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

                                   FORM 10-K/A
                                 Amendment No. 1


(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>




         The Form 10-K of CNL Income Fund IV, Ltd.  for the year ended  December
31,  1997 is being  amended  to  provide  additional  disclosure  under  Item 1.
Business, Item 2. Properties and Item 7. Management's Discussion and Analysis of
Financial  Condition and Results of Operations - Capital  Resources,  Short-Term
Liquidity and Long-Term Liquidity.



                                     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 pay  Partnership  liabilities.  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.  The 40 Properties  include  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.



                                                         1

<PAGE>



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 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.


                                                         2

<PAGE>



         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 in excess of 20 percent of the
total assets of the Partnership.

                                                         3

<PAGE>

Joint Venture Arrangements and Tenancy in Common Arrangements

         The   Partnership   has  entered  into  five  separate   joint  venture
arrangements:  Holland Joint Venture with CNL Income Fund II, Ltd., an affiliate
of the General  Partners,  to purchase and hold one Property;  Titusville  Joint
Venture with CNL Income Fund III, Ltd., an affiliate of the General Partners, to
purchase  and hold one  Property;  Cocoa Joint  Venture  with CNL Income Fund V,
Ltd., an affiliate of the General  Partners,  to purchase and hold one Property;
Auburn Joint  Venture with CNL Income Fund VI, Ltd., an affiliate of the General
Partners,  to purchase and hold one Property;  and Kingsville  Real Estate Joint
Venture with CNL Income Fund XII, Ltd., an affiliate of the General Partners, to
purchase  and  hold  one  Property.  The  affiliates  are  limited  partnerships
organized pursuant to the laws of the State of Florida.

         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 has a 51.0% interest in Holland Joint Venture, a
26.6%  interest in Titusville  Joint  Venture,  a 57.0%  interest in Cocoa Joint
Venture,  a 96.1%  interest in Auburn Joint  Venture,  and a 68.87%  interest in
Kingsville  Real Estate 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.


         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.


                                                         4

<PAGE>




         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 CNL Income Fund VI, Ltd., CNL Income Fund X, Ltd., and
CNL  Income  Fund XV,  Ltd.,  each of which is a limited  partnership  organized
pursuant to the laws of the State of Florida  and each of which is an  affiliate
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- tenant's percentage interest. The Partnership owns a 53.68% interest in
this  Property.  The  tenancy in common  agreement  restricts  each  co-tenant's
ability to sell,  transfer,  or assign its  interest  in the tenancy in common's
Property without first offering it for sale to the remaining co-tenant.

         The use of joint venture and tenancy in common  arrangements allows the
Partnership  to fully invest its available  funds at times at which it would not
have  sufficient  funds to purchase an additional  property,  or at times when a
suitable  opportunity to purchase an additional  property is not available.  The
use of joint  venture  and  tenancy in common  arrangements  also  provides  the
Partnership  with  increased  diversification  of its portfolio  among a greater
number of properties. In addition,  tenancy in common arrangements may allow the
Partnership  to defer the gain for federal  income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional  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.

                                                         5

<PAGE>




         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.

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 40 Properties. Of the 40
Properties,  34 are  owned by the  Partnership  in fee  simple,  five are  owned
through joint venture  arrangements and one is owned through a tenancy in common
arrangement.  See  Item 1.  Business  - Joint  Venture  and  Tenancy  in  Common
Arrangements.  The Partnership is not permitted to encumber its Properties under
the terms of its  partnership  agreement.  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.


         The following table lists the Properties owned by the Partnership as of
December 31, 1997 by state. More detailed information  regarding the location of
the  Properties  is  contained  in the  Schedule of Real Estate and  Accumulated
Depreciation filed with this report.

                                                         6

<PAGE>

         State                                       Number of Properties
         -----                                       --------------------

         Alabama                                              3
         Washington D.C.                                      1
         Florida                                             11
         Illinois                                             2
         Indiana                                              3
         Kansas                                               1
         Massachusetts                                        1
         Maryland                                             1
         Michigan                                             3
         Mississippi                                          1
         North Carolina                                       1
         Ohio                                                 2
         Tennessee                                            1
         Texas                                                7
         Virginia                                             2
                                                         ------
         TOTAL PROPERTIES:                                   40
                                                         ======

         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. As of December 31, 1997, the Partnership had no plans for
renovation of the Properties. Depreciation expense is computed for buildings and
improvements  using the straight line method using depreciable lives of 31.5 and
39 years for federal income tax purposes. As of December 31, 1997, the aggregate
cost  basis  of the  Properties  owned by the  Partnership  and  joint  ventures
(including  the  Property  held  through a tenancy  in common  arrangement)  for
federal income tax purposes was $23,285,225 and $4,439,602, respectively.



                                                         8

<PAGE>


         The following table lists the Properties owned by the Partnership as of
December 31, 1997 by Restaurant Chain.


