<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-K/A

(Mark One)

[ X ]    ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934

                   For the fiscal year ended December 31, 1997

                                       OR

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

        For the Transition period from                to 
                                       --------------    ----------------

                         Commission file number 333-9371

                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
              ---------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                           38-3304096
  ---------------------------                              ------------------
  (State or other jurisdiction                              (I.R.S. Employer
 of incorporation or organization)                         Identification No.)

<TABLE>
<S><C>
    24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544
     ---------------------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code:  (734) 994-5505
Securities registered under Section 12(b) of the Exchange Act:                          None

Securities registered under Section 12(g) of the Exchange Act:                          None
                                                                                     --------------
                                                                                    (Title of Class)

</TABLE>

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 for 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.
         [ X ] Yes    [   ] 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]

At December 31, 1997 subscriptions for 15,391.986 units of limited partnership
interest (the "Units") had been accepted, representing an aggregate amount of
$15,391,986. The aggregate sales price does not reflect market value and it
reflects only the price at which the Units were offered to the public.
Currently, there is no market for the Units and no market is expected to
develop.

                       DOCUMENTS INCORPORATED BY REFERENCE
A portion of the Prospectus of the Registrant dated December 23, 1996, as
supplemented and filed pursuant to Rule 424(b) under the Securities Act of 1933,
as amended, S.E.C. File No. 333-9371, and is incorporated by reference in Parts
I and III of this Annual Report on Form 10-K.



                                       1


<PAGE>   2




                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
               ITEM 14-EXHIBITS, FINANCIAL STATEMENTS AND REPORTS


         Due to information being transferred between computer applications, the
balance sheets submitted March 31, 1998 for the year ended December 31, 1997
were misstated.

         As required, we are submitting the entire financial statements and
auditors' reports including the corrected balance sheets.


                                       2
<PAGE>   3



                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV                                                             PAGE
<S>                                                                                                   <C>

REPORT OF INDEPENDENT ACCOUNTANTS........................................................................4

FINANCIAL STATEMENTS:

        Balance Sheet ...................................................................................5

        Statement of Operations..........................................................................6

        Statement of Changes in Partners' Capital........................................................7

        Statement of Cash Flows..........................................................................8

        Notes to Financial Statements....................................................................9


<CAPTION>


CAPTEC FRANCHISE CAPITAL CORPORATION IV                                                               PAGE


REPORT OF INDEPENDENT ACCOUNTANTS.......................................................................15

FINANCIAL STATEMENTS:

        Balance Sheet ..................................................................................16

        Statement of Operations.........................................................................17

        Statement of Changes in Stockholders' Equity....................................................18

        Statement of Cash Flows.........................................................................19

        Notes to Financial Statements...................................................................20
</TABLE>



                                       3




<PAGE>   4



REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Captec Franchise Capital Corporation IV
Managing General Partner of
Captec Franchise Capital Partners L.P. IV:

We have audited the accompanying balance sheet of Captec Franchise Capital
Partners L.P. IV as of December 31, 1997 and 1996 and the related statements of
operations, changes in partners' capital, and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Captec Franchise Capital
Partners L.P. IV as of December 31, 1997 and 1996, and the results of its
operations, changes in partners' capital and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.



/s/ Coopers & Lybrand

Detroit, Michigan
March 14, 1998


                                       4

<PAGE>   5

                           CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                                         BALANCE SHEET
                                   December 31, 1997 and 1996


<TABLE>
<CAPTION>

                                                                         1997              1996
                                                                         ----              ----
<S>                                                                   <C>                 <C>
                                             ASSETS

Cash and cash equivalents                                             $ 5,008,194          $   -
Investment in property under leases:
   Operating leases, net                                                5,805,870              -
   Financing leases, net                                                2,838,663              -
Prepaid expenses                                                                -            339
Accounts receivable                                                         3,487              -
Unbilled rent                                                              25,983              -
Due from related parties                                                   49,381              -
                                                                     ------------          -----

    Total assets                                                     $ 13,731,578          $ 339
                                                                     ============          =====


                                LIABILITIES & PARTNERS' CAPITAL

Liabilities:
   Accounts payable                                                  $     49,375          $   -
   Due to related parties                                                 129,683              -
   Overdraft                                                                    -             39
                                                                                -              -
                                                                     ------------          -----
 
