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, 1998

                                       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) 650-1000

               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 60,000 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.  During the year ended  December 31,  1998,  the  Partnership  sold its
Properties in Fort Myers,  Florida and Union Township,  Ohio and distributed the
majority  of the  net  sales  proceeds  to the  limited  partners  as a  special
distribution.  In  addition,  during  the year  ended  December  31,  1998,  the
Partnership sold a Property in Leesburg,  Florida and reinvested the majority of
the net sales proceeds in a joint venture, Warren Joint Venture, to purchase and
hold one  restaurant  Property,  and sold a Property  in Naples,  Florida.  As a
result of the above transactions, as of December 31, 1998, the Partnership owned
37 Properties,  including interests in six Properties owned by joint ventures in
which the Partnership is a co-venturer and one Property owned with affiliates as
tenants-in-common. During January 1999, the Partnership reinvested the net sales
proceeds  from the sale of the Property in Naples,  Florida,  in one Property in
Zephyrhills,  Florida,  as  tenants-in-common,  with an affiliate of the General
Partners.  Generally,  the Properties are leased on a triple-net  basis with the
lessees responsible for all repairs and maintenance,  property taxes,  insurance
and utilities.

         On March 11, 1999, the  Partnership  entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership  would be merged with and into a subsidiary  of APF (the  "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term,  "triple-net" basis to operators of
national and regional  restaurant  chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger.  At a special meeting of the partners that is expected to be held in
the third  quarter  of 1999,  Limited  Partners  holding in excess of 50% of the
Partnership's  outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger,  APF will own the Properties and other assets of the
Partnership. See Item 8.
Financial Statements and Supplementary Data -- Note 12. Subsequent Events.

         In the event that the Limited  Partners  vote  against the Merger,  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


<PAGE>


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.  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 2001 and 2018. 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.

         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 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 on  substantially  the same  terms as the
Partnership's other leases as described above.

         During 1994, the leases relating to the Properties in Dundee,  Michigan
and Marion, Ohio, were amended to provide for the payment of reduced annual base
rent with no scheduled rent increases.  However,  the lease amendments  provided
for lower  percentage  rent  breakpoints,  as  compared  to the  original  lease
agreements,  a change  that was  designed  to result in higher  percentage  rent
payments at any time that percentage  rent became payable.  In accordance with a
provision in the  amendments,  as a result of the former  tenant  assigning  the
leases to a new tenant during 1998, the rents under the assigned leases reverted
back to those required under the original lease agreements.

         In January  1999,  the  Partnership  invested in an Arby's  Property in
Zephyrhills,  Florida,  as  tenants-in-common  with  affiliates  of the  General
Partners.  The lease terms for this Property are  substantially  the same as the
Partnership's other leases as described above.

         During 1998, the tenant of the Property owned by Kingsville Real Estate
Joint Venture  experienced  financial  difficulties  and ceased payment of rents
under the terms of its lease agreement.  In January 1999, Kingsville Real Estate
Joint  Venture  entered into a new lease with a new tenant.  The lease terms are
substantially the same as the Partnership's other leases as described above.

Major Tenants

         During 1998, one lessee of the Partnership, Shoney's, Inc., contributed
more than ten percent of the  Partnership's  total rental income  (including the
Partnership's  share of the rental  income  from six  Properties  owned by joint
ventures and one Property  owned with  affiliates as  tenants-in-common).  As of
December 31, 1998,  Shoney's,  Inc. was the lessee under leases  relating to six
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 1999.  In  addition,  two
Restaurant  Chains,  Shoney's and Wendy's Old  Fashioned  Hamburger  Restaurants
("Wendy's"), each accounted for more than ten percent of the Partnership's total
rental income in 1998  (including the  Partnership's  share of the rental income
from  six  Properties  owned by  joint  ventures  and one  Property  owned  with
affiliates  as  tenants-in-common).  In 1999, it is  anticipated  that these two
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 if the  Partnership  is unable to re-lease the
Property in a timely  manner.  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

         As of December 31, 1997, the Partnership had 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.  In
addition,  in September  1998,  the  Partnership  entered  into a joint  venture
arrangement, Warren Joint Venture, to purchase and hold one restaurant Property.
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.

         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, Kingsville Real Estate
Joint Venture,  and Warren Joint Venture is  distributed  51.0%,  26.6%,  57.0%,
96.1%, 68.87%, and 35.71%,  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 percent interest in this Property.

         In addition, in January 1999, the Partnership entered into an agreement
to hold an Arby's Property in Zephyrhills,  Florida, 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 and net
cash flow from the  Property,  in proportion  to each  co-venturer's  percentage
interest. The Partnership owns a 76 percent interest in this Property.



<PAGE>


Certain Management Services

         CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain  services  relating to management of the  Partnership and its Properties
pursuant to a management  agreement with the Partnership.  Under this agreement,
CNL  Fund  Advisors,   Inc.  is  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 Fund  Advisors,  Inc.  also  assists  the  General  Partners in
negotiating the leases.  For these  services,  the Partnership has agreed to pay
CNL 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").

         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.

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, 1998,  the  Partnership  owned,  either  directly or
through joint venture  arrangements,  37 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
1,200 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,  1998 (see Item 1.  Business -
Major  Tenants),  are  substantially  the  same as  those  described  in Item 1.
Business - Leases.

         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  $65,000 (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

         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 11, 1999,  there were 2,916 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 was $475 per Unit. The price paid for any
Unit  transferred  other than pursuant to the Plan was 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 1998 and 1997 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>

                                                    1998 (1)                              1997 (1)
                                         --------------------------------      --------------------------------
                                          High       Low        Average         High       Low        Average
                                         -------    -------    ----------      -------    -------    ----------
<S> <C>
         First Quarter                   $435         $411          $422         $500       $425          $467
         Second Quarter                     475        475           475          500        410           461
         Third Quarter                      500        387           463          465        420           437
         Fourth Quarter                     476        380           433          475        450           470
</TABLE>

 (1)     A total of 552 and 647 Units were  transferred  other than  pursuant to
         the Plan for the years ended December 31, 1998 and 1997, 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 the  years  ended  December  31,  1998 and  1997,  the  Partnership
declared cash distributions of $3,633,748 and $2,760,000,  respectively,  to the
Limited  Partners.  Distributions  for the year ended December 31, 1998 included
$1,233,748 as a result of the  distribution  of the net sales  proceeds from the
sale of the Properties in Fort Myers,  Florida and Union Township,  Ohio, to the
Limited  Partners.   This  amount  was  applied  toward  the  Limited  Partners'
cumulative 10% Preferred  Return.  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  Partnerhsip  receives  rental  payments,  as well as
ongoing operations,  reduced the Partnership's  revenues in 1998 and is expected
to reduce the  Partnership's  revenues  in  subsequent  years.  The  decrease in
Partnership  revenues,  combined with the fact that a significant portion of the
Partnership's  expenses are fixed in the nature,  resulted in a decrease in cash
distributions  to the Limited  Partners  during 1998. No amounts  distributed to
partners for the years ended  December 31, 1998 and 1997,  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.
As indicated in the chart below, these  distributions were declared at the close
of each of the  Partnership's  calendar  quarters.  This amount includes monthly
distributions  made in arrears for the Limited Partners electing to receive such
distributions on this basis.

                Quarter Ended              1998                1997
                --------------------   -------------       -------------
                March 31                 $1,833,748           $ 690,000
                June 30                     600,000             690,000
                September 30                600,000             690,000
                December 31                 600,000             690,000


         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>

                                           1998           1997           1996            1995            1994
                                       -------------  -------------- -------------- ---------------  --------------
<S> <C>
Year ended December 31:
     Revenues (1)                       $ 2,285,696    $ 2,531,385     $ 2,820,295     $ 2,871,572     $ 2,865,770
     Net income (2)                       1,821,449      1,720,668       2,347,167       2,210,339       2,310,524
     Cash distributions
         declared (3)                     3,633,748      2,760,000       2,760,000       2,760,000       2,760,000
     Net income per Unit (2)                  30.15          28.42           38.75           36.48           38.13
     Cash distributions declared
         per Unit                             60.56          46.00           46.00           46.00           46.00

At December 31:
     Total assets                       $21,189,833    $23,309,888     $23,730,892     $24,057,829     $24,598,179
     Partners' capital                   20,340,000     22,152,299      22,897,631      23,288,164      23,837,825
</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  31,1998,  1996,
         1995, and 1994, includes $226,024,  $221,390,  $128,547,  and $128,592,
         respectively, from gains on the sale of land and buildings.

    (3)  Distributions  for the year ended December 31, 1998,  include a special
         distribution  to the  Limited  Partners  of  $1,233,748  in  net  sales
         proceeds from the sale of two properties in 1998.

         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


<PAGE>


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, 1998,
the Partnership owned 37 Properties, either directly or indirectly through joint
venture arrangements.

Liquidity and Capital Resources

         During  the  years  ended  December  31,  1998,  1997,  and  1996,  the
Partnership  generated cash from  operations  (which includes cash received from
tenants, distributions from joint ventures and interest received, less cash paid
for expenses) of $2,362,320,  $2,417,972,  and $2,713,964.  The decrease in cash
from  operations  for 1998 and 1997,  each as compared to the previous  year, 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, 1998,  1997,
and 1996, 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, 1998, 1997, and 1996.

         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,
1998, the Partnership owned a 53 percent 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 were 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.  As of  December  31,  1998,  the
Partnership had collected the full amount of the promissory note.

         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, 1998, 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.  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  were  used  to pay  liabilities  of the  Partnership,
including  quarterly  distributions  to the  Limited  Partners,  and to fund the
renovation costs described above. The Partnership distributed 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 a third  party for  $842,100  and  received  net sales  proceeds of
$794,690, resulting in a gain of $225,902 for financial reporting purposes. This
Property was originally  acquired by the  Partnership in December 1988 and had a
cost of approximately  $598,000,  excluding  acquisition fees and  miscellaneous
acquisition  expenses;   therefore,   the  Partnership  sold  the  Property  for
approximately $196,700 in excess of its original purchase price. In addition, in
March 1998, the  Partnership  sold its Property in Union  Township,  Ohio, to an
unrelated  third party for $680,000 and received net sales proceeds of $674,135,
resulting in a loss of $104,987 for financial reporting purposes.  In connection
with  the  sale  of  these  Properties,   the  Partnership   incurred  deferred,
subordinated,  real  estate  disposition  fees of $45,663.  In April  1998,  the
Partnership  distributed  $1,233,748  of  the  net  sales  proceeds  from  these
Properties  as a  special  distribution  to the  Limited  Partners  and used the
remaining net proceeds for other Partnership purposes.