         Restaurant Chain                              Number of Properties
         ----------------                              --------------------

         Arby's                                                      2
         Boston Market                                               1
         Captain D's                                                 1
         Checkers                                                    2
         Denny's                                                     5
         Dunkin Donuts/Holsum Bread                                  1
         Golden Corral                                               3
         Jack in the Box                                             1
         KFC                                                         1
         Perkins                                                     2
         Pizza Hut                                                   5
         Po Folks                                                    1
         Shoney's                                                    6
         Taco Bell                                                   3
         Waffle House                                                1
         Wendy's                                                     4
         Other                                                       1
                                                                ------
         TOTAL PROPERTIES                                           40
                                                                ======

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

         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.

         Leases.  The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term  "triple  net"  basis,  meaning  that the  tenant is  responsible  for
repairs,  maintenance,  property taxes,  utilities and insurance.  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.  The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.

         At December 31, 1997,  1996,  1995, 1994, and 1993, the Properties were
93%, 98%, 98%, 98%, and 100% occupied, respectively. The following is a schedule
of the average annual rent for each of the five years ended December 31:
<TABLE>
<CAPTION>
<S> <C>

                                                       For the Year Ended December 31:
                                   1997            1996              1995             1994             1993
                              ---------------------------------------------------------------------------------

    Rental Revenues (1)        $2,596,455        $2,815,542       $2,876,873        $2,861,346      $2,671,416
    Properties (2)                     37                40               39                41              40
    Average Rent per Unit         $70,174           $70,389          $73,766           $66,789         $66,785
</TABLE>


                                                      9

<PAGE>

(1) Rental revenues includes the Partnership's share of rental revenues from the
    five Properties  owned through joint venture  arrangements  and the property
    owned  through a tenancy in common  arrangement.  Rental  revenues have been
    adjusted,  as  applicable,  for any  amounts for which the  Partnership  has
    established an allowance for doubtful accounts.

(2) Excludes  Properties  that  were  vacant at  December  31 and which did  not
    generate rental revenues during the year ended December 31.

    The following is a schedule of lease  expirations  for leases in place as of
December 31, 1997 for each of the ten years beginning with 1998 and thereafter.
<TABLE>
<CAPTION>
<S> <C>

                                                                                            Percentage of
                                          Number                Annual Rental                Gross Annual
        Expiration Year                 of Leases                  Revenues                 Rental Income
        ---------------                 ---------                  --------                 -------------

             1998                              1                     25,755                        1.00%
             1999                              -                          -                            -
             2000                              -                          -                            -
             2001                              1                     37,800                        1.50%
             2002                              2                    100,855                        4.00%
             2003                              1                     70,708                        2.80%
             2004                              -                          -                            -
             2005                              -                          -                            -
             2006                              -                          -                            -
             2007                              -                          -                            -
             Thereafter                       32                  2,290,561                       90.70%
                                        --------              -------------                -------------
             Totals (1)                       37                  2,525,679                      100.00%
                                        ========              =============                =============
</TABLE>

(1)      Excludes  Properties that were vacant at December 31, 1997.

         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).

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.

         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.

                                                        11

<PAGE>


                                     PART II


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 or tenancy in
common arrangements.

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  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
pay Partnership liabilities.


         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 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 to pay Partnership liabilities .


         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
or the tenancy in common  arrangement 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  and net
sales proceeds  received from the sale of Properties,  pending  reinvestment  in
additional  Properties,  distributions  to the  Limited  Partners or use for the
payment of  Partnership  liabilities,  are invested in money market  accounts or
other short-term,  highly liquid  investments such as demand deposit accounts at
commercial banks, CDs and money market accounts with less than a 30-day maturity
date, 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. As of December 31, 1997,  the
average  interest rate earned on the rental income  deposited in demand  deposit
accounts at commercial banks was approximately three percent annually. The funds
remaining at December 31,  1997,  will be used for the payment of  distributions
and other liabilities, as described above.

Short-Term Liquidity

         The Partnership's  short-term liquidity  requirements consist primarily
of the operating expenses of the Partnership.

         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.


         The Partnership  generally  distributes cash from operations  remaining
after the payment of the operating  expenses of the  Partnership,  to the extent
that  the  General  Partners   determine  that  such  funds  are  available  for
distribution.  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 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.

         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.

Long-Term Liquidity

         The  Partnership  has no long-term  debt or other  long-term  liquidity
requirements.

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  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 "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 "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.

         Rental and earned income in 1997,  1996, and 1995,  continued to remain
at reduced  amounts due to the fact that the  Partnership  is not  receiving any
rental income from the Property in Leesburg,  Florida.  The General Partners are
currently  seeking a replacement  tenant or purchaser for this Property.  Rental
and earned  income for 1998 is expected to remain at reduced  amounts until such
time as the  Partnership  executes  a new lease for this  Property  or until the
Property is sold and proceeds  from such sale are  reinvested  in an  additional
Property.


         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 "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 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 "Capital Resources."

                                                        12

<PAGE>


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


                                                        13

<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 29th day of
July, 1999.


                                             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.

         Signature                  Title                             Date
         ---------                  -----                             ----

/s/ Robert A. Bourne          President, Treasurer and           July 29, 1999
--------------------          Director (Principal Financial
Robert A. Bourne              and Accounting  Officer)



/s/ James M. Seneff, Jr.      Chief Executive Officer            July 29, 1999
------------------------      and Director (Principal
James M. Seneff, Jr.          Executive Officer)


<PAGE>