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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K

(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, 2002

OR

|  |  |                                                                                   
|- |  | ----------------------------------------------------------------------------------
|o |  | 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
of incorporation or organization)                     |  | (I.R.S. Employer
Identification No.)
|                                                                                   |  |                                     
|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)                    

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.

Yes x No o

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]

Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Act). Yes
o No x

At December 31, 2002, subscriptions for 30,000 Units of limited partnership
interest (the Units) had been accepted, representing an aggregate amount of
$30,000,000. The aggregate sales price does not reflect market value and
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. At December 31, 2002, there were 29,341 Units issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference in Part III of this
Annual Report on Form 10-K:



|(1) |  | Portions of the Registrants Form 10-K for the fiscal year ended December
31, 1998; and
|--- |  | ---------------------------------------------------------------------------------------
|(2) |  | A portion of the Registrants Form 10-Q for the quarter ended March 31,
1999.          





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TABLE OF CONTENTS



|                                                                             |  |  |  |  |  |  |  | 
|---------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I                                                                      
|PART II                                                                     
|PART III                                                                    
|SIGNATURES                                                                  
|Certifications                                                              
|Report of Independent Accountants                                           
|Balance Sheets                                                              
|Statements of Operations                                                    
|Statements of Changes in Partners Capital                                  
|Statements of Cash Flows                                                    
|Notes to Financial Statements                                               
|SCHEDULE III PROPERTIES AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2002
|Certification Pursuant to Section 906                                       



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PART I

Item 1. Business

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 upon formation of the Partnership were Captec
Franchise Capital Corporation IV (the Corporation), a wholly-owned subsidiary
of Captec Financial Group, Inc. (Captec), an affiliate, and Patrick L. Beach,
the Chairman of the Board of Directors, President and Chief Executive Officer
of the Corporation and Captec. In August 1998, Captec Net Lease
Realty, Inc., (Captec Net Lease),
an affiliate, acquired the General Partnership interest of the Partnership. In
December 2001, Captec Net Lease Realty merged with and into Commercial
Net Lease Realty, Inc. (Commercial Net Lease). In connection with the
merger, Commercial Net Lease agreed to sell and assign its General Partnership
interest in the Partnership to GP4 Asset Acquisition, LLC, (GP 4 Asset
Acquisition) which is wholly-owned by Mr. Beach and is an affiliate of Captec.
The Limited Partners of the Partnership (the Limited Partners) have
consented to the transfer of the general partner interest. In accordance with
the terms of an agreement with Commercial Net Lease, immediately upon the
closing of the merger and until such time as the consent of the Partnerships
secured lender is obtained, GP4 Asset Acquisition has assumed all of the
General Partners obligations and liabilities prescribed under the terms of the
Partnership Agreement.

The Partnership commenced a public offering (the Offering) of up to
30,000 limited partnership Units, priced at $1,000 per Unit, registered under
the Securities Act of 1933, as amended, by means of a Registration Statement
filed on Form S-11 which was declared effective by the Securities and Exchange
Commission on December 23, 1996. The Partnership accepted subscriptions for the
minimum number of Units on March 5, 1997 and immediately commenced operations.
The Offering reached final funding in December 1998 having received
subscriptions for the entire 30,000 Units. Since 1999, 659 Units have been
repurchased by the Partnership pursuant to the terms of the Repurchase Plan set
forth in the Partnerships December 23, 1996 prospectus with respect to the
Offering. At December 31, 2002, the Partnership had 29,341 Units issued and
outstanding.

The principal investment objectives of the Partnership are: (i)
preservation and protection of capital; (ii) distribution of cash flow
generated by the Partnerships leases; (iii) capital appreciation of
Partnership properties; (iv) generation of increased income and protection
against inflation through escalation of base rents or participation in gross
revenues of tenants of Partnership properties; and (v) deferred taxation of
cash distributions to the Limited Partners.

The properties generally are leased on terms, which provide for a base
minimum annual rent with fixed increases on specific dates or indexation of
rent to indices such as the Consumer Price Index. The equipment is leased only
pursuant to leases under which the present value of non-cancellable rental
payments payable during the initial term of the lease is at least sufficient to
permit a lessor to recover the purchase price of the equipment.

The Partnership has no employees. The General Partner and its affiliates,
however, are permitted to perform services for the Partnership.

Item 2. Description of Properties

As of December 31, 2002, the Partnership had a portfolio of 21 properties
located in 10 states, with a cost basis of $31.9 million, 18 performing
equipment leases with an original investment of $6.2 million and one
repossessed equipment package related to a defaulted equipment contract. The
properties are leased to ten operators of restaurant concepts and four retail
operators.

As of December 31, 2002, operating leases to S&A Restaurants Corporation,
Kona Restaurant Group, Inc. and United Supermarkets, Inc. represented 13.86%,
12.32% and 10.19%, respectively, of the annualized rent from the total
portfolio. Equipment leases to Champps Americana, Inc. represented 10.19% of
the annualized rent from the total portfolio. Any performance failure under
these leases could materially adversely affect the Partnerships income and
financial position.

As of December 31, 2002, all of the properties owned by the Partnership
are occupied and the related leases are performing, and all of the
Partnerships investments
in equipment subject to financing leases are performing. The Partnership has
two properties for which rental payments have been delinquent approximately 90
days. The tenant is experiencing financial difficulties that may result in
store

2



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closure. The Partnership is closely monitoring and would aggressively
retenant the property should the tenant vacate. The General Partner does not
believe an impairment exists at this time.

As of
December 31, 2002, the Partnership had one impaired equipment lease
with a recorded investment of $15,000, net of a related allowance of $260,542.
The net investment in the impaired lease represents the estimated net proceeds
that the Partnership expects to receive on liquidating the equipment. Rental
payments on this lease are delinquent by more than 90 days, and income accrual
has been suspended by the Partnership. The tenant, a Dennys restaurant
franchisee, filed for Chapter 11 bankruptcy protection in September 2001 and
subsequently converted to a Chapter 7 filing in May 2002. The restaurant in
which the equipment is located is a leased facility. The landlord, who had been
operating the restaurant during the bankruptcy period, decided to
discontinue operation of
the restaurant in December 2002, at which time the Partnership recorded an
additional $196,000 allowance against this investment.

The following is a summary description of the property and equipment
leases as of December 31, 2002.



|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |            | 
|-------------------------------- |  | --------------------- |  |  | -------- |  |  | ---------- | -------- |  | ---------------- | - | --------- | ------------------- | ---------- | 
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           | Original Asset Cost |           
|                                 |  | Concept               |  |  | Date of  |  |  | Date of    |          |  | Including        |  
|Lessee Name                      |  | Name                  |  |  | Commence |  |  | Expiration |          |  | Acquisition Fees |  
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |  
|PROPERTIES                       |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |            | 
|Hollywood Entertainment Corp.    |  | Hollywood Video       |  |  | 11/01/97 |  |  |            | 07/01/12 |  |                  | $ | 1,455,300 |                    
|Blockbuster Entertainment Corp.  |  | Blockbuster Video     |  |  | 09/01/97 |  |  |            | 08/01/07 |  |                  |   | 1,170,000 |                    
|Kona Restaurant Group, Inc.      |  | Johnn Carinos        |  |  | 08/01/97 |  |  |            | 08/01/14 |  |                  |   | 1,680,000 |                    
|Capital Foods, Inc.              |  | Arbys                |  |  | 12/01/98 |  |  |            | 12/01/18 |  |                  |   | 819,000   |                    
|Taco Two of Bakersfield          |  | Del Taco              |  |  | 02/01/99 |  |  |            | 02/01/19 |  |                  |   | 1,239,000 |                    
|Kona Restaurant Group, Inc.      |  | Johnn Carinos        |  |  | 08/01/99 |  |  |            | 08/01/16 |  |                  |   | 1,801,622 |                    
|Kona Restaurant Group, Inc.      |  | Kona Ranch Steakhouse |  |  | 08/01/99 |  |  |            | 08/01/16 |  |                  |   | 1,675,622 |                    
|Hollywood Entertainment Corp.    |  | Hollywood Video       |  |  | 10/01/98 |  |  |            | 11/01/12 |  |                  |   | 1,454,880 |                    
|S&A Restaurant Corporation       |  | Steak & Ale           |  |  | 07/01/98 |  |  |            | 07/01/18 |  |                  |   | 2,100,000 |                    
|S&A Restaurant Corporation       |  | Steak & Ale           |  |  | 07/01/98 |  |  |            | 07/01/18 |  |                  |   | 2,441,250 |                    
|S&A Restaurant Corporation       |  | Bennigans            |  |  | 07/01/98 |  |  |            | 07/01/18 |  |                  |   | 1,627,500 |                    
|Slaymaker Group                  |  | Wingers              |  |  | 03/01/99 |  |  |            | 03/01/19 |  |                  |   | 941,850   |                    
|Slaymaker Group                  |  | Wingers              |  |  | 02/01/99 |  |  |            | 02/01/19 |  |                  |   | 948,150   |                    
|Sterling Jewelers                |  | Jared Jewelers        |  |  | 02/01/99 |  |  |            | 02/01/19 |  |                  |   | 1,131,619 |                    
|TEC Foods                        |  | Taco Bell             |  |  | 01/01/99 |  |  |            | 01/01/09 |  |                  |   | 766,500   |                    
|TEC Foods                        |  | Taco Bell             |  |  | 01/01/99 |  |  |            | 01/01/19 |  |                  |   | 766,500   |                    
|RTM Acquisition Company, Inc.    |  | Arbys                |  |  | 09/01/98 |  |  |            | 09/01/18 |  |                  |   | 840,000   |                    
|Romacorp, Inc.                   |  | Tony Romas           |  |  | 01/01/99 |  |  |            | 01/01/14 |  |                  |   | 1,942,500 |                    
|DRM, Inc.                        |  | Arbys                |  |  | 01/01/00 |  |  |            | 01/01/20 |  |                  |   | 987,000   |                    
|United Supermarkets, Inc.        |  | United Supermarket    |  |  | 11/01/00 |  |  |            | 06/01/20 |  |                  |   | 5,077,907 |                    
|Golden Restaurant Operations     |  | Boston Market         |  |  | 04/01/97 |  |  |            | 08/01/12 |  |                  |   | 1,012,200 |                    
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |           
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     | 31,878,400 | 
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |           
|EQUIPMENT                        |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |            | 
|Girardi-Riva Enterprises, Inc.   |  | Arbys                |  |  | 02/01/98 |  |  |            | 02/01/05 |  |                  |   | 252,269   |                    
|Girardi-Riva Enterprises, Inc.   |  | Arbys                |  |  | 07/01/97 |  |  |            | 07/01/04 |  |                  |   | 167,444   |                    
|Morgans Restaurants of PA, Inc. |  | KFC                   |  |  | 10/15/97 |  |  |            | 10/15/04 |  |                  |   | 242,572   |                    
|Virginia QSC, LLC                |  | Burger King           |  |  | 11/01/97 |  |  |            | 11/01/04 |  |                  |   | 296,444   |                    
|J-Four, Inc.                     |  | KFC                   |  |  | 02/01/98 |  |  |            | 02/01/03 |  |                  |   | 292,691   |                    
|RTM Georgia                      |  | TJ Cinnamons          |  |  | 04/01/98 |  |  |            | 04/01/03 |  |                  |   | 236,250   |                    
|RTMSC, Inc.                      |  | TJ Cinnamons          |  |  | 04/01/98 |  |  |            | 04/01/03 |  |                  |   | 210,000   |                    
|RTM, Inc.                        |  | Arbys                |  |  | 10/01/98 |  |  |            | 10/01/03 |  |                  |   | 74,327    |                    
|RTM, Inc.                        |  | Arbys                |  |  | 10/01/98 |  |  |            | 10/01/03 |  |                  |   | 73,446    |                    
|GC of Charlottesville            |  | Golden Corral         |  |  | 05/01/98 |  |  |            | 05/01/05 |  |                  |   | 418,870   |                    
|Taco Two of Bakersfield          |  | Del Taco              |  |  | 01/01/99 |  |  |            | 01/01/06 |  |                  |   | 319,528   |                    
|Circle Restaurant Company, Inc.  |  | Arbys                |  |  | 12/01/00 |  |  |            | 09/01/05 |  |                  |   | 98,425    |                    
|El Chico Restaurants, Inc.       |  | El Chico              |  |  | 09/01/98 |  |  |            | 09/01/03 |  |                  |   | 487,516   |                    
|El Chico Restaurants, Inc.       |  | El Chico              |  |  | 09/01/98 |  |  |            | 09/01/03 |  |                  |   | 436,688   |                    
|DJ Enterprises, Inc.             |  | Taco Bell             |  |  | 10/01/98 |  |  |            | 09/01/07 |  |                  |   | 180,600   |                    
|J.M.C. Limited Partnership       |  | Applebees            |  |  | 03/01/97 |  |  |            | 03/01/04 |  |                  |   | 422,101   |                    
|Champps Americana, Inc.          |  | Champps               |  |  | 04/01/98 |  |  |            | 04/01/03 |  |                  |   | 896,229   |                    
|Champps Americana, Inc.          |  | Champps               |  |  | 07/01/98 |  |  |            | 07/01/03 |  |                  |   | 1,089,913 |                    
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |           
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     | 6,195,312  | 
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |           
|REPOSSESSED EQUIPMENT            |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |            | 
|Cypress Restaurants, Inc. (3)    |  | Dennys               |  |  | 09/01/98 |  |  |            | 09/01/05 |  |                  |   | 367,500   |                    
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |           
|Totals                           |  |                       |  |  |          |  |  |            |          |  |                  |   |           | $                   | 38,441,212 | 
|                                 |  |                       |  |  |          |  |  |            |          |  |                  |   |           |                     |           