         In  addition,  in July  1998,  the  Partnership  sold its  Property  in
Leesburg,  Florida for $565,000  and  received  net sales  proceeds of $523,931,
resulting in a total loss for financial  reporting purposes of $135,509.  Due to
the fact that at December 31, 1997,  the  Partnership  recorded a provision  for
loss on the land and  building in the amount of $70,337 for this  Property,  the
Partnership  recognized  the remaining  loss of $65,172 for financial  reporting
purposes at July 1998,  relating to the sale. In September 1998, the Partnership
contributed the majority of the net sales proceeds from the sale of the Property
in Leesburg,  Florida, to a joint venture, Warren Joint Venture, to purchase and
hold one  restaurant  property.  The  Partnership  has an approximate 36 percent
interest  in the profits and losses of Warren  Joint  Venture and the  remaining
interest in this joint venture is held by an affiliate of the General Partners.

         In  September  1998,  the  Partnership  sold its  Property  in  Naples,
Florida,  to a third  party for  $563,000  and  received  net sales  proceeds of
$533,598, resulting in a gain of $170,281 for financial reporting purposes. This
Property was originally  acquired by the  Partnership in December 1988 and had a
cost of approximately  $410,500  excluding  acquisition  fees and  miscellaneous
acquisition  expenses;   therefore,   the  Partnership  sold  the  Property  for
approximately  $123,100 in excess of its  original  purchase  price.  In January
1999,  the  Partnership  invested  a  majority  of the net sales  proceeds  in a
Property in Zephyrhills,  Florida,  with an affiliate of the General Partners as
tenants-in-common  for a 76 percent  interest in the Property.  The  Partnership
will account for its  investment in this Property  using the equity method since
the  Partnership  will share  control with an  affiliate.  The General  Partners
believe that the transaction,  or a portion thereof, relating to the sale of the
Property in Naples,  Florida and the reinvestment of the net sales proceeds will
be structured to qualify as a like-kind exchange  transaction for federal income
tax purposes.  However,  the Partnership 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.

         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, 1998.

         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


<PAGE>


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,  1998,  the  Partnership  had
$739,382  invested in such  short-term  investments,  as compared to $876,452 at
December 31, 1997. The decrease in the amount invested in short-term investments
during 1998,  as compared to 1997, is primarily  attributable  to the payment of
construction  costs accrued at December 31, 1997,  relating to the Partnership's
Properties in Winchester and Portland, Indiana, as described above. The decrease
was  partially  offset by an  increase in cash due to using a portion of the net
sales  proceeds  from the sales of the  Properties in Fort Myers,  Florida,  and
Union Township,  Ohio, for other Partnership purposes, as described above. Total
liabilities  at  December  31,  1998,  to the extent  they  exceed cash and cash
equivalents at December 31, 1998, 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.

         During  1998,  1997,  and 1996,  affiliates  of the  General  Partners,
incurred  on  behalf  of  the  Partnership  $111,482,   $85,702,  and  $114,409,
respectively,  for certain operating expenses. As of December 31, 1998 and 1997,
the Partnership owed $103,315 and $88,854,  respectively, to affiliates for such
amounts and accounting and administrative services. In addition, during the year
ended  December  31,  1998,  the  Partnership  incurred  $45,663 in real  estate
disposition  fees due to an affiliate as a result of its services in  connection
with the sale of two Properties.  The payment of such fees is deferred until the
Limited  Partners have received the sum of their 10% Preferred  Return and their
adjusted  capital  contributions.  Amounts  payable to other parties,  including
distributions  payable,  decreased  to  $700,855  at  December  31,  1998,  from
$1,068,735  at December 31, 1997.  The decrease in  liabilities  at December 31,
1998, is primarily  attributable  to the payment  during the year ended December
31, 1998 of  construction  costs accrued at December 31, 1997 for the Properties
in Portland and Winchester,  Indiana,  in connection with the new leases entered
into  in  July  1997.  In  addition,  the  decrease  in  total  liabilities  was
attributable to a decrease in  distributions  payable to the Limited Partners at
December  31,  1998,  as compared to December 31,  1997.  Total  liabilities  at
December  31,  1998,  to the extent  they exceed  cash and cash  equivalents  at
December 31,  1998,  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 on (i) current and anticipated future cash from operations,  (ii)
for the year ended  December 31, 1998,  net sales  proceeds from the sale of the
Properties in Fort Myers, Florida and Union Township, Ohio and (iii) to a lesser
extent, for the year ended December 31, 1997,  additional capital  contributions
received from the General Partners,  the Partnership  declared  distributions to
the Limited  Partners of  $3,633,748,  $2,760,000,  and $2,760,000 for the years
ended  December  31,  1998,  1997,  and  1996,  respectively.   This  represents
distributions  of $60.56,  $46 and $46 per Unit for the years ended December 31,
1998, 1997, and 1996,  respectively.  Distributions  for the year ended December
31,  1998  included  $1,233,748  as a result  of the  distribution  of net sales
proceeds  from the sale of the  Properties  in Fort  Myers,  Florida  and  Union
Township,  Ohio. This special distribution was effectively a return of a portion
of  the  Limited  Partners'   investment,   although,  in  accordance  with  the
Partnership agreement,  it was applied to the Limited Partners' unpaid preferred
return.  The reduced  number of Properties  for which the  Partnership  receives
rental  payments,  as well as  ongoing  operations,  reduced  the  Partnerhsip's
revenues  in 1998 and is  expected  to  reduce  the  Partnerhsip's  revenues  in
subsequent years. The decrease in Partnership  revenues,  combined wtih the fact
that a significant  portion of the  Partnership's  expenses are fixed in nature,
resulted in a decrease in cash  distributions  to the  Limited  Partners  during
1998.  No  amounts  distributed  to the  Limited  Partners  for the years  ended
December 31, 1998,  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.  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.

         On  March 11, 1999, the Partnership  entered into an Agreement and Plan
of Merger with APF,  pursuant to which the Partnership  would be merged with and
into a subsidiary  of APF. As  consideration  for the Merger,  APF has agreed to
issue  2,668,016  APF Shares  which,  for the  purposes  of  valuing  the merger
consideration,  have been valued by APF at $10.00 per APF Share,  the price paid
by APF  investors in APF's most recent public  offering.  In order to assist the
General  Partners in evaluating the proposed merger  consideration,  the General
Partners  retained  Valuation  Associates,  a nationally  recognized real estate
appraisal firm, to appraise the  Partnership's  restaurant  property  portfolio.
Based on Valuation Associates'  appraisal,  the Partnership's property portfolio
and other assets were valued on a going concern basis  (meaning the  Partnership
continues  unchanged) at  $26,259,630  as of December 31, 1998.  Legg Mason Wood
Walker,  Incorporated  has  rendered  a  fairness  opinion  that  the APF  Share
consideration, payable by APF, is fair to the Partnership from a financial point
of view.  The APF Shares are  expected  to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and, therefore,
would be freely  tradable  at the option of the former  Limited  Partners.  At a
special meeting of the partners that is expected to be held in the third quarter
of  1999,  Limited  Partners  holding  in  excess  of 50%  of the  Partnership's
outstanding  limited  partnership  interests  must  approve the Merger  prior to
consummation of the  transaction.  The General Partners intend to recommend that
the Limited Partners of the Partnership  approve the Merger.  In connection with
their  recommendation,  the  General  Partners  will  solicit the consent of the
Limited Partners at the special meeting.

Results of Operations

         During  1996,  the  Partnership   owned  and  leased  36  wholly  owned
Properties  (including  one  Property  in  Tampa,  Florida,  which  was  sold in
September 1996),  during 1997, the Partnership  owned and leased 35 wholly owned
Properties (including one Property in Douglasville,  Georgia,  which was sold in
November 1997) and during 1998, the Partnership owned and leased 34 wholly owned
Properties  (including  four  Properties  which were sold in 1998). In addition,
during 1998,  1997, and 1996, the Partnership was a co-venturer in five separate
joint  ventures  that each owned and leased one Property  and one Property  with
affiliates as tenants-in-common. In addition, during 1998, the Partnership was a
co-venturer  in an additional  joint venture that owned and leased one Property.
As of December 31, 1998, the Partnership owned, either directly or through joint
venture  arrangements,   37  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,  1998,  1997,  and  1996,  the
Partnership  earned $2,231,513,  $2,189,386,  and $2,397,691,  respectively,  in
rental  income from  operating  leases and earned  income from direct  financing
leases from its wholly owned Properties  described above. The increase in rental
and earned income during 1998, as compared to 1997,  was partially  attributable
to the fact that during  1997,  the  Partnership  increased  its  allowance  for
doubtful  accounts  for  past  due  rental  amounts  relating  to  the  Hardee's
Properties located in Portland and Winchester, Indiana, which were leased by the
same tenant, due to financial difficulties the tenant was experiencing.  No such
allowance  was  recorded  during  1998  due to the  fact  that  the  Partnership
renovated  both  Properties,  as  described  above  in  "Liquidity  and  Capital
Resources"  and  re-leased  the  Properties  to a new  tenant  for  which  rents
commenced in October 1997. The decrease in rental and earned income during 1997,
as compared to 1996, is partially attributable to the Partnership increasing its
allowance  for doubtful  accounts by  approximately  $28,500,  for rental income
amounts relating to the Hardee's  Properties located in Portland and Winchester,
Indiana,  as  described  above.  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  Partnership  re-leased  these  Properties  in October 1997, as
described  above. 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 in
October 1997, after it was renovated into an Arby's Property.

         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.  Rental and
earned income  increased  during 1998, as compared to 1997, due to the fact that
no such allowance was established  during 1998 and the fact that the Partnership
negotiated a settlement  agreement with the former tenant's guarantor to collect
some of the amounts due to the Partnership from the former tenant.  During 1998,
the  Partnership  collected  and  recognized as income a portion of the past due
rental  amounts from the former  tenant's  guarantor.  In addition,  in February
1998,  the  Partnership  entered  into a new lease  with a new  tenant  for this
Property.