    Total liabilities                                                     179,058             39
                                                                     ------------          -----
                                                                       
Partners' Capital:
Limited partners' capital accounts                                     13,547,060            100
General partners' capital accounts                                          5,460            200
                                                                     ------------          -----
                                                                        
    Total partners' capital                                            13,552,520            300
                                                                     ------------          -----

    Total liabilities & partners' capital                            $ 13,731,578          $ 339
                                                                     ============          =====
</TABLE>



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


                                        5

<PAGE>   6

                            CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                                     STATEMENT OF OPERATIONS
                         for the years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
  
                                                                               1997        1996
                                                                               ----        ----
<S>                                                                         <C>              <C> 
Operating revenue:
   Rental income                                                            $ 295,367        $ -
   Finance income                                                             201,314          -
                                                                            ---------        ---

             Total operating revenue                                          496,681          -
                                                                            ---------        ---
                                                                           
Operating costs and expenses:
   Depreciation                                                                32,988          -
   General and administrative                                                  31,296          -
                                                                            ---------        ---                                   

             Total operating costs and expenses                                64,284          -
                                                                            ---------        ---

             Income from operations                                           432,397          -
                                                                            ---------        ---

Other income:
   Interest income                                                             92,048          -
   Other                                                                        1,598          -
                                                                            ---------        ---

             Total other income                                                93,646          -
                                                                            ---------        ---

Net income                                                                    526,043          -

Net income allocable to general partners                                        5,260          -
                                                                            ---------          -

Net income allocable to limited partners                                    $ 520,783        $ -
                                                                            =========        ===

Net income per limited partnership unit                                     $   74.10        $ -
                                                                            =========        ===

Weighted average number of limited partnership
   units outstanding                                                            7,028          -
                                                                             ========        ===
</TABLE>



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


                                       6
<PAGE>   7

                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                    STATEMENT OF CHANGES IN PARTNERS' CAPITAL
                 for the years ended December 31, 1997 and 1996


<TABLE>
<CAPTION>
                                                      Limited        Limited       General        Total
                                                     Partners'      Partners'     Partners'     Partners'
                                                       Units        Accounts      Accounts       Capital
                                                      -------     -----------    ---------       -------       

<S>                                                   <C>         <C>             <C>          <C>
Balance July 30, 1996                                       -     $        100    $    200     $        300

Net income                                                  -                -           -                -
                                                      -------     ------------    --------     ------------

Balance, December 31, 1996                                  -              100         200              300

Issuance of 15,392 limited partnership
units, net                                             15,392       13,385,077                   13,385,077

Distributions - ($23.32 per unit)                          -         (358,900)          -         (358,900)

Net income                                                 -           520,783       5,260          526,043
                                                      -------     ------------    --------     ------------

Balance, December 31, 1997                             15,392     $ 13,547,060    $  5,460     $ 13,552,520
                                                      =======     ============    ========     ============
</TABLE>



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


                                       7
<PAGE>   8

                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                             STATEMENT OF CASH FLOWS
                  for the year ended December 31, 1997 and 1996

<TABLE>
<CAPTION>


                                                                                 1997            1996
                                                                                 ----            ----
<S>                                                                           <C>                <C>
Cash flows from operating activities:
   Net Income                                                                 $ 526,043          $   -
   Adjustments to net income:
        Depreciation                                                             32,987              -
        Decrease (increase) in prepaids                                             339           (339)
        Increase in unbilled rent                                               (25,983)             -
        Increase in accounts receivable                                          (3,487)             -
        Increase in  accounts payable                                            49,336             39
                                                                            -----------              -

Net cash provided by operating activities                                       579,235           (300)
                                                                            -----------          -----

Cash flows from investing activities:
   Purchase of real estate for operating leases                              (5,838,857)             -
   Purchase of equipment for financing leases                                (3,051,499)             -
   Reduction of net investment in financing leases                              212,836              -
                                                                            -----------              -

Net cash used in investing activities                                        (8,677,520)             -
                                                                            -----------          -----