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                 |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        |  |         | 
|-------------------------------- |  | ---------- |  | - | ------- | - | ------- | --------- | ------------ |  | ------------ | ------ | ---- | ------- |  |  | ------ |  | ------- | 
|                                 |  | Asset      |  |   |         |   |         |           | Date of      |  |              | Annual |      |         |  |  |       
|                                 |  | State      |  |   | Monthly |   |         | Next Rent |              |  | Rate of      |        |      |         |  | 
|Lessee Name                      |  | Location   |  |   | Rent    |   |         | Increase  |              |  | Increase (2) |        |      | Sq. Ft. | 
|                                 |  |            |  |   |         |   |         |           |              |  |              |        |      |         | 
|PROPERTIES                       |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        |  |         | 
|Hollywood Entertainment Corp.    |  | OH         |  | $ | 12,702  |   |         |           | (1) 07/01/03 |  |              |        | 1.92 | %       |  |  | 7,488  | 
|Blockbuster Entertainment Corp.  |  | GA         |  |   | 11,012  |   |         |           |             |  |              |        | 2.29 | %       |  |  | 6,500  | 
|Kona Restaurant Group, Inc.      |  | TX         |  |   | 15,400  |   |         |           | 08/01/03     |  |              |        | 1.64 | %       |  |  | 6,257  | 
|Capital Foods, Inc.              |  | OH         |  |   | 8,072   |   |         |           | 12/01/03     |  |              |        | 2.50 | %       |  |  | 2,950  | 
|Taco Two of Bakersfield          |  | CA         |  |   | 10,994  |   |         |           | 02/01/06     |  |              |        | 0.99 | %       |  |  | 2,200  | 
|Kona Restaurant Group, Inc.      |  | TX         |  |   | 16,515  |   |         |           | 08/01/05     |  |              |        | 1.63 | %       |  |  | 6,335  | 
|Kona Restaurant Group, Inc.      |  | TX         |  |   | 15,360  |   |         |           | 08/01/05     |  |              |        | 1.63 | %       |  |  | 7,814  | 
|Hollywood Entertainment Corp.    |  | OH         |  |   | 12,268  |   |         |           |             |  |              |        | n/a  |         |  |  | 7,488  | 
|S&A Restaurant Corporation       |  | MI         |  |   | 18,109  |   |         |           | 07/01/04     |  |              |        | 1.96 | %       |  |  | 7,724  | 
|S&A Restaurant Corporation       |  | PA         |  |   | 21,051  |   |         |           | 07/01/04     |  |              |        | 1.96 | %       |  |  | 7,239  | 
|S&A Restaurant Corporation       |  | VA         |  |   | 14,034  |   |         |           | 07/01/04     |  |              |        | 1.96 | %       |  |  | 5,210  | 
|Slaymaker Group                  |  | AZ         |  |   | 8,036   |   |         |           | 03/01/04     |  |              |        | 1.92 | %       |  |  | 3,172  | 
|Slaymaker Group                  |  | AZ         |  |   | 8,089   |   |         |           | 02/01/04     |  |              |        | 1.92 | %       |  |  | 3,240  | 
|Sterling Jewelers                |  | TX         |  |   | 11,667  |   |         |           | 02/01/04     |  |              |        | 1.92 | %       |  |  | 5,800  | 
|TEC Foods                        |  | MI         |  |   | 6,360   |   |         |           | 01/01/05     |  |              |        | 0.66 | %       |  |  | 2,252  | 
|TEC Foods                        |  | MI         |  |   | 6,360   |   |         |           | 01/01/05     |  |              |        | 0.66 | %       |  |  | 2,269  | 
|RTM Acquisition Company, Inc.    |  | MI         |  |   | 6,524   |   |         |           | 09/01/03     |  |              |        | 1.49 | %       |  |  | 5,909  | 
|Romacorp, Inc.                   |  | TX         |  |   | 16,342  |   |         |           | 01/01/05     |  |              |        | 1.96 | %       |  |  | 6,385  | 
|DRM, Inc.                        |  | IA         |  |   | 8,029   |   |         |           | 01/01/05     |  |              |        | 1.92 | %       |  |  | 3,094  | 
|United Supermarkets, Inc.        |  | TX         |  |   | 39,094  |   |         |           |             |  |              |        | n/a  |         |  |  | 43,100 | 
|Golden Restaurant Operations     |  | MN         |  |   | 8,351   |   |         |           | 06/01/03     |  |              |        | 5.01 | %       |  |  | 3,035  | 
|                                 |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        | 
|                                 |  |            |  |   |         |   | 274,367 |           |              |  |              |        |      |         |  |  |        |  | 145,461 | 
|                                 |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        | 
|EQUIPMENT                        |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        |  |         | 
|Girardi-Riva Enterprises, Inc.   |  | WA         |  |   | 4,108   |   |         |           |              |  |              |        |      |         |  |  |        | 
|Girardi-Riva Enterprises, Inc.   |  | WA         |  |   | 2,727   |   |         |           |              |  |              |        |      |         |  |  |        | 
|Morgans Restaurants of PA, Inc. |  | PA         |  |   | 3,766   |   |         |           |              |  |              |        |      |         |  |  |        | 
|Virginia QSC, LLC                |  | VA         |  |   | 4,862   |   |         |           |              |  |              |        |      |         |  |  |        | 
|J-Four, Inc.                     |  | NY, NH, MA |  |   | 5,882   |   |         |           |              |  |              |        |      |         |  |  |        | 
|RTM Georgia                      |  | GA         |  |   | 4,590   |   |         |           |              |  |              |        |      |         |  |  |        | 
|RTMSC, Inc.                      |  | SC         |  |   | 4,080   |   |         |           |              |  |              |        |      |         |  |  |        | 
|RTM, Inc.                        |  | GA         |  |   | 1,444   |   |         |           |              |  |              |        |      |         |  |  |        | 
|RTM, Inc.                        |  | AL         |  |   | 1,427   |   |         |           |              |  |              |        |      |         |  |  |        | 
|GC of Charlottesville            |  | VA         |  |   | 6,439   |   |         |           |              |  |              |        |      |         |  |  |        | 
|Taco Two of Bakersfield          |  | CA         |  |   | 5,087   |   |         |           |              |  |              |        |      |         |  |  |        | 
|Circle Restaurant Company, Inc.  |  | CO         |  |   |        |   |         |           |              |  |              |        |      |         |  |  |        | 
|El Chico Restaurants, Inc.       |  | TX         |  |   | 9,797   |   |         |           |              |  |              |        |      |         |  |  |        | 
|El Chico Restaurants, Inc.       |  | OK         |  |   | 8,775   |   |         |           |              |  |              |        |      |         |  |  |        | 
|DJ Enterprises, Inc.             |  | FL         |  |   | 500     |   |         |           |              |  |              |        |      |         |  |  |        | 
|J.M.C. Limited Partnership       |  | UT         |  |   | 6,838   |   |         |           |              |  |              |        |      |         |  |  |        | 
|Champps Americana, Inc.          |  | IL         |  |   | 17,651  |   |         |           |              |  |              |        |      |         |  |  |        | 
|Champps Americana, Inc.          |  | MI         |  |   | 21,466  |   |         |           |              |  |              |        |      |         |  |  |        | 
|                                 |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        |  |        
|                                 |  |            |  |   |         |   | 109,438 |           |              |  |              |        |      |         |  |  |        |  |         | 
|                                 |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        |  |        
|REPOSSESSED EQUIPMENT            |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        |  |         | 
|Cypress Restaurants, Inc. (3)    |  | SC         |  |   |        |   |         |           |              |  |              |        |      |         |  |  |        | 
|                                 |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        |  |        
|Totals                           |  |            |  |   |         | $ | 383,805 |           |              |  |              |        |      |         |  |  |        |  |         | 
|                                 |  |            |  |   |         |   |         |           |              |  |              |        |      |         |  |  |        |  |        



---

|(1) |  | Rent Increase equals the lesser of CPI or 10%.    
|--- |  | --------------------------------------------------
|(2) |  | Rent increase is based on percentage CPI increase.
|(3) |  | Non-accrual as of 8/2001.                         

