  in Under an Operating Lease:
    Waffle House Restaurant:
      Cocoa, Florida                    -         $  183,229         $  192,857       $       -      $     -
                                                  ==========         ==========       ==========     =======

Property of Joint Venture in
  Which the Partnership has a
  96.1% Interest and has Invested
  in Under an Operating Lease:
    KFC Restaurant:
      Auburn, Massachusetts             -         $  484,362         $       -        $       -      $     -
                                                  ==========         ==========       ==========     =======

Property of Joint Venture in
  Which the Partnership has a
  68.87% Interest and has Invested
  in Under an Operating Lease:
    Denny's Restaurant:
      Kingsville, Texas                 -         $  171,061         $       -        $   99,128     $     -
                                                  ==========         ==========       ==========     =======

Property of Joint Venture in
  Which the Partnership has a
  53.68% Interest and has Invested
  in Under an Operating Lease:
    Golden Corral Family
      Steakhouse Restaurant:
        Clinton, North Carolina         -         $  138,382         $  676,588       $       -      $     -
                                                  ==========         ==========       ==========     =======
</TABLE>


<PAGE>








<TABLE>
<CAPTION>



                                                                                                                         Life
                                                                                                                       on Which
                    Gross Amount at Which Carried                                                                    Depreciation
                       at Close of Period (c)                                                                         in Latest
                           Buildings                                                   Date                             Income
                               and                                Accumulated         of Con-          Date          Statement is
           Land            Improvements           Total           Depreciation       struction       Acquired          Computed
        ----------         ------------        -----------        ------------       ---------       --------        ----------
<S> <C>





        $  295,987          $   780,451        $ 1,076,438          $  238,471          1988           11/88            (b)
        ==========          ===========        ===========          ==========






        $  271,350          $   750,985        $ 1,022,335          $  225,296          1988           12/88            (b)
        ==========          ===========        ===========          ==========






        $  183,229          $   192,857        $   376,086          $   51,482          1986           12/89            (b)
        ==========          ===========        ===========          ==========






        $  484,362              (f)            $   484,362          $       -          1989            05/89            (d)
        ==========                             ===========          ==========






        $  270,189              (f)            $   270,189          $       -          1988            10/88           (d)
        ==========                             ===========          ==========







        $  138,382          $   676,588        $   814,970          $   43,720          1996           01/96            (b)
        ==========          ===========        ===========          ==========
</TABLE>

                                       F-4

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

       SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED

                                December 31, 1997

<TABLE>
<CAPTION>


                                                                                            Costs Capitalized
                                                                                                Subsequent
                                                             Initial Cost                      To Acquisition
                                                                         Buildings
                                         Encum-                             and             Improve-      Carrying
                                        brances           Land          Improvements         ments         Costs
<S> <C>
Properties the Partnership
  has Invested in Under Direct
  Financing Leases:
    Pizza Hut Restaurant:
      Washington, D.C.                       -         $       -          $  459,543       $       -      $     -

    Shoney's Restaurant:
      Punta Gorda, Florida                   -            210,438            770,826           39,193           -
                                                       ----------         ----------       ----------     -------

                                                       $  210,438         $1,230,369       $   39,193     $     -
                                                       ==========         ==========       ==========     =======

Property of Joint Venture in
  Which the Partnership has a
  96.1% Interest and has Invested
  in Under a Direct Financing
  Lease:
    KFC Restaurant:
      Auburn, Massachusetts                  -         $       -          $       -        $  434,947     $     -
                                                       ==========         ==========       ==========     =======

Property of Joint Venture in
  Which the Partnership has a
  68.87% Interest and has Invested
  in Under a Direct Financing
  Lease:
    Denny's Restaurant:
      Kingsville, Texas                      -         $       -          $       -        $  535,489     $     -
                                                       ==========         ==========       ==========     =======


</TABLE>



<PAGE>









<TABLE>
<CAPTION>


                                                                                                                        Life
                                                                                                                       on Which
                  Gross Amount at Which Carried                                                                     Depreciation
                       at Close of Period (c)                                                                        in Latest
                            Buildings                                                  Date                             Income
                               and                                Accumulated         of Con-          Date          Statement is
           Land            Improvements           Total           Depreciation       struction       Acquired          Computed
        ----------         ------------        -----------        ------------       ---------       --------        ----------
<S> <C>




              -                (f)                (f)                (d)               1986            01/89            (d)


                (f)            (f)                (f)                (e)               1989            02/89            (e)









              -                 (f)                 (f)              (d)               1989            05/89           (d)







              -                 (f)                 (f)              (d)               1988            10/88           (d)
</TABLE>

                                       F-5

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 1997



(a)      Transactions in real estate and accumulated  depreciation  during 1997,
         1996 and 1995, are summarized as follows:
<TABLE>
<CAPTION>

                                                                                                    Accumulated
                                                                                    Cost            Depreciation
<S> <C>
                    Properties the Partnership
                      has Invested in Under
                      Operating Leases:

                        Balance, December 31, 1994                              $22,436,693           $2,666,857
                        Dispositions                                               (447,176)             (77,251)
                        Additional costs
                          capitalized                                                   326                   -
                        Depreciation expense                                             -               455,543
                                                                                -----------           ----------