         The  increase in rental and earned  income for the year ended  December
31, 1998 was  partially  offset by a decrease in rental and earned income due to
the sale of the Property in Douglasville,  Georgia in November 1997, the sale of
the Properties in Fort Myers,  Florida and Union  Township,  Ohio in March 1998,
and the sale of the Property in Naples,  Florida in September  1998.  During the
year ended December 31, 1998, the  Partnership  used the net sales proceeds from
the sale of the Property in  Douglasville,  Georgia to fund renovation costs for
two Properties and for other Partnership purposes.  Rental and earned income are
expected to remain at reduced amounts as a result of distributing  the net sales
proceeds from the 1998 sales of the Properties in Fort Myers,  Florida and Union
Township, Ohio to the Limited Partners.

         In addition,  rental and earned income decreased  approximately $76,300
during the year ended 1997 as compared  to 1996,  as a result of the sale of the
Property in Tampa, Florida, in September 1996. The decrease in rental income for
1997 was  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.

         For the years ended December 31, 1998,  1997, and 1996, the Partnership
earned $83,377, $117,031 and $97,318,  respectively, in contingent rental income
from the  Partnership's  wholly owned  Properties.  The  decrease in  contingent
rental income  during the year ended  December 31, 1998, as compared to the year
ended December 31, 1997, is partially  attributable to the Partnership adjusting
estimated  contingent  rental  amounts  accrued at December 31, 1997,  to actual
amounts during the year ended December 31, 1998 and is partially attributable to
a decrease in gross sales for certain restaurant Properties whose leases require
the payment of  contingent  rental  income.  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,  the leases of which require the
payment of contingent rental income.

         In October  1998,  the tenant of one Boston Market  Property  filed for
bankruptcy. As of March 11, 1999, the Partnership has continued receiving rental
payments  relating to this lease.  While the tenant has not rejected or affirmed
the lease,  there can be no assurance that the lease will not be rejected in the
future.  The lost revenue  resulting from the rejection of this lease could have
an  adverse  effect on the  results  of  operations  of the  Partnership  if the
Partnership is not able to re-lease this Property in a timely manner.

         In addition, for the years ended December 31, 1998, 1997, and 1996, the
Partnership  recognized a loss of $90,144 and income of $189,747  and  $277,431,
respectively,  attributable  to net income earned by joint ventures in which the
Partnership is a co-venturer. The decrease in net income in 1998, as compared to
1997, is primarily due to the fact that Kingsville Real Estate Joint Venture (in
which the Partnership owns a 68.87% interest)  established an allowance for loss
on the land and net  investment in the direct  financing  lease for its Property
for  approximately  $316,000 during the year ended December 31, 1998. The tenant
of this Property experienced financial  difficulties and ceased payment of rents
under the terms of its lease agreement.  The allowance represents the difference
between the Property's carrying value at December 31, 1998 and the estimated net
realizable value of the Property.  In addition,  the joint venture increased its
allowance for doubtful accounts by approximately  $130,000 during the year ended
December 31, 1998, as compared to an increase in allowance for doubtful accounts
of  approximately  $20,600  during the year ended December 31, 1997, for amounts
due from this tenant  deemed  uncollectible  in accordance  with its  collection
policy. In January 1999, Kingsville Real Estate Joint Venture entered into a new
lease for this  Property  with a new  tenant  and the  General  Partners  ceased
collection efforts on the past due amounts. The decrease in net income for 1998,
as compared to 1997, is partially  offset by an increase in net income earned by
joint  ventures  due to  the  fact  that  in  September  1998,  the  Partnership
reinvested net sales proceeds from the sale of its Property in Leesburg, Florida
in Warren Joint Venture.

         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. 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 ceased collection efforts on past due amounts and the joint venture will
not recognize any rental income from this Property until a new tenant is located
or until the Property is sold and the proceeds  from such a sale are  reinvested
in an additional Property.  Titusville Joint Venture is currently seeking either
a replacement  tenant or purchaser for this Property.  In addition,  during 1998
and 1997,  the  joint  venture  established  an  allowance  for loss on land and
building for its Property in Titusville, Florida, for approximately $125,300 and
$147,000,   respectively,   for  financial  reporting  purposes.  The  allowance
represents the difference between the Property's  carrying value at December 31,
1998, and the estimated net realizable value of the Property.  Net income earned
by joint  ventures also  decreased  during 1997, as compared to 1996,  due to an
adjustment in estimated  contingent rental amounts accrued at December 31, 1996,
to actual  amounts  during the year ended  December 31, 1997 for the Property in
Clinton, North Carolina, held as tenants-in-common.

         During the year  ended  December  31,  1998,  one of the  Partnership's
lessees,  Shoney's, Inc., contributed more than ten percent of the Partnership's
total rental income (including the Partnership's share of the rental income from
six Properties owned by joint ventures and one Property owned with affiliates as
tenant-in-common).  As of December 31, 1998, Shoney's, Inc. was the lessee under
leases relating to six 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
1999.  In addition,  during the year ended  December 31,  1998,  two  Restaurant
Chains,  Shoney's and Wendy's Old Fashioned Hamburger  Restaurants  ("Wendy's"),
each  accounted  for more than ten  percent of the  Partnership's  total  rental
income  (including  the  Partnership's  share  of the  rental  income  from  six
Properties  owned by joint  ventures and one Property  owned with  affiliates as
tenants-in-common).  In 1999, it is anticipated that these two 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 if the  Partnerhsip is not able to re-lease the Properties
in a timely manner.

         Operating expenses,  including  depreciation and amortization  expense,
were  $690,271,  $733,728,  and $694,518 for the years ended  December 31, 1998,
1997, and 1996,  respectively.  The decrease in operating  expenses for 1998, as
compared to 1997,  and 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 decrease in operating
expenses  for 1998,  as compared to 1997,  is  partially  due to the decrease in
depreciation  expense  which  resulted from the sale of one Property in November
1997, and the sale of four Properties in 1998.

         The  decrease in operating  expenses for 1998,  as compared to 1997, is
partially  offset by an increase in  operating  expense for 1998 due to the fact
that the  Partnership  incurred  $18,286  in  transaction  costs  related to the
General  Partners  retaining  financial  and legal  advisors  to assist  them in
evaluating and  negotiating  the proposed Merger with APF, as described above in
"Liquidity and Capital  Resources." If the Limited  Partners  reject the Merger,
the


<PAGE>


Partnership  will bear the  portion  of the  transaction  costs  based  upon the
percentage of "For" votes and the General Partners will bear the portion of such
transaction costs based upon the percentage of "Against" votes and abstentions.

         The increase in operating  expenses  during 1997 was also partially due
to the fact that the  Partnership  recorded bad debt expense of $12,794 from the
former tenant during 1997,  relating to the  Properties  located in Portland and
Winchester,  Indiana,  for past due rental income amounts.  Due to the fact that
the Partnership  re-leased these  Properties to a new tenant in October 1997, as
described above, no such expense was recorded during 1998.

         The  Partnership is  responsible  for the  proportionate  share of real
estate taxes and insurance expense for one of the two leases for the Property in
Maywood,  Illinois.  In addition,  during 1998,  1997, and 1996, 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 1998,  1997, and 1996. The Partnership
sold this Property in July 1998,  therefore the Partnership  does not anticipate
incurring such expenses in future periods.

         As a result  of the  sales of four  Properties  and one  Property,  the
Partnership  recognized  a gain of  $226,024  and  $221,390,  respectively,  for
financial  reporting purposes during the years ended December 31, 1998 and 1996,
respectively.  In  addition,  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.

         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 tenant of this Property defaulted under the
terms of its lease and vacated  the  Property.  The  allowance  represented  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. In July 1998, the Partnership sold this Property.

         The  Partnership's  leases as of December  31,  1998,  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.

Year 2000

         The Year 2000 problem is the result of information  technology  systems
and embedded  systems  (products which are made with  microprocessor  (computer)
chips such as HVAC systems,  physical  security  systems and elevators)  using a
two-digit  format,  as  opposed  to four  digits,  to  indicate  the year.  Such
information  technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.

         The  Partnership  currently  does not have any  information  technology
systems.  Affiliates of the General Partners provide all services  requiring the
use of information  technology  systems pursuant to a management  agreement with
the  Partnership.   The  maintenance  of  embedded  systems,   if  any,  at  the
Partnership's  Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's  leases.  The General Partners
and  affiliates  have  established  a team  dedicated to reviewing  the internal
information technology systems used in the operation of the Partnership, and the
information  technology and embedded  systems and the Year 2000 compliance plans
of the Partnership's tenants, significant suppliers,  financial institutions and
transfer agent.

         The  information  technology  infrastructure  of the  affiliates of the
General  Partners  consists of a network of personal  computers and servers that
were  obtained   from  major   suppliers.   The   affiliates   utilize   various
administrative  and financial  software  applications on that  infrastructure to
perform the business functions of the Partnership.  The inability of the General
Partners  and  affiliates  to identify  and timely  correct  material  Year 2000
deficiencies  in  the  software  and/or   infrastructure   could  result  in  an
interruption in, or failure of, certain of the Partnership's business activities
or operations.  Accordingly,  the General Partners and affiliates have requested
and  are  evaluating  documentation  from  the  suppliers  of the  software  and
infrastructure  of the  affiliates  regarding the Year 2000  compliance of their
products  that  are  used  in  the  business  activities  or  operations  of the
Partnership.   The  General  Partners  and  affiliates  have  not  yet  received
sufficient certifications to be assured that the suppliers have fully considered
and mitigated any potential material impact of the Year 2000  deficiencies.  The
costs  expected to be incurred by the General  Partners and affiliates to become
Year 2000  compliant  will be incurred by the General  Partners and  affiliates;
therefore,  these  costs  will  have no impact  on the  Partnership's  financial
position or results of operations.

         The  Partnership  has  material  third  party  relationships  with  its
tenants,  financial  institutions and transfer agent. The Partnership depends on
its  tenants  for  rents  and  cash  flows,   its  financial   institutions  for
availability  of cash and its  transfer  agent to  maintain  and track  investor
information.  If any of these third parties are unable to meet their obligations
to the  Partnership  because of the Year 2000  deficiencies,  such a failure may
have a material impact on the  Partnership.  Accordingly,  the General  Partners
have requested and are evaluating  documentation from the Partnership's tenants,
financial  institutions,   and  transfer  agent  relating  to  their  Year  2000
compliance  plans.  The  General  Partners  have  not  yet  received  sufficient
certifications  to be assured  that the  tenants,  financial  institutions,  and
transfer agent have fully considered and mitigated any potential material impact
of the Year 2000 deficiencies.  Therefore,  the General Partners do not, at this
time,  know of the potential  costs to the  Partnership of any adverse impact or
effect of any Year 2000 deficiencies by these third parties.