Cash flows from financing activities:
   (Increase) in due from related parties                                       (49,381)             -
   Increase in due to related parties                                           129,683              -
   Issuance of limited partnership units                                     15,380,902              -
   Offering costs                                                            (1,995,825)             -
   Distributions to limited partners                                           (358,900)             -
                                                                            -----------              -

Net cash provided by financing activities                                    13,106,479              -
                                                                            -----------          -----

Net (decrease) increase in cash and cash equivalents                          5,008,194           (300)

Cash and cash equivalents, beginning of period                                       -             300
                                                                            -----------          -----

Cash and cash equivalents, end of period                                    $ 5,008,194          $   -
                                                                            ===========          =====

</TABLE>

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


                                       8
<PAGE>   9




                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                          NOTES TO FINANCIAL STATEMENTS


1.     THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:

       Captec Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
       limited partnership, was organized on July 23, 1996 for the purpose of
       acquiring income-producing commercial real properties and equipment
       leased on a "triple net" or "double net" basis, primarily to operators of
       national and regional chain franchised fast food and family style
       restaurants, as well as other national and regional retail chains.

       The general partners of the Partnership are Captec Franchise Capital
       Corporation IV (the "Corporation"), a wholly owned subsidiary of Captec
       Financial Group, Inc. ("Captec"), and Patrick L. Beach, an individual,
       hereinafter collectively referred to as the Sponsor. Patrick L. Beach is
       also the Chairman of the Board of Directors, President and Chief
       Executive Officer of the Corporation and Captec. The General Partners
       have each contributed $100 in cash to the Partnership as a capital
       contribution.

       The Partnership commenced a public offering of limited partnership
       interests ("Units") on December 31, 1996. A minimum of 2,000 Units and a
       maximum of 30,000 Units, priced at $1,000 per Unit, were offered on a
       "best efforts, part or none" basis. The Partnership broke impound on
       March 5, 1997, at which time funds totaling $2,015,500 were released from
       escrow and the Partnership immediately commenced operations. At December
       31, 1997, the Partnership had accepted subscriptions for 15,392 Units,
       and funds totaling $15,380,902.

       The initial Limited Partner of the Partnership was Patrick L. Beach. As
       of December 31, 1996, Mr. Beach had contributed $100 to the capital of
       the Partnership and had received 0.1 Unit. During 1997, upon admission to
       the Partnership of other Limited Partners, the initial Limited Partner
       may withdraw from the Partnership, and his 0.1 Unit shall be redeemed for
       $100.

       Allocation of profits, losses and cash distributions from operations and
       cash distributions from sale or refinancing are made pursuant to the
       terms of the Partnership Agreement. Profits and losses from operations
       are allocated among the limited partners based upon the number of Units
       owned. In no event will the General Partners be allocated less than one
       percent of profits and losses in any year.


                                       9
<PAGE>   10



                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                          NOTES TO FINANCIAL STATEMENTS

       Following is a summary of the Partnership's significant accounting
policies:

       A.  CASH EQUIVALENTS: The Partnership considers all highly liquid
           investments purchased with an original maturity of three months or
           less to be cash equivalents.

1.     THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES, CONTINUED:

       B.  RENTAL INCOME FROM OPERATING LEASES: The Partnership's operating
           leases have scheduled rent increases which occur at various dates
           throughout the lease terms. The Partnership recognizes the total
           rent, as stipulated by the lease agreement, as income on a
           straight-line basis over the term of each lease. To the extent rental
           income on the straight-line basis exceeds rents billable per the
           lease agreement, an amount is recorded as unbilled rent.

       C.  LAND AND BUILDING SUBJECT TO OPERATING LEASES: Land and buildings
           subject to operating leases are stated at cost less accumulated
           depreciation. Buildings are depreciated on the straight-line method
           over their estimated useful lives (40 years).

       D.  NET INVESTMENT IN FINANCING LEASES: Leases classified as financing
           leases are stated as the sum of the minimum lease payments plus the
           unguaranteed residual value accruing to the benefit of the lessor,
           less unearned income. Unearned income is amortized to income over the
           lease term so as to produce a constant periodic rate of return on the
           net investment in the lease.

       E.  NET INCOME PER LIMITED PARTNERSHIP INTEREST: Net income per limited
           partnership interest is calculated using the weighted average number
           of limited partnership units outstanding during the period and the
           limited partners' allocable share of the net income.