Leases

Real Estate
Leases:All of the properties are subject to triple net leases on the
Partnerships standard lease pursuant to which the tenant is responsible for all expenses related to
the cost of operating the properties, including real estate taxes, insurance,
maintenance and repair costs. As of December 31, 2002, original base terms of
the property leases ranged from 14 to 20 years, and the weighted average
remaining base term of the property lease portfolio was 14.4 years. Certain of
the leases provide the tenant with one or more options to renew the lease upon
expiration of the base term at predetermined or market rental rates. All but
one of the leases provide for increases in the monthly rents during the base
term of the lease, with most of these determined based upon fixed, contractual
rates of increases. Two of the leases provide for rental increases
based upon the
lesser of a fixed percentage and changes in the Consumer Price Index. The
timing of rental increases is specified in the leases, but generally occurs no
more often than annually and no less often than once every five years.

Equipment Leases:All of the equipment leases are on the Partnerships
standard form of lease pursuant to which the lessee is responsible for all
expenses related to the equipment, including taxes, insurance, maintenance and
repair costs. All of the equipment was purchased with cash from Offering
proceeds. As of December 31, 2002, original base terms of the equipment leases
ranged from 5 to 9 years, and the weighted average remaining base term of the
equipment lease portfolio was 18 months. All of the leases provide for fixed
monthly rents during the entire term of the lease. Approximately 61% of the
equipment leases provide the lessee with the option to purchase the equipment
for a nominal purchase price ($1) upon expiration of the base lease term.

Summary of Investment Objectives and Policies

The Partnership acquires income-producing property and equipment which are
leased primarily to operators of nationally franchised fast-food, family style
and dinner house restaurants as well as other franchised service-type
businesses such as automotive and specialty retail franchises. Properties are
selected for acquisition based on an examination and evaluation by the General
Partner, or an affiliate, of the potential value of the site, the financial
condition and business history of the proposed tenant or lessee, area
demographics, prospective purchase price and lease terms, geographic and market
diversification, and potential operating results. Similar analyses are utilized
in selecting equipment for inclusion in lease packages. The Partnership
anticipates that fee interests in real property will be acquired, although
other interests (including acquisitions of buildings subject to a long-term
ground lease) may be acquired if it is deemed to be advantageous to the
Partnership. In no event is property or equipment acquired unless a satisfactory lease
commitment has been obtained from a suitable tenant or lessee as further
described below.

In selecting specific properties, the General Partner generally requires
the following:

(i)  Base annual rent that provides a specified minimum return on the
contract purchase price of the property; and

(ii)  An initial lease term of between ten and twenty years.

In selecting specific equipment, the General Partner typically requires
the following:

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(i)  Leases providing for fixed rents structured to return 100% of the cost
of the equipment plus yield a return equivalent to market interest rates over
the lease term; and

(ii)  Terms of five to seven years with residual values of equipment at the
end of such terms expected to be minimal.

The determination of whether particular properties or equipment should be
sold or otherwise disposed of is made after consideration of relevant factors,
including performance or projected performance of the property or equipment and
market conditions, with a view toward achieving the principal investment
objectives of the Partnership.

Item 3. Legal Proceedings

On November 19, 2002, the Partnership was named as one of the defendants in a
personal injury and liability suit relating to an alleged unsafe walkway at a
property. The General Partner and
Partnership have denied any wrongdoing and intend to vigorously contest the
matter. The Partnership has insurance, which would cover any amounts
less retention that may
ultimately be paid.

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

Captec Net Lease merged with and into Commercial Net Lease effective on
December 1, 2001. In connection with the merger, Commercial Net Lease agreed
to sell and assign its general partnership interest in the Partnership to GP4
Asset Acquisition. In order to complete this transaction, the consent of a
majority in interest of the Limited Partners and the Partnerships lender was
required. Effective January 15, 2002, the requisite Limited Partner consent
was obtained and the consent solicitation was closed. Lender consent is still
pending.




PART II

Item 5. Market for Registrants Limited Partnership Interests and Related Security Holder Matters

There is no public market for the Units and the Partnership does not
currently expect that any market will develop. There are restrictions upon the
transferability of Units, including the requirement that the General Partner
consent to any transferee becoming a substituted Limited Partner (which consent
may be granted or withheld at the sole discretion of the General Partner). In
addition, restrictions on transfer may be imposed under state
securities laws. As of December 31, 2002, Units were held by
1,585 investors of record.

The Internal Revenue Code of 1986, as amended, contains provisions that
may have an adverse impact on investors in certain publicly traded
partnerships. If the Partnership were to be classified as a publicly traded
partnership, income attributable to the Units would be characterized as
portfolio income and the gross income attributable to Units acquired by
tax-exempt entities would be unrelated business income, which could
render the Units less marketable. The General Partner will, if necessary,
take appropriate steps to ensure that the Partnership will not be deemed a
publicly traded partnership.

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Item 6. Selected Financial Data

|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |           |   |             |           |           | 
|----------------------------------------------------- | -------------------------------- | ---------------------------------- | ---------- | ------------ | --------- | - | ------------ | --------- | --------- | ------------ | ---------- | --------- | ------------ | - | ---------- | ------------ | --------- | - | ----------- | --------- | --------- | 
|                                                      |                                  |                                    |            | Year Ended   |           |   | Year Ended   |           |           | Year Ended   |            |           | Year Ended   |   |            | Year Ended   |          
|                                                      |                                  |                                    |            | December 31, |           |   | December 31, |           |           | December 31, |            |           | December 31, |   |            | December 31, |          
|                                                      |                                  |                                    |            | 2002         |           |   | 2001         |           |           | 2000         |            |           | 1999         |   |            | 1998         |          
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |          
|Statements of Operations Data:                        |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |           |   |             |          
|Operating revenue:                                    |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |           |   |             |          
|                                                      | Rental income                    |                                    | $          | 3,363,815    |           |   | $            | 3,363,815 |           |              | $          | 3,002,022 |              |   | $          | 2,672,588    |           |   | $           | 1,243,403 |          
|                                                      | Finance income                   |                                    |            | 310,428      |           |   |              | 456,552   |           |              |            | 588,435   |              |   |            | 805,410      |           |   |             | 548,342   |          
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |           
|                                                      |                                  | Total operating revenue            |            |              | 3,674,243 |   |              |           | 3,820,367 |              |            |           | 3,590,457    |   |            |              | 3,477,998 |   |             |           | 1,791,745 | 
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |           
|Operating costs and expenses:                         |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |           |   |             |          
|                                                      | Interest expense                 |                                    |            | 1,266,420    |           |   |              | 1,217,899 |           |              |            | 923,965   |              |   |            | 788,199      |           |   |             | 23,603    |          
|                                                      | Depreciation                     |                                    |            | 489,976      |           |   |              | 482,954   |           |              |            | 394,312   |              |   |            | 327,803      |           |   |             | 131,565   |          
|                                                      | General and administrative       |                                    |            | 166,788      |           |   |              | 129,144   |           |              |            | 101,226   |              |   |            | 108,023      |           |   |             | 80,536    |          
|                                                      | Provision for losses             |                                    |            | 195,542      |           |   |              | 65,000    |           |              |            |          |              |   |            |             |           |   |             |          |          
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |           
|                                                      |                                  | Total operating costs and expenses |            |              | 2,118,726 |   |              |           | 1,894,997 |              |            |           | 1,419,503    |   |            |              | 1,224,025 |   |             |           | 235,704   | 
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |           
|Income from operations                                |                                  |                                    | 1,555,517  |              |           |   | 1,925,370    |           |           |              | 2,170,954  |           |              |   | 2,253,973  |              |           |   | 1,556,041   |          
|Other income (expense):                               |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |           |   |             |          
|                                                      | Interest income                  |                                    |            | 1,478        |           |   |              | 14,608    |           |              |            | 488       |              |   |            | 29,143       |           |   |             | 254,673   |          
|                                                      | (Loss) gain on sale of equipment |                                    |            |             |           |   |              | (258      | )         |              |            | 42,433    |              |   |            | 5,858        |           |   |             |          |          
|                                                      | Other                            |                                    |            |             |           |   |              |          |           |              |            | 234       |              |   |            | 5,055        |           |   |             | 35        |          
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |             
|                                                      |                                  | Total other income                 |            |              | 1,478     |   |              |           | 14,350    |              |            |           | 43,155       |   |            |              | 40,056    |   |             |           | 254,708   | 
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |           
|Net income                                            |                                  |                                    | 1,556,995  |              |           |   | 1,939,720    |           |           |              | 2,214,109  |           |              |   | 2,294,029  |              |           |   | 1,810,749   |          
|Net income allocable to general partner               |                                  |                                    | 15,570     |              |           |   | 19,397       |           |           |              | 22,141     |           |              |   | 22,940     |              |           |   | 18,107      |          
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |           
|Net income allocable to limited partners              |                                  | $                                  | 1,541,425  |              |           | $ | 1,920,323    |           |           | $            | 2,191,968  |           |              | $ | 2,271,089  |              |           | $ | 1,792,642   |          
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |           
|Net income per limited partnership unit               |                                  | $                                  | 52.49      |              |           | $ | 65.10        |           |           | $            | 73.65      |           |              | $ | 75.78      |              |           | $ | 72.37       |          
|Weighted average units outstanding                    |                                  |                                    | 29,369     |              |           |   | 29,496       |           |           |              | 29,763     |           |              |   | 29,969     |              |           |   | 24,769      |          
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |           |   |             |           |           | 
|Other Data:                                           |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |           |   |             |          
|Cash flows from operating activities                  |                                  | $                                  | 1,934,582  |              |           | $ | 2,020,200    |           |           | $            | 2,626,092  |           |              | $ | 3,306,697  |              |           | $ | 715,635     |          
|Cash flows from (used in) investing activities        |                                  | $                                  | 1,402,096  |              |           | $ | 1,253,154    |           |           | $            | (3,138,164 | )         |              | $ | (4,000,047 | )            |           | $ | (20,428,353 | )        
|Cash flows used in financing activities               |                                  | $                                  | (3,461,189 | )            |           | $ | (2,094,788   | )         |           | $            | (110,817   | )         |              | $ | (507,083   | )            |           | $ | 16,606,682  |          
|                                                      |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |           |   |             |           |           | 
|Balance Sheet Data:                                   |                                  |                                    |            |              |           |   |              |           |           |              |            |           |              |   |            |              |           |   |             |          
|Cash and cash equivalents (including restricted cash) |                                  | $                                  | 1,367,069  |              |           | $ | 1,460,847    |           |           | $            | 179,066    |           |              | $ | 915,760    |              |           | $ | 2,890,347   |          
|Investment in property under leases                   |                                  | $                                  | 31,516,729 |              |           | $ | 33,604,343   |           |           | $            | 35,405,709 |           |              | $ | 32,619,423 |              |           | $ | 28,941,321  |          
|Total assets                                          |                                  | $                                  | 34,612,180 |              |           | $ | 36,589,728   |           |           | $            | 36,819,022 |           |              | $ | 34,533,478 |              |           | $ | 32,659,591  |          
|Total liabilities                                     |                                  | $                                  | 14,552,078 |              |           | $ | 14,928,823   |           |           | $            | 13,753,388 |           |              | $ | 9,832,387  |              |           | $ | 6,671,410   |          
|Total partners capital                               |                                  | $                                  | 20,060,102 |              |           | $ | 21,660,905   |           |           | $            | 23,065,634 |           |              | $ | 24,701,091 |              |           | $ | 25,988,181  |          