         The General  Partners  currently  expect that all Year 2000  compliance
testing  and any  necessary  remedial  measures  on the  information  technology
systems used in the business  activities and operations of the Partnership  will
be completed prior to June 30, 1999.  Based on the progress the General Partners
and affiliates  have made in identifying and addressing the  Partnership's  Year
2000 issues and the plan and timeline to complete the  compliance  program,  the
General  Partners  do  not  foresee   significant   risks  associated  with  the
Partnership's  Year 2000 compliance at this time.  Because the General  Partners
and affiliates are still  evaluating  the status of the  information  technology
systems used in business  activities and operations of the  Partnership  and the
systems of the third parties with which the  Partnership  conducts its business,
the General Partners have not yet developed a comprehensive contingency plan and
are unable to identify "the most reasonably  likely worst case scenario" at this
time.  If  the  General  Partners  identify  significant  risks  related  to the
Partnership's  Year 2000 compliance or if the Partnership's Year 2000 compliance
program's  progress deviates  substantially from the anticipated  timeline,  the
General Partners will develop appropriate contingency plans.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.


Item 8.   Financial Statements and Supplementary Data


<PAGE>


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

                                    CONTENTS








                                                 Page

Report of Independent Accountants                 

Financial Statements:

  Balance Sheets                                  

  Statements of Income                            

  Statements of Partners' Capital                 

  Statements of Cash Flows                        

  Notes to Financial Statements                   


<PAGE>







                        Report of Independent Accountants




To the Partners
CNL Income Fund IV, Ltd.



In our opinion,  the financial  statements  listed in the index  appearing under
item 14(a)(1) present fairly, in all material  respects,  the financial position
of CNL Income Fund IV, Ltd. (a Florida limited partnership) at December 31, 1998
and 1997,  and the results of its  operations and its cash flows for each of the
three years in the period ended  December 31, 1998 in conformity  with generally
accepted  accounting  principles.  In addition,  in our opinion,  the  financial
statement  schedules  listed in the index appearing under item 14(a)(2)  present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial  statements.  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 of these  statements in accordance with generally  accepted  auditing
standards which 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,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.




Orlando, Florida
January 18, 1999,  except for the second paragraph of Note 12 for which the date
is March 11, 1999.


<PAGE>


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

                                 BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                                          December 31,
                                                                                  1998                    1997
                                                                             ----------------        ----------------
<S> <C>
                         ASSETS

Land and buildings on operating leases, less
    accumulated depreciation and allowance
    for loss on land and building                                                $15,486,459              $18,097,997
Net investment in direct financing leases                                          1,231,482                1,269,389
Investment in joint ventures                                                       2,862,906                2,708,012
Cash and cash equivalents                                                            739,382                  876,452
Restricted cash                                                                      537,274                       --
Receivables, less allowance for doubtful
    accounts of $258,641 and $295,580                                                 24,676                   37,669
Prepaid expenses                                                                       9,836                   11,115
Lease costs, less accumulated amortization
    of $21,450 and $17,956                                                            18,094                   21,588
Accrued rental income                                                                279,724                  287,466
Other assets                                                                              --                      200
                                                                            -----------------        -----------------

                                                                                 $21,189,833              $23,309,888
                                                                            =================        =================


                    LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                                                                   $   4,503                $   8,576
Accrued construction costs payable                                                        --                  250,000
Accrued and escrowed real estate taxes
    payable                                                                           36,732                   65,176
Distributions payable                                                                600,000                  690,000
Due to related parties                                                               148,978                   93,854
Rents paid in advance and deposits                                                    59,620                   49,983
                                                                            -----------------        -----------------
       Total liabilities                                                             849,833                1,157,589

Partners' capital                                                                 20,340,000               22,152,299
                                                                            -----------------        -----------------

                                                                                 $21,189,833              $23,309,888
                                                                            =================        =================

</TABLE>


                 See accompanying notes to financial statements.


<PAGE>


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

                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                          Year Ended December 31,
                                                                 1998                 1997                  1996
                                                            --------------       --------------       --------------
<S> <C>
Revenues:
    Rental income from operating leases                        $2,104,520           $2,058,703           $2,263,677
    Earned income from direct financing
       leases                                                     126,993              130,683              134,014
    Contingent rental income                                       83,377              117,031               97,318
    Interest and other income                                      60,950               35,221               47,855
                                                            --------------       --------------       --------------
                                                                2,375,840            2,341,638            2,542,864
                                                            --------------       --------------       --------------
Expenses:
    General operating and administrative                          151,775              149,808              161,714
    Professional services                                          43,609               33,439               29,289
    Bad debt expense                                                   --               12,794                   --
    Real estate taxes                                              31,879               65,316               37,589
    State and other taxes                                          15,747               16,476               21,694
    Depreciation and amortization                                 428,975              455,895              444,232
    Transaction costs                                              18,286                   --                   --
                                                            --------------       --------------       --------------
                                                                  690,271              733,728              694,518
                                                            --------------       --------------       --------------
Income Before Equity in Earnings (Losses)
    of Joint Ventures, Gain (Loss) on Sale of
    Land and Buildings and Provision for
    Loss on Land and Building                                   1,685,569            1,607,910            1,848,346

Equity in Earnings (Losses) of Joint Ventures                     (90,144 )            189,747              277,431

Gain (Loss) on Sale of Land and Buildings                         226,024               (6,652 )            221,390

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

Net Income                                                     $1,821,449           $1,720,668           $2,347,167
                                                            ==============       ==============       ==============

Allocation of Net Income:
    General partners                                             $ 12,724             $ 15,697             $ 22,219
    Limited partners                                            1,808,725            1,704,971            2,324,948
                                                            --------------       --------------       --------------
                                                               $1,821,449           $1,720,668           $2,347,167
                                                            ==============       ==============       ==============

Net Income Per Limited Partner Unit                              $  30.15             $  28.42             $  38.75
                                                            ==============       ==============       ==============

Weighted Average Number of Limited
    Partner Units Outstanding                                      60,000               60,000               60,000
                                                            ==============       ==============       ==============
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


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

                         STATEMENTS OF PARTNERS' CAPITAL

                  Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>

                                       General Partners                                        Limited Partners
                                 --------------------------   ---------------------------------------------------------------------
                                                Accumulated                                 Accumulated   Syndication
                                 Contributions    Earnings    Contributions  Distributions    Earnings       Costs         Total
                                 -------------  ------------  -------------  -------------  ------------- ------------  ------------
<S> <C>
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

    Distributions to limited
       partners ($61  per
       limited partner unit)              --             --             --      (3,633,748 )           --            --  (3,633,748)
    Net income                            --         12,724             --              --      1,808,725            --   1,821,449
                                 ------------   ------------  -------------  --------------  ------------- ------------- -----------

Balance, December 31, 1998       $   557,804    $   211,274   $ 30,000,000   $ (28,841,711 ) $ 21,852,633  $ (3,440,000) $20,340,000
                                 ============   ============  =============  ==============  ============= ============= ===========
</TABLE>




                 See accompanying notes to financial statements.


<PAGE>


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

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                   Year Ended December 31,
                                                                      1998                 1997                   1996
                                                                 ----------------     ----------------      ----------------
<S> <C>
Increase (Decrease) in Cash and Cash
   Equivalents:

      Cash Flows from Operating Activities:
         Cash received from tenants                                   $2,351,732          $2,345,612             $2,588,248
         Distributions from joint ventures                               248,360             265,473                305,866
         Cash paid for expenses                                         (274,436 )          (211,213  )            (206,059 )
         Interest received                                                36,664              18,100                 25,909
                                                                 ----------------     ----------------      ----------------
             Net cash provided by operating
                activities                                             2,362,320           2,417,972              2,713,964
                                                                 ----------------     ----------------      ----------------

      Cash Flows from Investing Activities:
         Proceeds from sale of land and building                       2,526,354             378,149              1,049,550
         Additions to land and buildings on
             operating leases                                           (275,000 )                  --           (1,035,516 )
         Investment in joint ventures                                   (493,398 )                  --             (437,489 )
         Decrease (increase) in restricted cash                         (533,598 )                  --              518,150
         Payment of lease costs                                               --             (17,384  )              (2,230 )
         Other                                                                --               9,122                     --
                                                                 ----------------     ----------------      ----------------
             Net cash provided by investing activities                 1,224,358             369,887                 92,465
                                                                 ----------------     ----------------      ----------------

      Cash Flows from Financing Activities:
         Contributions from general partners                                  --             294,000                 22,300
         Distributions to limited partners                            (3,723,748 )        (2,760,000  )          (2,760,000 )
                                                                 ----------------     ----------------      ----------------
             Net cash used in financing activities                    (3,723,748 )        (2,466,000  )          (2,737,700 )
                                                                 ----------------     ----------------      ----------------

Net Increase (Decrease) in Cash and Cash
   Equivalents                                                          (137,070 )           321,859                 68,729

Cash and Cash Equivalents at Beginning of Year                           876,452             554,593                485,864
                                                                 ----------------     ----------------      ----------------

Cash and Cash Equivalents at End of Year                               $ 739,382           $ 876,452              $ 554,593
                                                                 ================     ================      ================

</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>

                                                                               Year Ended December 31,
                                                                   1998                  1997               1996
                                                               ---------------      ---------------    ----------------
<S> <C>
Reconciliation of Net Income to Net Cash
   Provided by Operating Activities:

      Net income                                                 $ 1,821,449            $1,720,668          $2,347,167
                                                               ---------------      ---------------    ----------------
      Adjustments to reconcile net income to
         net cash provided by operating
         activities:
             Depreciation                                            425,481               453,397             442,065
             Amortization                                              3,494                 2,498               2,167
             Equity in earnings of joint ventures,
                net of distributions                                 338,504                75,726              28,435
             Bad debt expense                                             --                12,794                  --
             Loss (gain) on sale of land and
                buildings                                           (226,024  )              6,652            (221,390 )
             Provision for loss on land and
                building                                                  --                70,337                  --
             Decrease in receivables                                   8,607                 5,422              41,531
             Decrease (increase) in
                prepaid expenses                                       1,279                  (180 )            (1,202 )
             Decrease in net investment in direct
                financing leases                                      37,907                34,215              30,885
             Increase in accrued rental income                       (40,515  )            (39,669 )           (21,520 )
             Increase (decrease) in accounts
                payable and accrued expenses                         (26,960  )             31,976              11,162
             Increase in due to related parties                        9,461                26,701              39,987
             Increase in rents paid in advance
                and deposits                                           9,637                17,435              14,677
                                                               ---------------      ---------------    ----------------
                   Total adjustments                                 540,871               697,304             366,797
                                                               ---------------      ---------------    ----------------

Net Cash Provided by Operating Activities                        $ 2,362,320            $2,417,972          $2,713,964
                                                               ===============      ===============    ================

Supplemental Schedule of Non-Cash Investing and
   Financing Activities:

      Deferred  real estate  disposition  fees
        incurred and unpaid at December 31                         $  45,663               $    --              $   --
         unpaid at December 31                                 ===============      ===============    ================

      Distributions declared and unpaid at
         December 31                                               $ 600,000             $ 690,000           $ 690,000
                                                               ===============      ===============    ================
</TABLE>


                 See accompanying notes to financial statements.