                        Balance, December 31, 1995                               21,989,843            3,045,149
                        Dispositions                                               (887,486)             (96,179)
                        Acquisitions                                              1,026,194                   -
                        Depreciation expense                                             -               442,065
                                                                                -----------           ----------

                        Balance, December 31, 1996                               22,128,551            3,391,035
                        Dispositions                                               (365,785)                  -
                        Additional costs capitalized                                250,000                   -
                        Depreciation expense                                             -               453,397
                                                                                -----------           ----------

                        Balance, December 31, 1997 (j)                          $22,012,766            $3,844,432
                                                                                ===========           ==========


                    Property of Joint Venture in
                      Which the Partnership has a 51%
                      Interest and has Invested in
                      Under an Operating Lease:

                        Balance, December 31, 1994                               $ 1,076,438           $  160,426
                        Depreciation expense                                              -                26,015
                                                                                 -----------           ----------

                        Balance, December 31, 1995                                 1,076,438              186,441
                        Depreciation expense                                              -                26,015

                        Balance, December 31, 1996                                 1,076,438              212,456
                        Depreciation expense                                              -                26,015

                        Balance, December 31, 1997                               $ 1,076,438            $ 238,471
                                                                                 ===========            ==========

</TABLE>


                                       F-6

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

               NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
                            DEPRECIATION - CONTINUED

                                December 31, 1997

<TABLE>
<CAPTION>


                                                                                            Accumulated
                                                                                    Cost    Depreciation
<S> <C>
                    Property of Joint Venture in
                      Which the Partnership has a
                      26.6% Interest and has Invested
                      in Under an  Operating Lease:

                        Balance, December 31, 1994                               $ 1,022,335   $  150,197
                        Depreciation expense                                              -        25,033
                                                                                 -----------   ----------

                        Balance, December 31, 1995                                 1,022,335      175,230
                        Depreciation expense                                              -        25,033

                        Balance, December 31, 1996                                 1,022,335      200,263
                        Depreciation expense                                              -        25,033

                        Balance, December 31, 1997 (k)                           $ 1,022,335   $  225,296
                                                                                 ===========   ==========


                    Property of Joint Venture in
                      Which the Partnership has a 57%
                      Interest and has Invested in
                      Under an Operating Lease:

                        Balance, December 31, 1994                               $   376,086   $   32,195
                        Depreciation expense                                              -         6,429
                                                                                 -----------   ----------

                        Balance, December 31, 1995                                   376,08       638,624
                        Depreciation expense                                              -         6,429

                        Balance, December 31, 1996                                   376,086       45,053
                        Depreciation expense                                              -         6,429

                        Balance, December 31, 1997                               $   376,086   $   51,482
                                                                                 ===========    ==========
</TABLE>


                                       F-7

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

               NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
                            DEPRECIATION - CONTINUED

                                December 31, 1997


<TABLE>
<CAPTION>

                                                                                            Accumulated
                                                                                    Cost    Depreciation
<S> <C>
                    Property of Joint  Venture in Which
                      the Partnership has a 96.1%
                      Interest and has Invested
                      in Under an  Operating Lease:

                        Balance, December 31, 1994                               $   484,362   $       -
                        Depreciation expense (d)                                          -            -
                                                                                 -----------   ---------

                        Balance, December 31, 1995                                   484,362          -
                        Depreciation expense (d)                                          -           -

                        Balance, December 31, 1996                                   484,362          -
                        Depreciation expense (d)                                          -           -

                        Balance, December 31, 1997                               $   484,362   $       -
                                                                                 ===========   =========


                    Property of Joint Venture in Which
                      the Partnership has a 68.87%
                      Interest and has Invested in
                      Under an Operating Lease:

                        Balance, December 31, 1994                               $   270,189   $       -
                        Depreciation expense (d)                                          -            -
                                                                                 -----------   ---------

                        Balance, December 31, 1995                                   270,189           -
                        Depreciation expense (d)                                          -            -

                        Balance, December 31, 1996                                   270,189           -
                        Depreciation expense (d)                                          -            -

                        Balance, December 31, 1997                               $   270,189   $       -
                                                                                 ===========   =========


                    Property of Joint  Venture in Which
                      the Partnership has a 53.68% Interest
                      and has Invested in Under an
                      Operating Lease:

                        Balance, December 31, 1995                               $        -    $       -
                        Acquisitions                                                 814,970           -
                        Depreciation expense                                              -       21,168
                                                                                 -----------   ----------

                        Balance, December 31, 1996                                   814,970      21,168
                        Depreciation expense                                              -       22,552

                        Balance, December 31, 1997                               $   814,970  $   43,720
                                                                                 ===========  ==========
</TABLE>


                                       F-8

<PAGE>



                            CNL INCOME FUND IV, LTD.
                         (A Florida Limited Partnership)

               NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
                            DEPRECIATION - CONTINUED

                                December 31, 1997

(b)        Depreciation expense is computed for buildings and improvements based
           upon estimated lives of 30 years.