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

When used in this discussion, words such as intends anticipates
expects will could estimate and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties, which could cause actual results to differ materially
from those described herein. Such risks and uncertainties, some of which are
beyond the Partnerships control, include but are not limited, to the following:
(i) the possibility that tenants and lessees may default in making rent
payments, (ii) the risk of fire or another casualty interrupting the cash flow
stream from a property, (iii) the inability to enter into leases at the assumed
rental rates, (iv) unexpected expenses, and (v) the inability to sell properties
at anticipated prices and/or times.

As a result of these and other factors, the Partnership may experience
material fluctuations in future operating results on a quarterly or annual
basis, which could materially adversely affect its business, financial
condition and operating results. Any statements contained in this report or
any document incorporated herein by reference that are not statements of
historical fact may be deemed to be forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, some of
which are beyond the Partnerships control, and actual results may differ
materially depending on a variety of important factors, many of which are also
beyond the Partnerships control. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this report. The
Partnership disclaims, any obligations to
update or release revisions to these forward-looking statements to reflect
events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events except as may be required by law.

Results of Operations  2002 to 2001

For the year ended December 31, 2002, operating revenue decreased 4% to
approximately $3.7 million as compared to approximately $3.8 million for the
year ended December 31, 2001. Rental revenue from operating leases for the
year ended December 31, 2002 remained unchanged at $3,364,000. Earned income
from financing leases for 2002 decreased 32% to approximately $310,000 as
compared to approximately $457,000 for 2001 due to the amortization of
principal balances and the suspension of income recognition in January 2002 on
an impaired equipment lease.

Operating expenses increased 12% to approximately $2.1 million for 2002 as
compared to approximately $1.9 million for 2001. The increase in operating
expenses is principally due to increased interest expense resulting from the
$1.5 million term note that the Partnership entered into in November 2001 and
an increase in the provision for losses related to an impaired equipment lease.
The note was used to provide cash for future property acquisitions. The
Partnership recorded a provision for losses of $65,000 in 2001 and subsequently
recorded an additional provision of $196,000 in December 2002 to reserve for
losses anticipated in connection with an impaired equipment lease. Rental
payments on this lease are delinquent by more than 90 days, and income accrual
has been suspended by the Partnership. The tenant, a Dennys restaurant
franchisee, filed for Chapter 11 bankruptcy protection in September 2001 and
subsequently converted to a Chapter 7 filing in May 2002. The restaurant in
which the equipment is located is a leased facility. The landlord, who had been
operating the restaurant during the bankruptcy period, decided to
discontinue operation of the restaurant in December 2002, and accordingly the reserve allowance was
increased as described above.

Other income for 2001 of $14,000 was due to late fees and interest income
on short-term investments.

As a result of the foregoing, the Partnerships net income for 2002
decreased 20% to approximately $1.6 million as compared to $1.9 million in
2001. The Partnership is not subject to income taxation as all of its income
and expenses flow through to the Partners. During the year ended December 31,
2002, the Partnership made distributions to limited partners totaling $3.1
million, as compared to $3.2 million for the preceding year.

Results of Operations  2001 to 2000

For the year ended December 31, 2001, operating revenue increased 6% to
approximately $3.8 million as compared to approximately $3.6 million for the
year ended December 31, 2000. Rental income from operating leases for 2001
increased 12% to approximately $3.4 million as compared to approximately $3.0
million for 2000 due to the benefit of a full year of rental income from
properties acquired and leased in 2000. Earned income from financing leases for
2001 decreased 22% to approximately $457,000 as compared to approximately
$588,000 for 2000 due to the sale of one equipment lease in March 2000 and the
amortization of principal balances on the financing leases.

Operating expenses increased 33% to approximately $1.9 million for 2001 as
compared to approximately $1.4 million for 2000. The increase is primarily due
to increases in interest expense and depreciation and a charge for a provision
for credit losses. Interest

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expense increased 32% to approximately $1.2 million in connection with the
$3.75 million and the $1.5 million term notes that the Partnership entered into
in October 2000 and November 2001, respectively. These notes were used to fund
property purchases and provide cash for future property acquisitions.
Depreciation expense increased 22% to approximately $483,000 as a result of a
full year of depreciation for a property acquired in 2000. The Partnership
recognized a $65,000 provision for credit losses to reserve for losses
anticipated in connection with an impaired equipment lease. Rental payments on
this impaired lease are delinquent by more than 90 days, and income accrual has been
suspended by the Partnership. The tenant, a Dennys restaurant franchisee,
filed for Chapter 11 bankruptcy protection in September 2001. As of December
31, 2001, it was anticipated that the tenants restaurant operations would be
re-structured and/or sold and that, as a result, the tenants restaurants would
continue and the restaurant in which the leased equipment is located would
remain in operation. The restaurant was later closed in December 2002,
resulting in the recognition of an additional provision for losses as described
for the 2002 year above. General and administrative expenses increased 28% to
approximately $129,000 for 2001 as compared to $101,000 for 2000, primarily due
to the increase in professional fee expense.

Other income decreased 67% to approximately $14,000 for 2001, as compared
to approximately $43,000 for 2000. Other income for 2001 was due to late fees
and interest income on short-term investments. Other income for 2000 was
mainly a result of a gain on the sale of one equipment lease.

As a result of the foregoing, the Partnerships net income for 2001
decreased 12% to approximately $2.0 million as compared to $2.2 million in
2000. The Partnership is not subject to income taxation as all of its income
and expenses flow through to the Partners. During the year ended December 31,
2001, the Partnership made distributions to limited partners totaling $3.2
million, as compared to $3.6 million for the preceding year.

Liquidity and Capital Resources

In December 1996, the
Partnership commenced its Offering of up to
30,000 limited partnership Units. Net proceeds
after offering expenses were approximately $26.1 million.

In December 1998, the Partnership entered into a $6.4 million term note.
The Partnership entered into an additional $3.3 million term note in March
1999. Proceeds from the notes were used to acquire additional properties. The
notes each have a 10-year term, are collateralized by certain properties
subject to operating leases, and bear interest at rates ranging from 8.1% to
8.5% per annum.

The Partnership purchased one net leased real estate property in October
2000 and assumed a $3.75 million term note in connection with the acquisition.
The note has a 10-year term and bears interest at the rate of 8.35% per annum.

In November 2001, the Partnership entered into an additional $1.5 million
term note. The note has a 2-year term, is collateralized by certain properties
subject to operating leases and bears an interest rate of prime plus 2% per
annum. Proceeds from this note were

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used to repay approximately $700,000 of short-term borrowings and to
provide working capital intended to be used to fund Unit repurchases and
potential property acquisitions.

Debt issuance costs of approximately $634,000 incurred in connection with
the issuance of the notes are being amortized into interest expense over the
life of the notes using the straight-line method.

As of December 31, 2002, the Partnership had a portfolio of 21 properties
located in 11 states, with a cost basis of $31.9 million, 18 performing
equipment leases with an original investment of $6.2 million and one
repossessed equipment package related to a defaulted equipment contract. The remaining net investment in the
Partnerships leased equipment is $1.4 million, net of $5.2
million of aggregate principal collections on financing leases during the life of those investments. As of December 31, 2002, the
Partnership has not made any commitments to purchase additional properties, but
the Partnership will continue to consider property purchases to the extent that
it has capital available to invest. Subsequent to December 31, 2002, the
Partnership had agreed, subject to various contingencies, to acquire a real
property leased to a Taco Bell franchisee for a purchase price of $1,150,000.
The Partnership anticipates funding this purchase with cash and proceeds from a
bank loan.