<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 1998, 1997, and 1996


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.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


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.  Whenever a tenant defaults
                  under  the  terms  of its  lease,  or  events  or  changes  in
                  circumstance  indicate  that the  tenant  will not  lease  the
                  property  through the end of the lease term,  the  Partnership
                  either  reserves or writes-off the  cumulative  accrued rental
                  income balance.

         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' best 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,  Warren 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.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


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.

         Reclassification   -  Certain  items  in  the  prior  years'  financial
         statements  have been  reclassified  to conform  to 1998  presentation.
         These  reclassifications  had no effect  on  partners'  capital  or net
         income.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


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:
<TABLE>
<CAPTION>

                                                                    1998                  1997
                                                              -----------------     -----------------
<S> <C>
                  Land                                             $ 7,244,512            $8,328,572
                  Buildings                                         11,986,556            13,684,194
                                                              -----------------     -----------------
                                                                    19,231,068            22,012,766
                  Less accumulated depreciation                     (3,744,609 )          (3,844,432 )
                                                              -----------------     -----------------
                                                                    15,486,459            18,168,334
                  Less allowance for loss on
                       land and building                                    --               (70,337 )
                                                              -----------------     -----------------
                                                                   $15,486,459          $ 18,097,997
                                                              =================     =================
</TABLE>


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


3.       Land and Buildings on Operating Leases - Continued:

         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.

         In March  1998,  the  Partnership  sold  its  property  in Fort  Myers,
         Florida,  to a third party for $842,100 and received net sales proceeds
         of $794,690,  resulting in a gain of $225,902 for  financial  reporting
         purposes.  This property was originally  acquired by the Partnership in
         December  1988  and  had a cost  of  approximately  $598,000  excluding
         acquisition fees and miscellaneous acquisition expenses; therefore, the
         Partnership sold the Property for  approximately  $196,700 in excess of
         its original purchase price.

         In March 1998,  the  Partnership  sold its property in Union  Township,
         Ohio to a third party for $680,000  and received net sales  proceeds of
         $674,135,  resulting  in a loss of  $104,987  for  financial  reporting
         purposes.

         In connection  with the sale of the  properties  described  above,  the
         Partnership  incurred deferred,  subordinated,  real estate disposition
         fees of $45,663 (see Note 10).




<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


3.       Land and Buildings on Operating Leases - Continued:

         In July 1998, the Partnership  sold its property in Leesburg,  Florida,
         for $565,000 and received net sales proceeds of $523,931,  resulting in
         a loss for financial  reporting  purposes of $135,509.  Due to the fact
         that at December 31, 1997, the Partnership had recorded a provision for
         loss on land and  building in the amount of $70,337 for this  property,
         the Partnership  recognized the remaining loss of $65,172 for financial
         reporting purposes in July 1998, relating to the sale.

         In  September  1998,  the  Partnership  sold its  property  in  Naples,
         Florida,  to a third party for $563,000 and received net sales proceeds
         of $533,598,  resulting in a gain of $170,281 for  financial  reporting
         purposes.  This property was originally  acquired by the Partnership in
         December  1988  and  had a cost  of  approximately  $410,500  excluding
         acquisition fees and miscellaneous acquisition expenses; therefore, the
         Partnership sold the property for  approximately  $123,100 in excess of
         its original purchase price.

         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, 1998,  1997,  and 1996,  the  Partnership
         recognized $40,515, $39,669 and $21,520,  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, 1998:

                1999                           $ 1,975,839
                2000                             1,977,929
                2001                             1,947,479
                2002                             1,951,578
                2003                             1,759,818
                Thereafter                      10,670,163
                                          -----------------

                                               $20,282,806
                                          =================

         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.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


4.       Net Investment in Direct Financing Leases:

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

                                                                        1998                  1997
                                                                  -----------------     -----------------
<S> <C>
                  Minimum lease payments receivable                     $1,660,791            $1,825,690
                  Estimated residual values                                527,829               527,829
                  Less unearned income                                    (957,138 )          (1,084,130 )
                                                                  -----------------     -----------------

                  Net investment in direct
                      financing leases                                  $1,231,482           $ 1,269,389
                                                                  =================     =================
</TABLE>

         The  following  is a schedule of future  minimum  lease  payments to be
         received on direct financing leases at December 31, 1998:

                1999                           $ 164,899
                2000                             164,899
                2001                             164,899
                2002                             164,899
                2003                             164,899
                Thereafter                       836,296
                                         ----------------

                                              $1,660,791
                                         ================

         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:

         As of December 31, 1997, the Partnership  had 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,  and a 53 percent interest in the profits and losses of a
         property in Clinton,  North Carolina,  held as  tenants-in-common  with
         affiliates of the general partners.




<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


5.       Investment in Joint Ventures - Continued:

         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.

         In  September  1998,  the  Partnership  entered  into a  joint  venture
         arrangement,  Warren  Joint  Venture,  with an affiliate of the general
         partners, to hold one restaurant property. As of December 31, 1998, the
         Partnership had acquired a 35.71% interest in the profits and losses of
         the joint venture.  The Partnership accounts for its investment in this
         joint  venture  under the equity  method since the  Partnership  shares
         control with the affiliates.

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

                                                                                1998                 1997
                                                                          ----------------     ----------------
<S> <C>
                 Land and buildings on operating
                     leases, less accumulated
                     depreciation and allowance for
                     loss on land and building                                  $4,406,943           $3,338,372
                 Net investment in direct financing
                     leases less allowance for loss on
                     building                                                      626,594              842,633
                 Cash                                                               14,025               12,331
                 Receivables                                                        10,943               40,456
                 Accrued rental income                                             163,773              177,567
                 Other assets                                                        2,513                2,029
                 Liabilities                                                        27,211               16,283
                 Partners' capital                                               5,197,580            4,397,105
                 Revenues                                                          368,058              434,177
                 Provision for loss on land and
                     buildings and net investment in
                     direct financing lease                                       (441,364)            (147,039)
                 Net income                                                       (212,388)             126,271
</TABLE>




<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


5.       Investment in Joint Ventures - Continued:

         The  Partnership   recognized  a  loss  totalling  $90,144  and  income
         totalling  $189,747 and $277,431 for the years ended December 31, 1998,
         1997, and 1996, respectively, from these joint ventures.

6.       Restricted Cash:

         As of December 31, 1998,  the net sales  proceeds of $533,598  from the
         sale of the  property  in Naples,  Florida,  plus  accrued  interest of
         $3,676 were being held in an  interest-bearing  escrow account  pending
         the  release  of funds by the escrow  agent to  acquire  an  additional
         property on behalf of the Partnership.

7.       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.  As of December  31,  1998,  the
         Partnership had collected the full amount of the promissory note.

8.       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").



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


8.       Allocations and Distributions - Continued:

         Generally,  net  sales  proceeds  from  the sale of  properties  not in
         liquidation  of the  Partnership,  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  not  in
         liquidation of the  Partnership  is, in general,  allocated in the same
         manner as net sales proceeds are distributable.  Any loss from the sale
         of a property not in  liquidation  of the  Partnership  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.

         Generally,  net sales  proceeds from a liquidating  sale of properties,
         will be used in the following  order: i) first to pay and discharge all
         of the Partnership's liabilities to creditors, ii) second, to establish
         reserves that may be deemed necessary for any anticipated or unforeseen
         liabilities or obligations of the  Partnership,  iii) third, to pay all
         of the  Partnership's  liabilities,  if any, to the general and limited
         partners,  iv) fourth,  after  allocations of net income,  gains and/or
         losses,  to distribute to the partners with positive  capital  accounts
         balances,  in proportion to such balances,  up to amounts sufficient to
         reduce such positive  balances to zero,  and v)  thereafter,  any funds
         remaining shall then be distributed 95 percent to the limited  partners
         and five percent to the general partners.

         During each of the years ended  December 31, 1998,  1997, and 1996, the
         Partnership   declared   distributions   to  the  limited  partners  of
         $3,633,748, $2,760,000, and $2,760,000, respectively. Distributions for
         the year ended December 31, 1998 included $1,233,748 as a result of the
         distribution  of net sales  proceeds from the sale of the properties in
         Fort Myers,  Florida and Union Township,  Ohio. This amount was applied
         toward the limited  partners' 10% Preferred  Return.  No  distributions
         have been made to the general partners to date.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


9.       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>

                                                                     1998              1997             1996
                                                                 --------------     ------------     ------------
<S> <C>
                  Net income for financial reporting
                      purposes                                      $1,821,449       $1,720,668       $2,347,167

                  Depreciation for tax reporting
                      purposes in  excess of depreciation
                      for financial reporting purposes                  (8,014 )         (9,203 )        (17,764 )

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

                  Direct financing leases recorded as
                      operating leases for tax
                      reporting purposes                                37,907           34,215           30,885

                  Gain on sale  of land  and  buildings
                      for financial reporting purposes
                      less than (in excess of) gain for
                      tax reporting purposes                          (231,919 )         44,918         (140,228 )

                  Capitalization of  transaction costs
                      for tax reporting purposes                        18,286               --               --

                  Equity in earnings of joint ventures
                      for financial  reporting purposes
                      less than (in excess of) equity in
                      earnings of joint ventures for tax
                      reporting purposes                               319,186           51,115          (25,853 )

                  Allowance for doubtful accounts                      (36,939 )        138,647           (9,933 )

                  Accrued rental income                                (40,515 )        (39,669 )        (21,520 )

                  Rents paid in advance                                  9,137            7,435           14,677

                  Other                                                    501               --               --
                                                                 --------------     ------------     ------------

                  Net income for federal income tax
                      purposes                                      $1,889,079       $2,018,463       $2,177,431
                                                                 ==============     ============     ============
</TABLE>



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


10.      Related Party Transactions:

         One of the individual general partners, James M. Seneff, Jr., is one of
         the principal shareholders of CNL Group, Inc., the majority stockholder
         of CNL Fund Advisors, Inc. The other individual general partner, Robert
         A. Bourne,  serves as  treasurer,  director,  and vice  chairman of the
         Board of CNL Fund  Advisors,  Inc.  During the years ended December 31,
         1998, 1997, and 1996, CNL Fund Advisors,  Inc. (hereinafter referred to
         collectively as the  "Affiliate")  performed  certain  services for the
         Partnership, as described below.