(c)        As of December 31, 1997, the aggregate  cost of the Properties  owned
           by the Partnership and joint ventures for federal income tax purposes
           was $23,285,225 and $4,439,602,  respectively.  All of the leases are
           treated as operating leases for federal income tax purposes.

(d)        For financial reporting  purposes,  the portion of the lease relating
           to the building has been recorded as a direct  financing  lease.  The
           cost of the  building  has been  included  in the net  investment  in
           direct financing leases, therefore, depreciation is not applicable.

(e)        For financial reporting purposes, the lease for the land and building
           has been recorded as a direct  financing  lease. The cost of the land
           and  building  has been  included  in the net  investment  in  direct
           financing leases, therefore, depreciation is not applicable.

(f)        For financial  reporting  purposes,  certain  components of the lease
           relating  to  land  and  building  have  been  recorded  as a  direct
           financing lease. Accordingly,  costs relating to these components are
           not shown.

(g)        The  building  portion  of this  Property  is  owned  by the  tenant;
           therefore, depreciation is not applicable.

(h)        Effective  January 1, 1994,  the lease for this Property was amended,
           resulting  in the  reclassification  of the  building  portion of the
           lease as an  operating  lease.  The building was recorded at net book
           value as of January 1, 1994, and depreciated over remaining estimated
           life of approximately 25 years.

(i)        The restaurant on the Property in Maywood, Illinois, was converted to
           a Dunkin Donuts restaurant and a Holsum Bread bakery in 1993.

(j)        For  financial  reporting  purposes,  the  undepreciated  cost of the
           Property in Leesburg,  Florida,  was written  down to net  realizable
           value due to an  anticipated  impairment  in value.  The  Partnership
           recognized  the impairment by recording an allowance for loss on land
           and  building  in the amount of $70,337 at  December  31,  1997.  The
           impairment at December 31, 1997,  represents the  difference  between
           the Property's  carrying value at December 31, 1997, and the Property
           manager's  estimate of the net realizable value of the Property based
           on an  anticipated  sales  price  of this  Property.  The cost of the
           Property  presented on this schedule is the gross amount at which the
           Property was carried at December 31, 1997,  excluding  the  allowance
           for loss on land and building.

(k)        For  financial  reporting  purposes,  the  undepreciated  cost of the
           Property in Titusville,  Florida,  was written down to net realizable
           value due to an  anticipated  impairment  in value.  The  Partnership
           recognized  the impairment by recording an allowance for loss on land
           and  building in the amount of $147,039 at  December  31,  1997.  The
           impairment at December 31, 1997,  represents  difference  between the
           Property's  carrying value and the General Partners'  estimate of the
           net realizable  value of the Property  based on an anticipated  sales
           price of this  Property to an interested  and unrelated  third party.
           The cost of the  Property  presented  on this  schedule  is the gross
           amount at which the  Property  was  carried  at  December  31,  1997,
           excluding the allowance for loss on land and building.

                                       F-9

<PAGE>



                                    EXHIBITS


<PAGE>


                                  EXHIBIT INDEX


Exhibit Number                                                        Page

      3.1         Certificate of Limited Partnership of CNL Income Fund IV, Ltd.
                  (Included  as Exhibit 3.1 in Amendment  No. 1 to  Registration
                  Statement No. 33-20249 on Form S-11 and incorporated herein by
                  reference.)

      3.2         Amended and  Restated  Agreement  and  Certificate  of Limited
                  Partnership  of CNL Income Fund IV, Ltd.  (Included as Exhibit
                  3.2 to Form  10-K  filed  with  the  Securities  and  Exchange
                  Commission  on March  31,  1994,  and  incorporated  herein by
                  reference.)

      4.1         Certificate of Limited Partnership of CNL Income Fund IV, Ltd.
                  (Included  as Exhibit 3.1 in Amendment  No. 1 to  Registration
                  Statement No. 33-20249 on Form S-11 and incorporated herein by
                  reference.)

      4.2         Amended and  Restated  Agreement  and  Certificate  of Limited
                  Partnership  of CNL Income Fund IV, Ltd.  (Included as Exhibit
                  3.2 to Form  10-K  filed  with  the  Securities  and  Exchange
                  Commission  on March  31,  1994,  and  incorporated  herein by
                  reference.)

     10.1         Property  Management  Agreement  (Included  as Exhibit 10.1 to
                  Form 10-K filed with the Securities and Exchange Commission on
                  March 31, 1994, and incorporated herein by reference.)

     10.2         Assignment   of  Property   Management   Agreement   from  CNL
                  Investment Company to CNL Income Fund Advisors, Inc. (Included
                  as Exhibit  10.2 to Form 10-K filed  with the  Securities  and
                  Exchange Commission on March 30, 1995, and incorporated herein
                  by reference.)

     10.3         Assignment of Property  Management  Agreement  from CNL Income
                  Fund Advisors,  Inc. to CNL Fund Advisors,  Inc.  (Included as
                  Exhibit  10.3 to Form  10- K filed  with  the  Securities  and
                  Exchange  Commission on April 1, 1996, and incorporated herein
                  by reference.)

     27           Financial Data Schedule (Filed herewith.)

                                        i