The Partnership semi-annually considers written requests to repurchase
Units pursuant to the terms of the repurchase plan set forth in the
Partnerships prospectus with respect to the Offering. Since
1999, 659 Units have been repurchased by the Partnership pursuant to the terms of the Repurchase Plan set forth in the
Partnerships December 23, 1996 prospectus with respect to the Offering.  At December 31, 2002, the Partnership had 29,341 Units issued and outstanding. The Partnership expects to fund future Unit repurchases out of
working capital reserves and Net Sale or Refinancing Proceeds, but may also
fund such repurchases out of Cash Flow. The Partnership is not obligated to
accept Unit repurchase requests if the Partnership does not have the liquidity
to fund such requests and/or if the Partnership does not have sufficient Cash
Flow to distribute the 10% Current Preferred Return.

The Partnership expects that only limited amounts of liquid assets will be
required for existing properties since its property and equipment leases
require tenants and lessees to pay all taxes and assessments, maintenance and
repairs and insurance premiums, including casualty insurance thereby minimizing
the Partnerships operating expenses and capital requirements. The General
Partner expects that the cash flow to be generated by the Partnerships
properties and equipment will provide adequate liquidity and capital resources
to pay operating expenses and provide distributions to Limited Partners.

Critical Accounting Policies

The financial statements are prepared in accordance with Generally
Accepted Accounting Principles (GAAP), which requires the Partnership to make
certain estimates and assumptions. A summary of the Partnerships significant
accounting policies is provided in note 1 to the financial statements. The
following section is a summary of certain aspects of those accounting policies
that require management estimates and judgement.

When real estate properties are acquired, acquisition costs are allocated
to components of the property using relative fair values based on historical
experience and the Partnerships current judgement. These assumptions and
estimates impact the amount of costs allocated between land and building,
depreciation expense, and gains or losses recorded on sales of properties.

Receivables are reported net of allowance for doubtful accounts and may be
uncollectible in the future. The Partnership reviews its receivables regularly
for potential collection problems in computing the allowance recorded against
its receivables; this review process requires the Partnership to make certain
judgements regarding collections that are inherently difficult to predict.

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

Credit risk relates to investment in leases and
accounts receivable balances and results from the possibility that a
lessee defaults on its contractual obligation to the Partnership.
Both the ability of the lessees to pay rent on a timely basis and the
amount of the rent (which is the Partnerships principal source
of income) are affected by general economic conditions. A default by
a lessee or other premature termination of a lease agreement will
interrupt rental payments and Partnership cash flows would be
temporarily impacted. In such an instance, the General Partner
expects that it would find a substitute lessee, however, there can be no
assurances that the property or equipment could be leased on comparable or acceptable
terms. The Partnership monitors this risk by performing ongoing credit
evaluations of lessees and maintains allowances for potential credit
losses.

Item 8. Financial Statements and Supplementary Data

See Index to Financial Statements on Page F-I of this Form 10-K for
Financial Statements and Financial Statement Schedules, where applicable.

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 Partnership has no directors, officers or other employees.

Patrick L. Beach is the Sole Member of CRC Asset Acquisition LLC, the sole member of GP4 Asset
Acquisition and the President of GP4 Asset Acquisition, the Partnerships General Partner.

Mr. Beach attended the University of Michigan and graduated from its School of Business Administration in 1977 with a Bachelor of Business Administration degree.  From 1997 until 2001, Mr. Beach served as the Chairman, President and Chief Executive Officer of Captec Net Lease.  Since 1981, he has served as Chairman and Chief Executive Officer of Captec Financial Group, Inc., and affiliate of the Partnership, that is involved in the acquisition and
development of single tenant restaurant properties, shopping centers, and multi-family residential properties.

Item 11. Executive Compensation

The Partnership does not have directors, officers or employees. All
amounts paid by the Partnership for management and administration services are
pursuant to agreements described under Item 13, Certain Relationships and
Related Transactions.

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Item 12. Security Ownership of Certain Beneficial Owners and Management

To the best knowledge of the Partnership, as of December 31, 2002 no
person known by the Partnership, beneficially owned more than 5% of the
outstanding Units.

Item 13. Certain Relationships and Related Transactions

Pursuant to the Partnership Agreement, the General Partner receives
acquisition fees of 4%, plus an additional .00624% for each 1% of indebtedness
incurred in acquiring properties and equipment, of the aggregate purchase
prices of properties and equipment (not to exceed a total 5% acquisition fee).
The Partnership incurred no acquisition fees in 2002 and 2001. In 2000, the
Partnership incurred $240,772 in acquisition fees. The acquisition fees in 2000 were capitalized as part of the Partnerships investment in land and
buildings subject to operating leases and net investment in financing leases.

The Partnership has entered into an asset management agreement with the
General Partner and its affiliates, pursuant to which the General Partner and the General
Partners affiliates provide various property and equipment management services
for the Partnership. A subordinated asset management fee is charged, in an
amount equal to 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 10% per annum on their adjusted invested capital.
Management fees of $48,142, $47,426 and $45,556 were incurred during 2002, 2001
and 2000, respectively.

The Partnership Agreement provides for the General Partner to receive
liquidation fees limited to the lesser of 3% of the gross sales price or 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 10.5% per annum,
cumulative non-compounded preferred return on their adjusted invested capital
plus distributions of sale or refinancing proceeds equal to 100% of their
original contributions. The Partnership did not pay any liquidation fees
during 2002, 2001 or 2000.

The Partnership Agreement provides for the payment of
equipment liquidation fees to the General Partner in the amount of 3% of the contract sales price. The
Partnership did not incur any equipment liquidation fees during 2002 and 2001.

An affiliate of the
Partnership, a Small Business Investment Corporation
(SBIC), has invested in certain entities that have leases
with the Partnership. As a result of the investments made through the
SBIC, Mr. Beach or his associates in the SBIC, may have board
representation in these companies. The Partnership and its General
Partner believe that the leases are at market rates for such
properties and equipment.

In December 2001, Captec Net Lease merged with and into Commercial Net
Lease. In connection with the merger, Commercial Net Lease agreed to sell and
assign its General Partnership interest in the Partnership to GP4 Asset
Acquisition, LLC,  which is wholly-owned by Patrick L. Beach is the sole
member. Patrick L. Beach is the former Chairman of the Board of Directors and
President and Chief Executive Officer of Captec Net Lease and an original
general partner of the Partnership. In order to complete the assignment of the
General Partnership interest, a majority in interest of the Limited Partners
and the Partnerships lender were required to consent to the transfer to GP4
Asset Acquisition. A majority in interest of the Limited Partners consented to
the transfer to GP4 Asset Acquisition in January 2002 and the lender consent is
pending. Until such time that the transfer of the General Partnership interest
to GP4 Asset Acquisition is completed, Commercial Net Lease and GP4 Asset
Acquisition have entered into an agreement pursuant to which Commercial Net Lease
assigned to GP4 Asset Acquisition all economic interest as General Partner, GP4
Asset Acquisition assumed all obligations to be performed relative to such
economic interest and Commercial Net Lease contracted with GP4 Asset
Acquisition to perform all management services previously performed by the
General Partner under the terms of the Partnership Agreement.

The agreements and arrangements, including those relating to compensation,
between the Partnership and the General Partner or any of its affiliates have
not been and will not be the result of arms-length negotiations, although the
General Partner believes that such agreements and arrangements will approximate
been those which would be arrived at through arms-length negotiations. While the
Partnership will make no loans to the General Partner or its affiliates, the
Partnership may borrow money from the General Partner or its affiliates but
only on such terms as to interest rate, security, fees and other charges at
least as favorable to the Partnership as are charged by unaffiliated lending
institutions in the same locality on comparable loans for the same purpose. The
General Partner and its affiliates are not prohibited from providing services
to, and otherwise dealing or doing business with, persons (for example,
franchisees), who may deal with the Partnership. However, the Partnership
Agreement prohibits receipt of rebates or participation in any reciprocal
business arrangements which would have the effect of circumventing any of the
provisions of the Partnership Agreement.

9



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Item 14. Controls and Procedures

Mr. Beach, acting in his capacity as the principal executive officer of
GP4 Asset Acquisition, is ultimately responsible for the disclosure controls
and procedures of the Partnership. Disclosure controls and procedures are
established and maintained by the Partnership to ensure the information
required to be disclosed by the Partnership in the reports that it files or
submits pursuant to the Securities Exchange Act of 1934, as amended (the
Act), is recorded, processed, summarized and reported within the time periods
specified in the Commissions rules and forms. Mr. Beach has evaluated the
effectiveness of the Partnerships disclosure controls and procedures as of a
date within 90 days prior to the filing date of this report, and has determined
that the Partnerships disclosure controls and procedures effectively
communicate the information required to be disclosed by the Partnership in the
reports it files or submits under the Act in a manner that allows timely
decisions regarding such disclosure.

There have been no significant changes in the Partnerships internal
controls or in other factors that could significantly affect these controls
subsequent to the evaluation date, including, but not limited to, any
corrective actions with regard to significant deficiencies and material
weaknesses.

Item 15. Exhibits and Reports on Form 8-K

(a)  The following exhibits are included herein or incorporated by
reference:

|       |  |                                                                                                                                                                                                                               
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Exhibit                                                                                                                                                                                                                       
|       |  |                                                                                                                                                                                                                               
|      
|4      |  | Amended Agreement of Limited Partnership of Registrant.
(Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-K for the fiscal year ended December 31, 1998)                                    
|       |  |                                                                                                                                                                                                                               
|10.1   |  | Promissory Note dated December 17, 1998 between Registrant and
National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrants Form 10-K for the fiscal
year ended December 31, 1998)
|       |  |                                                                                                                                                                                                                               
|10.2   |  | Promissory Note dated March 30, 1999 between Registrant and
National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrants Form 10-Q for the quarter
ended March 31, 1999)          
|       |  |                                                                                                                                                                                                                               
|99     |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002                                                                                                        

(b)  Reports on Form 8-K:

There were no reports filed on Form 8-K for the year ended December 31,
2002.