         During the years ended December 31, 1998, 1997, and 1996, the Affiliate
         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  Affiliate  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  have not  received  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, 1998,  1997, and
         1996.

         The Affiliate is 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 the  Affiliate  provides  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  is
         subordinated to receipt by the


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


10.      Related Party Transactions - Continued:

         limited  partners of their aggregate 10% Preferred  Return,  plus their
         adjusted capital  contributions.  For the year ended December 31, 1998,
         the Partnership incurred $45,663 in deferred, subordinated, real estate
         disposition  fees as a result of the sales of properties.  No deferred,
         subordinated  real estate  disposition fees were incurred for the years
         ended December 31, 1997 and 1996.

         During the years ended December 31, 1998, 1997, and 1996, the Affiliate
         provided accounting and administrative services to the Partnership on a
         day-to-day basis. The Partnership incurred $94,365, $81,838 and $85,899
         for the years ended December 31, 1998,  1997,  and 1996,  respectively,
         for such services.

         The due to related parties consisted of the following at December 31:
<TABLE>
<CAPTION>

                                                                          1998                  1997
                                                                     ---------------       ---------------
<S> <C>
                 Due to the Affiliate:
                     Expenditures incurred on
                        behalf of the Partnership                           $53,363               $48,126
                     Accounting and administrative
                        services                                             49,952                40,728
                 Deferred, subordinated real
                     estate disposition fee                                  45,663                     --
                 Other                                                            --                 5,000
                                                                     ---------------       ---------------

                                                                           $148,978               $93,854
                                                                     ===============       ===============



</TABLE>

<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


11.      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 each of the years ended December 31:
<TABLE>
<CAPTION>

                                                                1998              1997               1996
                                                            -------------     -------------      -------------
<S> <C>
                  Shoney's, Inc.                                $413,755          $427,238           $425,390
                  Tampa Foods, L.P.                                  N/A               N/A            291,347
</TABLE>

         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 each of the years ended December 31:
<TABLE>
<CAPTION>

                                                                1998              1997               1996
                                                            -------------     -------------      -------------
<S> <C>
                  Shoney's                                      $541,175          $557,303           $557,841
                  Wendy's Old Fashioned
                      Hamburger Restaurants                      437,896           432,585            499,305
                  Denny's                                            N/A           345,749            360,080
                  Taco Bell                                          N/A           262,909            251,314
</TABLE>

         The  information   denoted  by  N/A  indicates  that  for  each  period
         presented,  the tenant and the chains did not  represent  more than ten
         percent of the Partnership's total rental and earned income.

         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.

12.      Subsequent Events:

         In January 1999, the  Partnership  used the net sales proceeds from the
         sale of the  property  in Naples,  Florida  to invest in a Property  in
         Zephyrhills,  Florida,  with an  affiliate  of the general  partners as
         tenants-in-common  for a 76  percent  interest  in  the  property.  The
         Partnership  will account for its investment in this property using the
         equity method since the Partnership will share control with affiliates.
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


12.      Subsequent Events - Continued:

         On March 11, 1999, the  Partnership  entered into an Agreement and Plan
         of Merger with CNL American Properties Fund, Inc. ("APF"),  pursuant to
         which the Partnership would be merged with and into a subsidiary of APF
         (the  "Merger").  As  consideration  for the Merger,  APF has agreed to
         issue 2,668,016  shares of its common stock, par value $0.01 per shares
         (the "APF  Shares")  which,  for the  purposes  of  valuing  the merger
         consideration,  have been  valued by APF at $10.00 per APF  Share,  the
         price paid by APF  investors in APF's most recent public  offering.  In
         order to assist the general  partners in evaluating the proposed merger
         consideration,  the general partners retained Valuation  Associates,  a
         nationally  recognized  real estate  appraisal  firm,  to appraise  the
         Partnership's   restaurant  property  portfolio.   Based  on  Valuation
         Associates'  appraisal,  the Partnership's property portfolio and other
         assets were valued on a going  concern basis  (meaning the  Partnership
         continues unchanged) at $26,259,630 as of December 31, 1998. Legg Mason
         Wood Walker,  Incorporated has rendered a fairness opinion that the APF
         Share consideration,  payable by APF, is fair to the Partnership from a
         financial  point of view.  The APF Shares are expected to be listed for
         trading  on  the  New  York  Stock  Exchange   concurrently   with  the
         consummation of the Merger, and, therefore, would be freely tradable at
         the option of the former limited partners.  At a special meeting of the
         partners  that is  expected  to be held in the third  quarter  of 1999,
         limited  partners  holding  in  excess  of  50%  of  the  Partnership's
         outstanding limited partnership interests must approve the Merger prior
         to  consummation  of the  transaction.  The general  partners intend to
         recommend  that the  limited  partners of the  Partnership  approve the
         Merger. In connection with their  recommendation,  the general partners
         will  solicit  the  consent  of the  limited  partners  at the  special
         meeting.  If the limited  partners  reject the Merger,  the Partnership
         will  bear  the  portion  of  the  transaction  costs  based  upon  the
         percentage  of "For"  votes  and the  general  partners  will  bear the
         portion  of  such  transaction  costs  based  upon  the  percentage  of
         "Against" votes and abstentions.



<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 52, is a principal  stockholder of CNL Group,
Inc., a diversified  real estate company,  and has served as its Chairman of the
Board of Directors,  a director and Chief Executive  Officer since its formation
in 1980. Mr. Seneff has been Chairman of the Board of Directors,  director,  and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979. Mr.
Seneff also has held the position of Chairman of the Board of  Directors,  Chief
Executive  Officer,   President  and  director  of  CNL  Management  Company,  a
registered investment advisor,  since its formation in 1976, has served as Chief
Executive  Officer,  Chairman  of the Board  and a  director  of CNL  Investment
Company,  has served as Chief Executive  Officer, a director and Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc., a publicly-traded REIT,
listed on the NYSE, since 1992,  served as Chief Executive  Officer,  a director
and  Chairman of the Board of Directors of CNL Realty  Advisors,  Inc.  from its
inception in May 1992 through  December  1997, at which time such company merged
with  Commercial  Net Lease  Realty,  Inc.,  and has held the  position of Chief
Executive  Officer,  Chairman of the Board and a director  of CNL  Institutional
Advisors, Inc., a registered investment advisor, since its inception in December
1990.  Mr.  Seneff  has  served as  Chairman  of the Board of  Directors  of CNL
American  Properties  Fund, Inc. since December 1994 and as a director and Chief
Executive  Officer  since May 1994.  Mr.  Seneff has served as  Chairman  of the
Board,  Chief Executive Officer and a director of CNL Fund Advisors,  Inc. since
March 1994.  Mr.  Seneff has served as Chairman  of the Board,  Chief  Executive
Officer and a director of CNL Hospitality  Properties,  Inc. since June 1996 and
of CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also served
as Chairman of the Board,  Chief Executive  Officer and a director of CNL Health
Care  Properties,  Inc. since  December 1997 and CNL Health Care Advisors,  Inc.
since July 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 advises 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 then $60 billion of retirement  funds.
Mr.  Seneff  has  served as a member of the board of  directors  of First  Union
National  Bank of  Florida  since  May 1998 and has  served  as a member  of the
Orlando Advisory Board of First Union National Bank of Florida since March 1994.
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 restaurants,  office buildings,  apartment complexes,  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.

         Robert A.  Bourne,  age 51, is  President  and  Treasurer of CNL Group,
Inc.,  President,  Treasurer,  a director,  and a  registered  principal  of CNL
Securities  Corp.,  President,  Treasurer,  and a  director  of  CNL  Investment
Company,  and  Chief  Investment  Officer,  a  director  and  Treasurer  of  CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne served
as President of CNL Institutional  Advisor,  Inc. from the date of its inception
through  July 1997.  Mr.  Bourne  served as President  of  Commercial  Net Lease
Realty,  Inc.  from July 1992 through  February  1996,  served as Secretary  and
Treasurer from February 1996 through December 1997, and has served as a director
since July 1992 and as Vice  Chairman of the Board of Directors  since  February
1996. In addition,  Mr. Bourne served as President of CNL Realty Advisors,  Inc.
from May 1992 through  February  1996,  served as Treasurer  from  February 1996
through  December 1997,  served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from  February 1996 through  December  1997, at
which time such company merged with Commercial Net Lease Realty, Inc. Mr. Bourne
has served as a Vice  Chairman of the Board of  Directors  and  Treasurer of CNL
American  Properties  Fund,  Inc.  since February 1999, has served as a director
since May 1994 and previously served as President from May 1994 through February
1999. Mr. Bourne has served as a director of CNL Fund Advisors, Inc. since March
1994, has served as Treasurer and Vice Chairman of the Board of Directors  since
September  1997,  and  previously  served as  President  from March 1994 through
September  1997.  Mr.  Bourne has  served as  President  and a  director  of CNL
Hospitality  Properties,  Inc. since June 1996 and of CNL Hospitality  Advisors,
Inc.  since January 1997. Mr. Bourne has served as President and director of CNL
Health Care  Properties,  Inc. since December 1997 and CNL Health Care Advisors,
Inc. since July 1997. 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
restaurants,  office  buildings,  apartment  complexes,  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.  Mr.  Bourne  formerly  was a
certified public  accountant with Coopers & Lybrand and a partner in the firm of
Bourne & Rose, P.A. Mr. Bourne received a B.A. in Accounting,  with honors, from
Florida State University in 1970.