       F.  INCOME TAXES: No provision for income taxes is included in the
           accompanying financial statements, as the Partnership's results of
           operations are passed through to the partners for inclusion in their
           respective income tax returns.

       G.  ESTIMATES: The preparation of financial statements in conformity with
           generally accepted accounting principles requires management to make
           estimates and assumptions that affect the reported amounts of assets
           and liabilities and disclosure of contingent assets and liabilities
           at the date of the financial statements and the reported amounts of
           revenues and expenses during the reporting period. Actual results
           could differ from those estimates.


                                       10
<PAGE>   11

                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                          NOTES TO FINANCIAL STATEMENTS

2.   DISTRIBUTIONS:

     Cash flows of the Partnership are allocated ninety-nine percent (99%) to
     the limited partners and one percent (1%) to the Sponsor, except that the
     Sponsor's share is subordinated to a ten percent (10%) per annum
     cumulative, non-compounded preferred return to the limited partners. Net
     sale or refinancing proceeds of the Partnership will be allocated ninety
     percent (90%) to the limited partners and ten percent (10%) to the Sponsor,
     except that the Sponsor's share will be subordinated to a ten and one-half
     percent (10.5%) per annum cumulative, non-compounded return on their
     Adjusted Investment plus return of the original contributions to the
     limited partners.

     Distributions of cash flow from operations are paid quarterly in arrears.



3.   RELATED PARTY TRANSACTIONS AND AGREEMENTS:

     Organization and offering expenses, excluding selling commissions, are paid
     initially by the General Partners and/or their affiliates and are
     reimbursed by the Partnership in an amount equal to up to three percent
     (3%) of the gross proceeds of the offering (less any amounts paid directly
     by the Partnership). In addition, the Sponsor and/or its affiliates are
     paid a non-accountable expense allowance by the Partnership in an amount
     equal to two percent (2%) of the gross proceeds of the offering. The
     Sponsor and/or its affiliates were reimbursed $710,310 during the twelve
     month period ended December 31, 1997. These costs were treated as capital
     issuance costs and have been netted against the limited partners' capital
     accounts.

     The Partnership paid to Participating Dealers, including affiliates of the
     general partners, selling commissions in an amount equal to eight percent
     (8%) of the purchase price of all Units placed by them directly. An
     additional one percent (1%) of the purchase price was paid to Participating
     Dealers on all Units placed by them until the minimum number of Units were
     sold (2,015.5). The additional one percent (1%) was paid out of the
     non-accountable expense allowance. There were $1,223,946 of selling
     commissions paid or incurred during the twelve month period ended December
     31, 1997. These costs were treated as capital issuance costs and have been
     netted against the limited partners' capital accounts. The Sponsor has also
     guaranteed payment of organization and offering expenses which exceed 13%,
     including selling commissions, of the gross proceeds of the offering.


                                       11
<PAGE>   12



                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                          NOTES TO FINANCIAL STATEMENTS


     An acquisition fee is charged, not to exceed the lesser of: (i) four
     percent (4%) of gross proceeds plus an additional .0677% for each 1% of
     indebtedness incurred in acquiring properties and/or equipment but in no
     event will acquisition fees exceed five percent (5%) of the aggregate
     purchase prices of properties and equipment; or (ii) compensation
     customarily charged in arm's length transactions by others rendering
     similar services. The Partnership paid the Sponsor $341,936 in acquisition
     fees during the twelve month period ended December 31, 1997, and expects to
     pay an additional $68,351 once the Partnership has obtained the maximum
     leverage. Of this amount $117,365 was capitalized into net investment in
     financing leases and $224,571 was capitalized into land and building
     subject to operating leases.

     The Partnership has entered into an asset management agreement with the
     Sponsor and its affiliates, whereby the Sponsor provides various property
     and equipment management services for the Partnership.

     A subordinated asset management fee is charged, in an amount equal to one
     percent (1%) of the gross rental revenues derived from the properties and
     equipment. Payment of the asset management fee is subordinated to receipt
     by the limited partners of annual distributions equal to a cumulative,
     non-compounded return of ten percent (10%) per annum on their Adjusted
     Investment. There was $6,297 paid or incurred to the General Partners
     during the twelve month period ended December 31, 1997.