10



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SIGNATURES

In accordance with Section 13 or 15 (d) of the Securities Exchange Act of
1934, as amended, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| |  |                                           |  |                                               
| |  | ----------------------------------------- |  | ----------------------------------------------
| |  | CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
|
| |  | By:                                       |  | GP4 Asset Acquisition, LLC
Its Manager        
|
| |  | By:                                       |  | /s/ Patrick L. BeachPatrick L. Beach
President
|
| |  | Date:                                     |  | March 28, 2003                                

In accordance with 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.

|      |  |                                                |  | 
|----- |  | ---------------------------------------------- |  | 
|By:   |  | /s/ Patrick L. BeachPatrick L. Beach
President |  | 
|     
|Date: |  | March 28, 2003                                 |  | 

11



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Certifications

I, Patrick L. Beach, certify that:

1.     I have reviewed this annual report on Form 10-K of Captec Franchise
Capital Partners L.P. IV;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|      |  |                                                                            |  | 
|----- |  | -------------------------------------------------------------------------- |  | 
|Date: |  | March 28, 2003                                                             |  | 
|     
|     
|By:   |  | /s/ Patrick L. BeachPatrick L. Beach
President, GP4 Asset Acquisition, LLC |  | 

The foregoing certification is as required by Section 302(a) of the
Sarbanes-Oxley Act of 2002 and amended Rules 13a-14 and 15d-14 of the
Securities Exchange Act of 1934, which state that the wording of such
certification may not be changed in any respect, even if such change would
appear inconsequential in nature. GP4 Asset Acquisition, LLC is a single
member limited liability company, the sole member of which is a limited
liability company of which Patrick L. Beach is the sole and managing member.
As a result, neither the Partnership or GP4 Asset Acquisition, LLC has a board
of directors or audit committee and Patrick L. Beach is only certifying officer
and is ultimately responsible for establishing and maintaining the registrants
disclosure controls.

12



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Captec Franchise Capital Partners, L.P. IV
Contents

|                                                                               |  |         |      | 
|------------------------------------------------------------------------------ |  | ------- | ---- | 
|                                                                               |  | Page(s) |     
|                                                                               |  |         |     
|Report of Independent Accountants                                              |  |         | F-1  | 
|Financial Statements                                                           |  |         |      | 
|Balance Sheets                                                                 |  |         | F-2  | 
|Statements of Operations                                                       |  |         | F-3  | 
|Statements of Changes in Partners Capital                                     |  |         | F-4  | 
|Statements of Cash Flows                                                       |  |         | F-5  | 
|Notes to Financial Statements                                                  |  |         | F-6  | 
|Schedule III  Properties and Accumulated Depreciation as of December 31, 2002 |  |         | F-11 | 

F-I



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Report of Independent Accountants

To the partners of Captec Franchise Capital
Partners L.P. IV

In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Captec
Franchise Capital Partners L.P. IV at December 31, 2002 and 2001, and the
results of its operations, its cash flows and its changes in partners capital
for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States
of America.  In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in
conjunction with the related financial statements.  These financial statements and the financial
statement schedule are the responsibility of the Partnerships
management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, 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 our opinion.

PricewaterhouseCoopers LLP

Chicago, Illinois
February 28, 2003

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Captec Franchise Capital Partners L.P. IV
Balance Sheets
December 31, 2002 and 2001

|                                   |                                       |                                         |                                   |            |            |      |            |            |            |  |  | 
|---------------------------------- | ------------------------------------- | --------------------------------------- | --------------------------------- | ---------- | ---------- | ---- | ---------- | ---------- | ---------- |  |  | 
|                                   |                                       |                                         |                                   |            |            | 2002 |            |            | 2001       | 
|                                   |                                       |                                         |                                   |            |            |      |            |            |            | 
|                                   |                                       |                                         |                                   | Assets     |            |      |            |            |            |  |  | 
|Cash and cash equivalents          |                                       | $                                       | 1,132,891                         |            |            | $    | 1,257,402  |           
|Restricted cash                    |                                       |                                         | 234,178                           |            |            |      | 203,445    |           
|Investment in leases:              |                                       |                                         |                                   |            |            |      |            |           
|                                   | Operating leases, net                 |                                         |                                   | 28,910,393 |            |      |            | 29,400,369 |           
|                                   | Financing leases, net                 |                                         |                                   | 2,591,336  |            |      |            | 3,993,432  |           
|                                   | Impaired financing leases, net        |                                         |                                   | 15,000     |            |      |            | 210,542    |           
|Accounts receivable                |                                       |                                         | 90,785                            |            |            |      | 20,697     |           
|Unbilled rent, net                 |                                       |                                         | 1,261,886                         |            |            |      | 1,044,659  |           
|Due from related parties           |                                       |                                         |                                  |            |            |      | 3,667      |           
|Deferred financing costs, net      |                                       |                                         | 375,711                           |            |            |      | 455,515    |           
|                                   |                                       |                                         |                                   |            |            |     
|                                   |                                       | Total assets                            |                                   | $          | 34,612,180 |      |            | $          | 36,589,728 | 
|                                   |                                       |                                         |                                   |            |            |     
|                                   |                                       |                                         | Liabilities and Partners Capital |            |            |      |            |            |            |  | 
|Liabilities:                       |                                       |                                         |                                   |            |            |      |            |           
|                                   | Notes payable                         |                                         | $                                 | 14,374,899 |            |      | $          | 14,678,290 |           
|                                   | Accounts payable and accrued expenses |                                         |                                   | 157,241    |            |      |            | 166,359    |           
|                                   | Due to related parties                |                                         |                                   | 19,938     |            |      |            | 84,174     |           
|                                   |                                       |                                         |                                   |            |            |     
|                                   |                                       | Total liabilities                       |                                   |            | 14,552,078 |      |            |            | 14,928,823 | 
|                                   |                                       |                                         |                                   |            |            |     
|Partners capital:                 |                                       |                                         |                                   |            |            |      |            |           
|Limited partners capital accounts |                                       |                                         | 20,091,845                        |            |            |      | 21,645,283 |           
|General partners capital account  |                                       |                                         | (31,743                           | )          |            |      | 15,622     |           
|                                   |                                       |                                         |                                   |            |            |     
|                                   |                                       | Total partners capital                 |                                   |            | 20,060,102 |      |            |            | 21,660,905 | 
|                                   |                                       |                                         |                                   |            |            |     
|                                   |                                       | Total liabilities and partners capital |                                   | $          | 34,612,180 |      |            | $          | 36,589,728 | 
|                                   |                                       |                                         |                                   |            |            |     

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

F-2



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Captec Franchise Capital Partners L.P. IV
Statements of Operations
For the Years Ended December 31, 2002, 2001 and 2000

|                                                                 |                                  |                                    |           |           |           |   |           |           |           |      |           |           |           | 
|---------------------------------------------------------------- | -------------------------------- | ---------------------------------- | --------- | --------- | --------- | - | --------- | --------- | --------- | ---- | --------- | --------- | --------- | 
|                                                                 |                                  |                                    |           | 2002      |           |   | 2001      |           |           | 2000 |          
|                                                                 |                                  |                                    |           |           |           |   |           |           |           |      |          
|Operating revenue:                                               |                                  |                                    |           |           |           |   |           |           |           |      |           |          
|                                                                 | Rental income                    |                                    | $         | 3,363,815 |           |   | $         | 3,363,815 |           |      | $         | 3,002,022 |          
|                                                                 | Finance income                   |                                    |           | 310,428   |           |   |           | 456,552   |           |      |           | 588,435   |          
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|                                                                 |                                  | Total operating revenue            |           |           | 3,674,243 |   |           |           | 3,820,367 |      |           |           | 3,590,457 | 
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|Operating costs and expenses:                                    |                                  |                                    |           |           |           |   |           |           |           |      |           |          
|                                                                 | Interest expense                 |                                    |           | 1,266,420 |           |   |           | 1,217,899 |           |      |           | 923,965   |          
|                                                                 | Depreciation                     |                                    |           | 489,976   |           |   |           | 482,954   |           |      |           | 394,312   |          
|                                                                 | General and administrative       |                                    |           | 166,788   |           |   |           | 129,144   |           |      |           | 101,226   |          
|                                                                 | Provision for losses             |                                    |           | 195,542   |           |   |           | 65,000    |           |      |           |          |          
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|                                                                 |                                  | Total operating costs and expenses |           |           | 2,118,726 |   |           |           | 1,894,997 |      |           |           | 1,419,503 | 
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|                                                                 |                                  | Income from operations             |           |           | 1,555,517 |   |           |           | 1,925,370 |      |           |           | 2,170,954 | 
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|Other income:                                                    |                                  |                                    |           |           |           |   |           |           |           |      |           |          
|                                                                 | Interest income                  |                                    |           | 1,478     |           |   |           | 14,608    |           |      |           | 488       |          
|                                                                 | Gain (loss) on sale of equipment |                                    |           |          |           |   |           | (258      | )         |      |           | 42,433    |          
|                                                                 | Other                            |                                    |           |          |           |   |           |          |           |      |           | 234       |          
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|                                                                 |                                  | Total other income                 |           |           | 1,478     |   |           |           | 14,350    |      |           |           | 43,155    | 
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|Net income                                                       |                                  |                                    | 1,556,995 |           |           |   | 1,939,720 |           |           |      | 2,214,109 |          
|Net income allocable to general partner                          |                                  |                                    | 15,570    |           |           |   | 19,397    |           |           |      | 22,141    |          
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|Net income allocable to limited partners                         |                                  | $                                  | 1,541,425 |           |           | $ | 1,920,323 |           |           | $    | 2,191,968 |          
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|Net income per limited partnership unit                          |                                  | $                                  | 52.49     |           |           | $ | 65.10     |           |           | $    | 73.65     |          
|                                                                 |                                  |                                    |           |           |           |   |           |           |          
|Weighted average number of limited partnership
units outstanding |                                  |                                    | 29,369    |           |           |   | 29,496    |           |           |      | 29,763    |          
|                                                                 |                                  |                                    |           |           |           |   |           |           |          