         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 majority 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.

         Curtis B. McWilliams,  age 43, joined CNL Group, Inc. in April 1997 and
currently serves as an Executive Vice President. In addition, Mr. McWilliams has
served  as  President  of  CNL  Fund  Advisors,  Inc.  and as  President  of the
Restaurant  and Financial  Services  Groups within CNL Group,  Inc.  since April
1997. Mr.  McWilliams has served as President of CNL American  Properties  Fund,
Inc. since February 1999 and previously  served as Executive Vice President from
February 1998 through February 1999. From September 1983 through March 1997, Mr.
McWilliams  was employed by Merrill  Lynch & Co.,  most  recently as Chairman of
Merrill  Lynch's  Private  Advisory  Services until March 1997.  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 40, has served as Executive  Vice President of CNL
American  Properties  Fund, Inc. since January 1996, as Chief Operating  Officer
since March 1995, and previously  served as Senior Vice President since December
1994. In addition, Mr. Walker has served as Executive Vice President of CNL Fund
Advisors, Inc. since January 1996, Chief Operating Officer since April 1995, and
previously  served as Senior Vice President  from November 1994 through  January
1996. In addition,  Mr. Walker  previously served as Executive Vice President of
CNL Hospitality  Properties,  Inc. and CNL Hospitality  Advisors,  Inc. From May
1992 to May 1994, Mr. Walker, a certified public accountant,  was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc.,   a  cable   television   network   (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 50, a  certified  public  accountant,  has served as
Secretary of CNL American  Properties  Fund, Inc. since December 1994 and served
as Treasurer from December 1994 through  February 1999. Ms. Rose has served as a
director  and  Secretary of CNL Fund  Advisors,  Inc.  since March 1994,  and as
Treasurer  from the date of its  inception  through June 30, 1997.  Ms. Rose has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer of
CNL Group, Inc. since December 1993, 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, as Treasurer of CNL Realty Advisors,  Inc. from 1991 to February 1996, and
as Secretary and a director of CNL Realty Advisors,  Inc. since its inception in
1991 until  December 31, 1997, at which time CNL Realty  Advisors,  Inc.  merged
with Commercial Net Lease Realty, Inc. In addition, Ms. Rose served as Secretary
and Treasurer of Commercial  Net Lease Realty,  Inc. from 1992 to February 1996.
Ms. Rose also serves as Secretary and Treasurer of CNL  Hospitality  Properties,
Inc. and CNL Health Care  Properties,  Inc. and as  Secretary,  Treasurer  and a
director of CNL Hospitality  Advisors,  Inc. and CNL Health Care Advisors,  Inc.
Ms. Rose also  currently  serves as Secretary  for  approximately  50 additional
corporations.  Ms.  Rose  oversees  the  legal  compliance,  accounting,  tenant
compliance,  and reporting  for over 250  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.

         Jeanne A. Wall,  age 40, has served as Executive  Vice President of CNL
American  Properties  Fund,  Inc.  since  December  1994. Ms. Wall has served as
Executive  Vice  President of CNL Fund  Advisors,  Inc. since November 1994, and
previously  served as Vice President from March 1994 through  November 1994. Ms.
Wall 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.  Ms. Wall joined CNL  Securities
Corp. in 1984. 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 its  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 until  December 31, 1997,  at which time CNL Realty  Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., and served as Vice President
of  Commercial  Net Lease Realty,  Inc. from 1992 through  December 31, 1997. In
addition,  Ms.  Wall  serves as  Executive  Vice  President  of CNL  Hospitality
Properties,  Inc., CNL Hospitality  Advisors,  Inc., CNL Health Care Properties,
Inc.  and CNL Health  Care  Advisors,  Inc.  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 35, a  certified  public  accountant,  has
served as Chief Financial  Officer of CNL American  Properties  Fund, Inc. since
January 1997 and as Chief  Financial  Officer of CNL Fund  Advisors,  Inc. since
September  1996.  From  March 1995 to July 1996,  Mr.  Shackelford  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.



<PAGE>


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 11,  1999,  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 11, 1999,  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.  On March 11,  1999,  the
Registrant  entered  into an  Agreement  and Plan of  Merger  with CNL  American
Properties  Fund, Inc.  ("APF") pursuant to which the Registrant would be merged
with and into a subsidiary of APF (the "Merger").  For further  discussion,  see
Item 8. Financial Statements and Supplementary Data -- Note 12.
Subsequent Events.



<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, 1998,  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, 1998
<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     $111,482
                                              comparable  services could have been
                                              obtained  in  the  same   geographic     Accounting    and     administrative
                                              area.   Affiliates  of  the  General     services:  $94,365
                                              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 management fee to       One  percent  of the  sum  of  gross        $ - 0 -
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  have not received  their
                                              10%   Preferred   Return   in  any
                                              particular   year,  no  management
                                              fees  will be due or  payable  for
                                              such year.

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

              Type of                                                                            Amount Incurred
           Compensation                                    Method of                              For the Year
           and Recipient                                  Computation                        Ended December 31, 1998
<S> <C>
Deferred,    subordinated   real   estate     A   deferred,    subordinated   real        $45,663
disposition fee payable to affiliates         estate   disposition   fee,  payable
                                              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,     A   deferred,   subordinated   share        $ - 0 -
sub-ordinated  share of  Partnership  net     equal to one percent of  Partnership
cash flow                                     distributions   of  net  cash  flow,
                                              subordinated   to  certain   minimum
                                              returns to the Limited Partners.

General        Partners'        deferred,     A   deferred,   subordinated   share        $ - 0 -
sub-ordinated  share of  Partnership  net     equal    to    five    percent    of
sales  proceeds  from a sale or sales not     Partnership  distributions  of  such
in liquidation of the Partnership             net sales proceeds,  subordinated to
                                              certain   minimum   returns  to  the
                                              Limited Partners.

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                                                                                 Amount Incurred
       Type of Compensation                                                                       For the Year
            and Recipient                            Method of Computation                   Ended December 31, 1998
      -----------------------                        ---------------------                   -----------------------
<S> <C>
General  Partners'  share of  Partnership     Distributions  of net sales proceeds        $ - 0 -
net sales  proceeds  from a sale or sales     from   a   sale    or    sales    of
in liquidation of the Partnership             substantially     all     of     the
                                              Partnership's   assets   will   be
                                              distributed in the following order
                                              or priority: (i) first, to pay all
                                              debts  and   liabilities   of  the
                                              Partnership   and   to   establish
                                              reserves; (ii) second, to Partners
                                              with  positive   capital   account
                                              balances,   determined  after  the
                                              allocation  of  net  income,   net
                                              loss, gain and loss, in proportion
                                              to such  balances,  up to  amounts
                                              sufficient to reduce such balances
                                              to zero; and (iii) thereafter, 95%
                                              to the Limited  Partners and 5% to
                                              the General Partners.
</TABLE>

         As discussed  above in Item 8. Financial  Statements and  Supplementary
Data -- Note 12. Subsequent Events, the Registrant has entered into an Agreement
and Plan of  Merger,  dated  March  11,  1999,  with APF  pursuant  to which the
Registrant would be merged with and into a subsidiary of APF in exchange for the
issuance of APF Shares.  The APF Shares are expected to be listed for trading on
the New York Stock Exchange concurrently with the consummation of the Merger. If
the Merger is approved by Limited Partners holding units greater than 50% of the
outstanding  units of the  Registrant,  the General  Partners of the  Registrant
would receive certain  benefits.  For instance,  following the Merger,  James M.
Seneff, Jr. and Robert A. Bourne, the individual General Partners, will continue
to serve as directors of APF, with Mr. Seneff serving as Chairman and Mr. Bourne
serving as Vice Chairman. As APF directors, they may also be entitled to receive
stock options under any stock option plan adopted by APF.




<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, 1998 and 1997

                  Statements  of Income for the years ended  December  31, 1998,
                  1997, and 1996

                  Statements of Partners'  Capital for the years ended  December
                  31, 1998, 1997, and 1996

                  Statements  of Cash  Flows for the years  ended  December  31,
                  1998, 1997, and 1996

                  Notes to Financial Statements

         2.  Financial Statement Schedules

                  Schedule II - Valuation and Qualifying  Accounts for the years
                  ended December 31, 1998, 1997 and 1996

                  Schedule  III - Real Estate and  Accumulated  Depreciation  at
                  December 31, 1998

                  Notes  to  Schedule   III  -  Real   Estate  and   Accumulated
                  Depreciation at December 31, 1998

                  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.)


<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, 1998 through December 31, 1998.


<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, 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.
<TABLE>
<CAPTION>

              Signature                                    Title                                   Date
<S> <C>0
/s/ Robert A. Bourne                       President,   Treasurer  and  Director              March 27, 1999
---------------------------
Robert A. Bourne                           (Principal  Financial and  Accounting
                                           Officer)

/s/ James M. Seneff, Jr.                   Chief Executive  Officer and Director              March 27, 1999
---------------------------
James M. Seneff, Jr.                       (Principal Executive Officer)

</TABLE>

<PAGE>







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

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                  Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>


                                                              Additions                            Deductions
                                                    -------------------------------       -----------------------------
                                                                                                            Collected
                                                                                                            or Deter-
                                    Balance at       Charged to       Charged to            Deemed       mined to         Balance
                                    Beginning        Costs and          Other             Uncollec-       be Col-         at End
   Year          Description         of Year          Expenses         Accounts             tible        lectible         of Year
  --------     ----------------    -------------    -------------    --------------       ------------  ------------    -----------
<S> <C>
   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
                                   =============    =============    ==============       ============  ============    ===========

  1998         Allowance for
                   doubtful
                   accounts (a)        $295,580           $  --          $ 26,370   (b)      $ 3,303        $60,006        $258,641
                                   =============    =============    ==============       ============  ============    ===========
</TABLE>


         (a)  Deducted from receivables on the balance sheet.

         (b) Reduction of rental and other income.