3.   RELATED PARTY TRANSACTIONS AND AGREEMENTS, CONTINUED:

     An equipment liquidation fee limited to the lesser of three percent (3%) of
     the sales price or customary fees for similar services will be paid in
     conjunction with asset liquidation services. There were no equipment
     liquidations during the twelve month period ended December 31, 1997.

     The Partnership Agreement provides for the Sponsor to receive a real estate
     liquidation fee limited to the lesser of three percent (3%) of the gross
     sales price or fifty percent (50%) of the customary real estate commissions
     in the event of a real estate liquidation. This fee is payable only after
     the limited partners have received distributions equal to a cumulative,
     non-compounded return of ten and one-half percent (10.5%) per annum,
     cumulative non-compounded preferred return on their Adjusted Investment
     capital plus distributions of sale or refinancing proceeds equal to 100% of
     their original contributions. There were no real estate liquidations during
     the twelve month period ended December 31, 1997.


                                       12

<PAGE>   13


                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                          NOTES TO FINANCIAL STATEMENTS


   The Partnership has agreed to indemnify the Sponsor and their affiliates
   against certain costs paid in settlement of claims which might be sustained
   by them in connection with the Partnership. Such indemnification is limited
   to the assets of the Partnership and not the limited partners.

4. LAND AND BUILDING SUBJECT TO OPERATING LEASES:

   The net investment in operating leases as of December 31, 1997 is comprised
   of the following:

<TABLE>
<CAPTION>
             <S>                                                                           <C>
             Land                                                                          $  2,676,582
             Building and improvements                                                        3,162,276
                                                                                           ------------
             Less accumulated depreciation                                                    5,838,858
                                                                                                (32,988)
                                                                                           ------------              
             Total                                                                         $  5,805,870
                                                                                           ============
</TABLE>

   The following is a schedule of future minimum lease payments to be
   received on the operating leases as of December 31, 1997.
<TABLE>
            <S>                                                                             <C>
             1998                                                                           $   607,570
             1999                                                                               607,570
             2000                                                                               611,235
             2001                                                                               616,366
             2002                                                                               632,662
             Thereafter                                                                       6,180,051
                                                                                           ------------

             Total                                                                         $  9,255,454
                                                                                           ============
</TABLE>


                                       13
<PAGE>   14

                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                          NOTES TO FINANCIAL STATEMENTS

5.   NET INVESTMENT IN FINANCING LEASES:

     The net investment in financing leases as of December 31, 1997 is 
     comprised of the following:
<TABLE>
             <S>                                                                          <C>
             Minimum lease payments to be received                                         $  3,714,592
             Estimated residual value                                                            81,372
                                                                                           ------------

             Gross investment in financing leases                                             3,795,964
             Less unearned income                                                             (957,301)

             Net investment in financing leases                                            $  2,838,663
                                                                                           ============
</TABLE>

  
     The following is a schedule of future minimum lease payments to be
     received on the financing leases as of December 31, 1997:
<TABLE>
             <S>                                                                           <C>
             1998                                                                          $    640,331
             1999                                                                               639,982
             2000                                                                               639,982
             2001                                                                               639,982
             2002                                                                               514,635
             Thereafter                                                                         639,680
                                                                                           ------------

             Total                                                                         $  3,714,592
                                                                                           ============
</TABLE>

6.   SUBSEQUENT EVENT:

     Based upon the results of operations for the three month period ended
     December 31, 1997, the Partnership will distribute $350,000, of which
     $284,706 was distributed to its limited partners on January 15, 1998 and
     the remaining $65,294 will be distributed to those limited partners who
     elected to receive distributions on a monthly basis on February 13, 1998
     and March 13, 1998.


                                       14
<PAGE>   15




REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Captec Franchise Capital Corporation IV:


We have audited the accompanying balance sheet of Captec Franchise Capital
Corporation IV as of December 31, 1997 and 1996, and the related statements of
operations, changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Captec Franchise Capital
Corporation IV as of December 31, 1997 and 1996, and the results of its
operations, changes in stockholders' equity and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.