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

F-3



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Captec Franchise Capital Partners L.P. IV
Statements of Changes in Partners Capital
For the Years Ended December 31, 2002, 2001 and 2000

|                                                       |  |           |        |   |           |   |            |           |  |   |           |   |  |   |            |  
|------------------------------------------------------ |  | --------- | ------ | - | --------- | - | ---------- | --------- |  | - | --------- | - |  | - | ---------- | -
|                                                       |  | Limited   |        |   | Limited   |   |            | General   |  |   | Total     |  
|                                                       |  | Partners |        |   | Partners |   |            | Partners |  |   | Partners |  
|                                                       |  | Units     |        |   | Accounts  |   |            | Account   |  |   | Capital   |  
|                                                       |  |           |        |   |           |   |            |           |  |   |           |  
|Balance, January 1, 2000                               |  |           | 29,883 |   |           | $ | 24,717,802 |           |  | $ | (16,711   | ) |  | $ | 24,701,091 |  
|Repurchase of limited partnership units                |  |           | (258   | ) |           |   | (230,363   | )         |  |   |          |   |  |   | (230,363   | )
|Distributions  ($121.29 per limited partnership unit) |  |           |       |   |           |   | (3,609,998 | )         |  |   | (9,205    | ) |  |   | (3,619,203 | )
|Net income                                             |  |           |       |   |           |   | 2,191,968  |           |  |   | 22,141    |   |  |   | 2,214,109  |  
|                                                       |  |           |        |   |           |   |            |           |  |   |           |  
|Balance, December 31, 2000                             |  |           | 29,625 |   |           |   | 23,069,409 |           |  |   | (3,775    | ) |  |   | 23,065,634 |  
|Repurchase of limited partnership units                |  |           | (234   | ) |           |   | (189,449   | )         |  |   |          |   |  |   | (189,449   | )
|Distributions  ($106.96 per limited partnership unit) |  |           |       |   |           |   | (3,155,000 | )         |  |   |          |   |  |   | (3,155,000 | )
|Net income                                             |  |           |       |   |           |   | 1,920,323  |           |  |   | 19,397    |   |  |   | 1,939,720  |  
|                                                       |  |           |        |   |           |   |            |           |  |   |           |  
|Balance, December 31, 2001                             |  |           | 29,391 |   |           |   | 21,645,283 |           |  |   | 15,622    |   |  |   | 21,660,905 |  
|Distributions  ($104.11 per limited partnership unit) |  |           |       |   |           |   | (3,057,620 | )         |  |   | (62,935   | ) |  |   | (3,120,555 | )
|Repurchase of limited partnership units                |  |           | (50    | ) |           |   | (37,243    | )         |  |   |          |   |  |   | (37,243    | )
|Net income                                             |  |           |       |   |           |   | 1,541,425  |           |  |   | 15,570    |   |  |   | 1,556,995  |  
|                                                       |  |           |        |   |           |   |            |           |  |   |           |  
|Balance, December 31, 2002                             |  |           | 29,341 |   |           | $ | 20,091,845 |           |  | $ | (31,743   | ) |  | $ | 20,060,102 |  
|                                                       |  |           |        |   |           |   |            |           |  |   |           |  

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

F-4



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Captec Franchise Capital Partners L.P. IV
Statements of Cash Flows
For the Years Ended December 31, 2002, 2001 and 2000

|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |          |           |            |            |          |         | 
|---------------------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------------------------------ | ---------------------- | ---------- | -------- | --------- | ---------- | ---------- | -------- | --------- | ---------- | ---------- | -------- | ------- | 
|                                                     |                                                                          |                                                              |                        |            | 2002     |           |            | 2001       |          |           | 2000       |           
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |          |           |            |           
|Cash flows from operating activities:                |                                                                          |                                                              |                        |            |          |           |            |            |          |           |            |           
|                                                     | Net Income                                                               |                                                              | $                      | 1,556,995  |          |           | $          | 1,939,720  |          |           | $          | 2,214,109  |         
|                                                     | Adjustments to net income:                                               |                                                              |                        |            |          |           |            |            |          |           |            |            |         
|                                                     |                                                                          | Depreciation                                                 |                        |            | 489,976  |           |            |            | 482,954  |           |            |            | 394,312  |        
|                                                     |                                                                          | Amortization of debt issuance costs                          |                        |            | 79,804   |           |            |            | 59,519   |           |            |            | 59,519   |        
|                                                     |                                                                          | (Gain) loss on sale of equipment                             |                        |            |         |           |            |            | 258      |           |            |            | (42,433  | )      
|                                                     |                                                                          | Provision for losses                                         |                        |            | 195,542  |           |            |            | 65,000   |           |            |            |         |        
|                                                     |                                                                          | Increase in unbilled rent                                    |                        |            | (217,227 | )         |            |            | (314,284 | )         |            |            | (340,879 | )      
|                                                     |                                                                          | Increase (decrease) in accounts receivable                   |                        |            | (70,088  | )         |            |            | 6,054    |           |            |            | 5,896    |        
|                                                     |                                                                          | Decrease (increase) in accounts payable and accrued expenses |                        |            | (9,118   | )         |            |            | 56,176   |           |            |            | (18,090  | )      
|                                                     |                                                                          | Decrease (increase) in due from related parties              |                        |            | 3,667    |           |            |            | (2,701   | )         |            |            | 39,511   |        
|                                                     |                                                                          | (Decrease) increase in due to related parties                |                        |            | (64,236  | )         |            |            | (169,280 | )         |            |            | 200,341  |        
|                                                     |                                                                          | (Increase) decrease in restricted cash                       |                        |            | (30,733  | )         |            |            | (103,216 | )         |            |            | 113,806  |        
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |         
|Net cash provided by operating activities            |                                                                          |                                                              | 1,934,582              |            |          |           | 2,020,200  |            |          |           | 2,626,092  |           
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |         
|Cash flows from investing activities:                |                                                                          |                                                              |                        |            |          |           |            |            |          |           |            |           
|                                                     | Purchase and construction cost of properties
subject to operating leases |                                                              |                        |           |          |           |            | (14,000    | )        |           |            | (5,063,907 | )       
|                                                     | Proceeds from sale of equipment                                          |                                                              |                        | 180,983    |          |           |            |           |          |           |            | 611,121    |         
|                                                     | Net principal collections on financing leases                            |                                                              |                        | 1,221,113  |          |           |            | 1,267,154  |          |           |            | 1,314,622  |         
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |         
|Net cash provided by (used in) investing activities  |                                                                          |                                                              | 1,402,096              |            |          |           | 1,253,154  |            |          |           | (3,138,164 | )         
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |         
|Cash flows from financing activities:                |                                                                          |                                                              |                        |            |          |           |            |            |          |           |            |           
|                                                     | Proceeds from issuance of notes payable                                  |                                                              |                        |           |          |           |            | 2,203,000  |          |           |            | 3,746,276  |         
|                                                     | Debt issuance costs                                                      |                                                              |                        |           |          |           |            | (38,879    | )        |           |            |           |         
|                                                     | Repayments of notes payable                                              |                                                              |                        | (303,391   | )        |           |            | (914,460   | )        |           |            | (7,527     | )       
|                                                     | Repurchase of limited partnership units                                  |                                                              |                        | (37,243    | )        |           |            | (189,449   | )        |           |            | (230,363   | )       
|                                                     | Distributions to limited partners                                        |                                                              |                        | (3,057,620 | )        |           |            | (3,155,000 | )        |           |            | (3,609,998 | )       
|                                                     | Distributions to general partner                                         |                                                              |                        | (62,935    | )        |           |            |           |          |           |            | (9,205     | )       
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |         
|Net cash used in financing activities                |                                                                          |                                                              | (3,461,189             | )          |          |           | (2,094,788 | )          |          |           | (110,817   | )         
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |         
|Net (decrease) increase in cash and cash equivalents |                                                                          |                                                              | (124,511               | )          |          |           | 1,178,566  |            |          |           | (622,889   | )         
|Cash and cash equivalents, beginning of year         |                                                                          |                                                              | 1,257,402              |            |          |           | 78,836     |            |          |           | 701,725    |           
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |         
|Cash and cash equivalents, end of year               |                                                                          | $                                                            | 1,132,891              |            |          | $         | 1,257,402  |            |          | $         | 78,836     |           
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |         
|Supplemental disclosure of cash flow information:    |                                                                          |                                                              |                        |            |          |           |            |            |          |           |            |           
|                                                     |                                                                          |                                                              | Cash paid for interest |            | $        | 1,191,910 |            |            | $        | 1,147,876 |            |            | $        | 838,430 | 
|                                                     |                                                                          |                                                              |                        |            |          |           |            |            |         

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

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##### Table of Contents






Captec 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 upon formation of the Partnership were Captec Franchise
Capital Corporation IV (the Corporation), a wholly-owned subsidiary of
Captec Financial Group, Inc. (Captec), an affiliate, and Patrick L. Beach,
the Chairman of the Board of Directors, President and Chief Executive Officer
of the Corporation and Captec. In August 1998, Captec Net Lease Realty, Inc.,
(Captec Net Lease) an affiliate, acquired the General Partnership interest of the Partnership.
In December 2001, Captec Net Lease merged with and into
Commercial Net Lease Realty, Inc (Commercial Net Lease Realty). In connection with the merger, Commercial
Net Lease Realty agreed to sell and assign its General Partnership interest
in the Partnership to GP4 Asset Acquisition, LLC, which is wholly-owned by
Mr. Beach and is an affiliate of Captec. The Limited Partners have consented
to the transfer of the general partner interest. In accordance with the terms
of an agreement with Commercial Net Lease, immediately upon the closing of
the merger and until such time as the consent of the Partnerships secured
lender is obtained, GP4 Asset Acquisition has assumed all of the General
Partners obligations and liabilities under the terms of the Partnership
Agreement.
|  
|   |  | The Partnership commenced a public offering (the Offering) of up to 30,000
limited partnership Units, priced at $1,000 per Unit, registered under the
Securities Act of 1933, as amended, by means of a Registration Statement
filed on Form S-11 which was declared effective by the Securities and
Exchange Commission on December 23, 1996. The Partnership accepted
subscriptions for the minimum number of Units on March 5, 1997 and
immediately commenced operations. The Offering reached final funding in
December 1998 having received subscriptions for the entire 30,000 Units.
Since 1999, 659 Units have been repurchased by the Partnership pursuant to
the terms of the Repurchase Plan set forth in the Partnerships December 23,
1996 prospectus with respect to the Offering. At December 31, 2002, the
Partnership had 29,341 Units issued and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | Following is a summary of the Partnerships significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | The Partnership considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | Restricted cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | The Partnership is required to maintain a cash balance in an escrow account
until specific post closing requirements have been satisfied related to a
note payable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | Rental income from operating leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | The Partnerships operating leases have scheduled rent increases which occur
at various dates throughout the lease terms. Increases to rental income on
leases that provide for rental increases based on changes in the Consumer
Price Index commence being recognized when the increase is known. 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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##### Table of Contents