<PAGE>
<TABLE>
<CAPTION>


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

                                             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                                              December 31, 1998
<S> <C>

                                                                                      Costs Capitalized      
                                                                                        Subsequent to        
                                                                    Initial Cost         Acquisition         
                                                       ---------------------------- -----------------------  
                                         Encum-                       Buildings and  Improve-      Carrying  
                                         brances            Land      Improvements     ments        Costs    
                                       -----------     -------------  -----------   -----------    --------  

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 Restaurant:
       Miami, Florida                      -                174,336            -            -         -     

     Denny's Restaurants:
       Marion, Ohio                        -                135,407      334,665            -         -     
       Dundee, Michigan                    -                251,650            -      372,278         -     

     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            -            -         -     

     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 Restaurant:
       Edgewood, Maryland                  -                440,355            -      523,478         -     



     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 Restaurants:
       Corpus Christi, Texas               -                204,287            -      460,803         -     
       Maywood, Illinois (i)               -                310,966            -      443,472         -     
       Palm Bay, Florida                   -                469,927      365,128      310,676         -     
                                                       ------------  -----------  -----------  --------  ---
  
                                                         $7,244,512   $7,386,772   $4,599,784         -    $
                                                       ============  ===========  ===========  ========  ===

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 (j)              -               $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 (k)                -               $171,061            -      $99,128         -     
                                                       ============  ===========  ===========  ========  ===

Property in Which the Partner-
  ship has a 53% Interest as
  Tenants-in-Common and
  has Invested in Under an
  Operating Lease:

    Golden Corral Family
     Steakhouse Restaurant:
      Clinton, North Carolina               -              $138,382     $676,588            -         -     
                                                       ============  ===========  ===========  ========  ===

Property of Joint Venture in Which
  the Partnership has a 35.71%
  Interest and has Invested in Under
  an Operating Lease:
 
    IHOP Restaurant:
      Warren, Michigan                     -               $507,965     $889,080            -         -     
                                                       ============  ===========  ===========  ========  ===

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         -     
                                                       ============  ===========  ===========  ========



         Gross Amount at Which                                                Life on Which        
      Carried at Close of Period (c)                                          Depreciation in        
----------------------------------------               Date                    Latest Income                
             Buildings and              Accumulated   of Con-       Date       Statement is  
   Land      Improvements    Total      Depreciation struction   Acquired        Computed    
------------ ------------ ------------  -----------  ---------   ---------    ---------------  
                                                                                            
 $287,769      $567,785      $855,554     $156,806    1988         07/88            (b)             
  187,928       657,931       845,859      171,007    1989         11/88            (b)             
                                                                                                
                                                                                                
  504,169       522,025     1,026,194       34,850    1996         12/96            (b)             
                                                                                                
                                                                                                
  120,210       279,689       399,899       93,460    1988         12/88            (b)             
  169,951       281,686       451,637       94,153    1988         12/88            (b)             
                                                                                                
                                                                                                
  174,336             -       174,336           (g)    -           06/94            (g)             
                                                                                                
                                                                                                
  135,407       334,665       470,072       66,711    1989         10/88            (h)             
  251,650       372,278       623,928      126,162    1988         10/88            (b)             
                                                                                                
                                                                                                
                                                                                                
  107,560       586,375       693,935      205,232    1988         06/88            (b)             
  161,616       650,934       812,550      224,211    1988         08/88            (b)             
                                                                                                
                                                                                                
  352,957       368,702       721,659      120,854    1989         11/88            (b)             
                                                                                                
                                                                                                
   26,510       231,874       258,384       79,547    1985         09/88            (b)             
   40,444       232,823       273,267       79,872    1981         09/88            (b)             
    8,826       178,570       187,396       61,259    1981         09/88            (b)             
   63,708       184,279       247,987       63,219    1974         09/88            (b)             
  191,737            (f)      191,737            -    1986         01/89            (d)             
                                                                                                
                                                                                                
  202,438       428,406       630,844      143,155    1988         12/88            (b)             
  292,407       465,321       757,728      155,532    1988         12/88            (b)             
  312,574       452,601       765,175      151,282    1988         12/88            (b)             
  363,432       426,123       789,555      142,431    1988         12/88            (b)             
  316,697       894,659     1,211,356      283,309    1989         02/89            (b)             
                                                                                                
                                                                                                
  440,355       523,478       963,833      172,312    1989         10/88            (b)             
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
  192,813       462,793       655,606      156,836    1983         10/88            (b)             
  346,627       502,117       848,744      168,768    1988         12/88            (b)             
  530,456       432,958       963,414      144,407    1984         12/88            (b)             
  476,755       368,405       845,160      122,877    1987         12/88            (b)             
                                                                                                
                                                                                                
  204,287       460,803       665,090      155,838    1988         10/88            (b)             
  310,966       443,472       754,438      146,189    1988         09/88            (b)             
  469,927       675,804     1,145,731      224,330    1989         12/88            (b)             
---------  ------------  ------------  -----------                                              
                                                                                                
$7,244,512  $11,986,556   $19,231,068   $3,744,609                                              
========== ============  ============  ===========                                              
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
 $295,987      $780,451    $1,076,438     $264,486    1988         11/88            (b)             
=========  ============  ============  ===========                                              
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
 $271,350      $750,985    $1,022,335     $245,306    1988         12/88            (b)             
=========  ============  ============  ===========                                              
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
 $183,229      $192,857      $376,086      $57,911    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      $66,273    1996         01/96            (b)             
=========  ============  ============  ===========                                              
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
 $507,965      $889,080    $1,397,045       $8,769    1998         09/98            (b)             
=========  ============  ============  ===========                                              
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
        -            (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>

<PAGE>

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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 1998



         (a)      Transactions  in  real  estate  and  accumulated  depreciation
                  during 1998, 1997 and 1996, are summarized as follows:
<TABLE>
<CAPTION>

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

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

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

                       Balance, December 31, 1997                           22,012,766         3,844,432
                       Dispositions                                         (2,781,698 )        (525,304  )
                       Depreciation expense                                         --           425,481
                                                                        ---------------    ---------------

                       Balance, December 31, 1998                         $ 19,231,068       $ 3,744,609
                                                                        ===============    ===============

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

                       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
                       Depreciation expense                                         --            26,015
                                                                        ---------------    ---------------

                       Balance, December 31, 1998                         $  1,076,438        $  264,486
                                                                        ===============    ===============

</TABLE>


<PAGE>


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

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

                                December 31, 1998
<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, 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                             1,022,335           225,296
                       Depreciation expense                                          --
                                                                        ---------------    --------------

                       Balance, December 31, 1998 (j)                       $ 1,022,335        $  245,306
                                                                        ===============    ==============

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

                       Balance, December 31, 1995                            $  376,086        $   38,624
                       Depreciation expense                                          --
                                                                        ---------------    --------------

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

                       Balance, December 31, 1997                               376,086            51,482
                       Depreciation expense                                          --
                                                                        ---------------    --------------

                       Balance, December 31, 1998                            $  376,086        $   57,911
                                                                        ===============    ==============


</TABLE>



<PAGE>


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

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

                                December 31, 1998
<TABLE>
<CAPTION>

                                                                                          Accumulated
                                                                             Cost         Depreciation
                                                                        --------------    ---------------
<S> <C>
               Property of Joint Venture in Which
                  the  Partnership  has a 35.71%
                  Interest and has Invested in
                  Under an Operating lease:

                       Balance, December 31, 1997                              $    --            $    --
                       Acquisition                                           1,397,045                 --
                       Depreciation expense                                         --              8,769
                                                                        --------------    ---------------

                       Balance, December 31, 1998                          $ 1,397,045          $   8,769
                                                                        ==============    ===============

               Property of Joint  Venture in Which
                  the  Partnership  has a 96.1%
                  Interest and has Invested in
                  Under an Operating lease:

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

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

                       Balance, December 31, 1997                              484,362
                       Depreciation expense (d)                                     --                  --
                                                                        --------------    ---------------

                       Balance, December 31, 1998                           $  484,362            $    --
                                                                        ==============    ===============

</TABLE>




<PAGE>


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

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

                                December 31, 1998
<TABLE>
<CAPTION>

                                                                                            Accumulated
                                                                            Cost           Depreciation
                                                                        --------------    ---------------
<S> <C>
               Property of Joint Venture in Which
                  the  Partnership  has a 68.87%
                  Interest and has Invested in
                  Under an Operating lease:

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

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

                       Balance, December 31, 1997                              270,189
                       Depreciation expense (d)                                     --                   --
                                                                        --------------    ---------------

                       Balance, December 31, 1998 (k)                      $  270,189             $    --
                                                                        ==============    ===============

               Property of Joint  Venture  in Which
                  the  Partnership  has a 53%
                  Interest and has Invested in
                  Under an Operating lease:

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

                       Balance, December 31, 1997                             814,970              43,720
                       Depreciation expense                                        --              22,553
                                                                        --------------    ---------------

                       Balance, December 31, 1998                          $  814,970           $  66,273
                                                                        ==============    ===============
</TABLE>



<PAGE>


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

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

                                December 31, 1998

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

         (c)        As  of  December  31,  1998,   the  aggregate  cost  of  the
                    Properties  owned by the  Partnership and joint ventures for
                    federal income tax purposes was  $20,503,529 and $6,360,167,
                    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 Titusville, Florida, was written down to net
                    realizable value due to an anticipated  impairment in value.
                    The  Partnership  recognized  the  impairment  by  recording
                    allowances  for loss on land and  building  in the amount of
                    $125,251  and $147,039 at December 31, 1998 and December 31,
                    1997,  respectively.  During  1997,  the  operator  of  this
                    Property  vacated the  Property and ceased  operations.  The
                    impairment  at  December  31,  1998,  represents  difference
                    between the Property's  carrying value and the estimated net
                    realizable  value of the Property.  The cost of the Property
                    presented on this  schedule is the gross amount at which the
                    Property  was carried at December 31,  1998,  excluding  the
                    allowance for loss on land and building.

         (k)        For financial reporting purposes,  the undepreciated cost of
                    the Property in Kingsville,  Texas,  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
                    $316,113 at December 31, 1998.  The tenant of this  Property
                    experienced  financial  difficulties  and ceased  payment of
                    rents  under  the  terms  of  their  lease  agreement.   The
                    impairment at December 31, 1998,  represents  the difference
                    between the Property's  carrying value at December 31, 1998,
                    and the estimated net realizable value of the Property.  The
                    cost of the Property presented on this schedule is the gross
                    amount at which the  Property  was carried at  December  31,
                    1998, excluding the allowance for loss on land and building.



<PAGE>






                                    EXHIBITS


<PAGE>







                                  EXHIBIT INDEX


Exhibit Number

      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.)