/s/ Coopers & Lybrand

Detroit, Michigan
March 14, 1998






                                       15
<PAGE>   16

                          CAPTEC FRANCHISE CAPITAL CORPORATION IV
                                       BALANCE SHEET
                                 December 31, 1997 and 1996


<TABLE>
<CAPTION>
 
    
                                                                          1997         1996
                                                                          ----         ----  
<S>                                                                   <C>            <C>
                                           ASSETS

Cash                                                                    $ 1,748      $ 1,407
Investment in partnership                                                 2,730          100
Reimbursable organizational & offering expenses, net                     15,594       29,048
Receivable from affiliate                                                19,766        1,697
Other assets                                                             15,005       16,038
                                                                        -------      -------

Total assets                                                           $ 54,843     $ 48,290
                                                                       =========    ========


                             LIABILITIES & STOCKHOLDERS' EQUITY

Total liabilities:
   Accounts payable                                                    $ 51,213     $ 37,022
   Payable to affiliates                                                      -       10,268
   Income tax payable                                                       894           -
                                                                       --------     --------

Total liabilities                                                        52,107       47,290
                                                                       --------     --------
Stockholders' equity:
Common stock, no par value; 60,000 shares authorized,
   1,000 shares issued and outstanding                                        -            -
Paid-in capital                                                           1,000        1,000
Retained earnings                                                         1,736            -
                                                                       --------     --------
                                                                         
Total stockholders' equity                                                2,736        1,000
                                                                       --------     --------
 
Total liabilities & stockholders' equity                               $ 54,843     $ 48,290
                                                                       ========     ========
</TABLE>



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


                                       16
<PAGE>   17


                     CAPTEC FRANCHISE CAPITAL CORPORATION IV
                             STATEMENT OF OPERATIONS
                 for the years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>

                                                                                   1997         1996
                                                                                   ----         ----
<S>                                                                             <C>             <C>

Investment income from partnership                                              $  2,630        $     -
                                                                                --------        -------

                Net income before taxes                                            2,630              -

Income tax provision                                                                 894              -
                                                                                --------        -------

                Net income                                                      $  1,736        $     -
                                                                                ========        =======

</TABLE>


     The accompanying notes are an integral part of the financial statements





                                       17
<PAGE>   18
                      CAPTEC FRANCHISE CAPITAL CORPORATION IV
                    STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                   for the years ended December 31, 1997 and 1996



<TABLE>
<CAPTION>


                                          COMMON     PAID-IN    RETAINED
                                          STOCK      CAPITAL    EARNINGS      TOTAL
                                          -----      -------    --------      -----  
<S>                                       <C>        <C>         <C>         <C>
Balance, January 1, 1996                  $  -       $ 1,000     $     -     $ 1,000
                                            
Net Income                                   -             -           -           -
                                          ----       -------     -------     -------
                                            
Balance, December 31, 1996                   -         1,000           -       1,000
                                            
Net income                                   -             -       1,736       1,736
                                          ----       -------     -------     -------
                                            
Balance, December 31, 1997                $  -       $ 1,000     $ 1,736     $ 2,736
                                          ====       =======     =======     =======
</TABLE>                                    
                                            







                                       18
<PAGE>   19
                     CAPTEC FRANCHISE CAPITAL CORPORATION IV
                             STATEMENT OF CASH FLOWS
                 for the years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>

                                                                                        1997        1996
                                                                                        ----        ----  
<S>                                                                                     <C>        <C>
Cash flows from operating activities:
   Net income                                                                          $ 1,736     $     -
   Adjustments to net income:
      Undistributed income from partnership                                             (2,630)       (100)
      Increase in income tax payable                                                       894           -
      Decrease (increase)  in other assets                                               1,033     (16,038)
      Increase in accounts payable                                                      14,191      37,022
                                                                                       -------     -------

Net cash provided by operating activities                                               15,224      20,884
                                                                                       -------     -------


Cash flows from financing activities:
   Issuance of common stock                                                                  -       1,000
   Decrease in reimbursable offering expense and payable to affiliate, net             (14,883)    (20,477)
                                                                                       -------     -------


Net cash provided by financing activities                                              (14,883)    (19,477)
                                                                                       -------     -------

Net increase (decrease) in cash                                                            341       1,407

Cash, beginning of year                                                                  1,407           -
                                                                                       -------     -------

Cash, end of period                                                                    $ 1,748     $ 1,407
                                                                                       ========    =======
</TABLE>




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


                                       19
<PAGE>   20


                     CAPTEC FRANCHISE CAPITAL CORPORATION IV
                          NOTES TO FINANCIAL STATEMENTS

1.     ORGANIZATION:

       Captec Franchise Capital Corporation IV (the "Corporation") is a Michigan
       corporation organized on July 22, 1996. The Corporation was formed for
       the purpose of serving as the managing general partner of Captec
       Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
       limited partnership.

       The Corporation is a wholly owned subsidiary of Captec Financial Group,
       Inc. ("Captec"). Captec has paid $1,000 in cash to the Corporation for
       the purchase of 1,000 shares of common stock of the Corporation. As a
       general partner of the Partnership, the Corporation has contributed $100
       to the capital of the Partnership. Patrick L. Beach is also a general
       partner of the Partnership and is the Chairman of the Board of Directors,
       President and Chief Executive Officer of the Corporation and Captec. Each
       general partner has a 0.5 percent share in the Partnership's net income
       or loss.

       The Partnership undertook a public offering of limited partnership
       interests ("Units") in 1997. A minimum of 2,000 Units and a maximum of
       30,000 Units, priced at $1,000 per Unit, will be offered on a "best
       efforts, part or none" basis. As of December 31, 1997, the Partnership
       had accepted subscriptions for 15,380.902 Units and funds totaling
       $15,380,902.

       Affiliates of the Corporation are expected to provide various services to
       the Partnership and will be paid certain fees for such services as
       specified in the Partnership Agreement.

       Following is a summary of the Corporation's significant accounting
       principles:

       A.     INCOME TAXES: The Corporation reports its income for federal
              income tax purposes in the consolidated tax return of Captec.
              Income taxes are allocated by Captec to the Corporation on the
              separate return basis. The Corporation's income tax expense
              reflected in the statement of operations and that computed by
              applying the statutory federal income tax rate are approximately
              equal. Deferred income taxes, for financial reporting purposes,
              are not material.

       B.     ESTIMATES: The preparation of financial statements in conformity
              with generally accepted accounting principles requires management
              to make estimates and assumptions that affect the reported amounts
              of assets and liabilities and disclosure of contingent assets and
              liabilities at the date of the financial statements and the
              reported amounts of revenues and expenses during the reporting
              period. Actual results could differ from those estimates.

       C.     RECLASSIFICATIONS: Certain 1996 financial statement amounts have
              been reclassified to conform to the 1997 presentation.



                                       20
<PAGE>   21



                     CAPTEC FRANCHISE CAPITAL CORPORATION IV
                          NOTES TO FINANCIAL STATEMENTS


2.     OPERATIONS:

       The Corporation's only source of revenue in 1997 and 1996 was from its
       investment in the Partnership. See the accompanying financial statements
       of the Partnership.

3.     RELATED PARTY TRANSACTIONS:

       Organization and offering expenses related to the offering of Units are
       prepaid by the Corporation and reimbursed by the Partnership in an amount
       equal to up to three percent (3%) of the gross proceeds of the offering
       (less any amounts paid directly by the Partnership). The Corporation is
       also reimbursed by the Partnership for a non-accountable expense
       allowance in an amount equal to two percent (2%) of the gross proceeds of
       the offering. During 1997 the Corporation was reimbursed indirectly
       through payments made in the amount of $500,699 by LP IV to Captec on
       behalf of the Corporation.

       The Corporation receives advances from Captec in order to have sufficient
       funds for the prepayment of organization and offering and non-accountable
       expenses made on behalf of the Partnership. As the Corporation receives
       reimbursements of such prepaid expenses, the advances to Captec are
       repaid.




                                       21
<PAGE>   22



           Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

                                 By:   Captec Franchise Capital Corporation IV
                                       Managing General Partner of
                                       Captec Franchise Capital Partners L.P. IV


                                 By:   /s/ W. Ross Martin
                                       -----------------------------
                                       W. Ross Martin
                                       Chief Financial Officer and Sr. Vice
                                       President a duly authorized officer
                                      
                                 Date: June 23, 1998





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