| |  | the lease
agreement, an amount is recorded as unbilled rent. In addition to scheduled
rent increases, certain of the Partnerships leases also have percentage and
overage rent clauses, which the Partnership recognizes after the tenants
reported sales have exceeded the applicable sales breakpoint.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Land and buildings 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). The Partnership
periodically reviews its real estate portfolio for impairment whenever events
or changes in circumstances indicate that the carrying amount of the property
may not be recoverable. If an impairment loss is indicated using undiscounted
cash flows, the loss is measured as the amount by which the carrying amount
of the asset exceeds the estimated fair or present value of the asset on a
discounted cash flow basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | In October 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets (FAS 144). FAS 144 requires
that long-lived assets to be disposed of other than by sale be considered
held and used until they are disposed of. The new standard also requires
that long-lived assets to be disposed of by sale be accounted for under the
requirements of FAS No. 121 which requires that such assets be measured at
the lower of carrying amounts or fair value less cost to sell and to cease
depreciation. FAS 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001. The implementation of this
statement has not had a material effect on the Partnerships financial
statements.                                                                                                                                                                                                                                                                                                           
|
| |  | Net investment in financing leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Net investment in financing leases primarily represents equipment used in
restaurant operations which are leased on a triple-net basis. 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. Direct origination costs are deferred and amortized over the life
of the lease as an adjustment to yield. Income recognition is suspended on
financing leases that become delinquent for 90 or more days. The Partnership
periodically reviews its financing lease portfolio for impairment whenever
events or changes in circumstances indicate that the carrying value of a
lease may not be recoverable. If impairment is indicated, a loss reserve is
calculated based on the estimated amounts recoverable. At December 31, 2002,
the Partnership has provided an allowance of approximately $260,542 for
uncollectible amounts associated with its financing leases.
|
| |  | Note payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Notes payable have fair values
equal to $15,659,148 based on debt with similar terms reflecting
current interest rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Distributions per limited partnership Unit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Distributions per limited
partnership Unit is calculated using the actual distributions
disbursed during the period and the weighted average number of limited
partnership Units outstanding during the period. Actual individual limited
partner distributions realized may vary from this calculation as a
result of a variety of factors including: (i) actual distributions
are computed based on quarterly operating results and outstanding
limited partnership units, which are disbursed in the subsequent
quarter; (ii) certain limited partners have elected to receive
monthly distributions versus quarterly distributions which creates
timing differences between comparative calculations, and (iii) the
calculation ignores the timing of repurchases.                                                                                                                                                                                                                                                                                                                                                                                           

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|   |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | 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.                                                                                                                                                                                                                                                                                                 
|  
|   |  | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Certain prior period financial statement amounts have been reclassified to
conform to the 2002 presentations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|2. |  | Distributions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | Cash flows of the Partnership are allocated 99% to the limited partners and
1% to the General Partner, except that the General Partners share is
subordinated to a 10% per annum cumulative, non-compounded preferred return
to the limited partners. Net sale or refinancing proceeds of the Partnership
are allocated 90% to the limited partners and 10% to the General Partner,
except that the General Partners share is subordinated to a 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | Pursuant to the Partnership Agreement, the General Partner receives
acquisition fees of 4%, plus an additional .00624% for each 1% of
indebtedness incurred in acquiring properties and equipment, of the aggregate
purchase prices of properties and equipment (not to exceed a total 5%
acquisition fee). The Partnership incurred no acquisition fees during 2002
and 2001. In 2000, the Partnership incurred acquisition fees of $240,772. The
acquisition fees are capitalized as part of the Partnerships investment in
land and buildings subject to operating leases and net investment in
financing leases.                                                                                                                             
|  
|   |  | The Partnership has entered into an asset management agreement with the
General Partner and its affiliates, whereby the General Partner and the
General Partners affiliates provide various property and equipment
management services for the Partnership. A subordinated asset management fee
is charged, in an amount equal to 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 10% per annum on their adjusted
invested capital. Management fees of $48,142, $47,426 and $45,556 were
expensed as incurred during 2002, 2001 and 2000, respectively.
|  
|   |  | The Partnership Agreement provides for the General Partner to receive
liquidation fees limited to the lesser of 3% of the gross sales price or 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 10.5%
per annum, cumulative non-compounded preferred return on their adjusted
invested capital plus distributions of sale or refinancing proceeds equal to
100% of their original contributions. The Partnership did not pay any
liquidation fees during 2002, 2001 or 2000.                                                                                               
|  
|   |  | The Partnership Agreement provides for the General Partner to receive
equipment liquidation fees in the amount of 3% of the contract sales price.
The Partnership did not incur any equipment liquidation fees during 2002, 2001 and
2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | An affiliate of the
Partnership, a Small Business Investment Corporation
(SBIC), has invested in certain entities that have leases
with the Partnership. As a result of the investments made through the
SBIC, Mr. Beach or his associates in the SBIC, may have board
representation in these companies. The Partnership and its General
Partner believe that the leases are at market rates for such
properties and equipment.                                                                                                                                                                                                                                                                                                                

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|4. |  | Land and Building Subject to Operating Leases                                                         
|-- |  | ------------------------------------------------------------------------------------------------------
|  
|   |  | The net investment in operating leases as of December 31, 2002 and 2001 is
comprised of the following:

|                          |                               |   |            |            |   |      |            |            |  
|------------------------- | ----------------------------- | - | ---------- | ---------- | - | ---- | ---------- | ---------- | -
|                          |                               |   | 2002       |            |   | 2001 |           
|                          |                               |   |            |            |   |      |           
|Land                      |                               | $ | 11,197,200 |            |   | $    | 11,197,200 |           
|Building and improvements |                               |   | 19,549,580 |            |   |      | 19,549,580 |           
|                          |                               |   |            |            |   |     
|                          |                               |   | 30,746,780 |            |   |      | 30,746,780 |           
|                          | Less accumulated depreciation |   |            | (1,836,387 | ) |      |            | (1,346,411 | )
|                          |                               |   |            |            |   |     
|                          |                               | $ | 28,910,393 |            |   | $    | 29,400,369 |           
|                          |                               |   |            |            |   |     

The following is a schedule of future minimum lease payments to be received on
the operating leases as of December 31, 2002:

|           |  |   |            | 
|---------- |  | - | ---------- | 
|2003       |  | $ | 3,157,794  | 
|2004       |  |   | 3,216,979  | 
|2005       |  |   | 3,274,194  | 
|2006       |  |   | 3,298,327  | 
|2007       |  |   | 3,281,862  | 
|Thereafter |  |   | 32,363,813 | 
|           |  |   |           
|Total      |  | $ | 48,592,969 | 
|           |  |   |           



|5. |  | Net Investment in Financing Leases                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------
|  
|   |  | The net investment in financing leases as of December 31, 2002 and 2001 is
comprised of the following:

|                                      |  |      |            |   |      |   |            |  
|------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                      |  | 2002 |            |   | 2001 |  
|                                      |  |      |            |   |      |  
|Minimum lease payments to be received |  | $    | 3,567,069  |   |      | $ | 5,239,395  |  
|Estimated residual value              |  |      | 183,485    |   |      |   | 232,697    |  
|                                      |  |      |            |   |      |  
|Gross investment in financing leases  |  |      | 3,750,554  |   |      |   | 5,472,092  |  
|Less unearned income                  |  |      | (1,147,432 | ) |      |   | (1,398,482 | )
|Less direct origination costs         |  |      | (11,786    | ) |      |   | (80,178    | )
|                                      |  |      |            |   |      |  
|Net investment in financing leases    |  | $    | 2,591,336  |   |      | $ | 3,993,432  |  
|                                      |  |      |            |   |      |  



| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | The following is a schedule of future minimum lease payments to be received
on the financing leases as of December 31, 2002:

|           |  |   |           | 
|---------- |  | - | --------- | 
|2003       |  | $ | 978,544   | 
|2004       |  |   | 474,287   | 
|2005       |  |   | 255,818   | 
|2006       |  |   | 115,250   | 
|2007       |  |   | 157,485   | 
|Thereafter |  |   | 1,585,685 | 
|           |  |   |          
|Total      |  | $ | 3,567,069 | 
|           |  |   |          



|6. |  | Impaired Financing Leases                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Partnership has one impaired equipment lease at December 31, 2002, with a
recorded investment of $15,000, net of a related allowance of $260,542.
Installment payments on the lease are delinquent by more than 90 days, and
income accrual has been suspended by the Partnership. The net investment in
the impaired lease represents the estimated net proceeds that the Partnership
expects to receive upon sale of the equipment.
|  
|7. |  | Notes Payable                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | In December 1998, the Partnership entered into a $6.4 million term note. The
note has a 10-year term, is collateralized by certain properties subject to
operating leases, and bears an interest rate of 8.13% per annum.                                                                                                                                                                                                                

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##### Table of Contents





| |  | In March 1999, the Partnership entered into an additional $3.3 million term
note. The note has a 10-year term, is collateralized by certain properties
subject to operating leases, and bears an interest rate of 8.5% per annum.         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In October 2000, the Partnership assumed a $3.7 million term note in
connection with the acquisition of a United Supermarket property. The note
has a 10-year term, and bears an interest rate of 8.35% per annum.                        
|
| |  | In November 2001, the Partnership entered into an additional $1.5 million
term note. The note has a 2-year term, is collaterized by certain properties
subject to operating leases, and bears an interest rate of prime plus 2% per
annum.
|
| |  | At December 31, 2002, annual maturities on the notes in aggregate are as
follows:                                                                                                                                                         

|           |       |   |            |            | 
|---------- | ----- | - | ---------- | ---------- | 
|2003       |       | $ | 1,746,059  |           
|2004       |       |   | 310,613    |           
|2005       |       |   | 337,300    |           
|2006       |       |   | 366,279    |           
|2007       |       |   | 397,750    |           
|Thereafter |       |   | 11,216,898 |           
|           |       |   |           
|           | Total |   | $          | 14,374,899 | 
|           |       |   |           



|   |  | Debt issuance costs of $622,434 in aggregate were incurred in connection with
the issuance of the notes, and are being amortized to interest expense using
the straight-line method over the term of the notes.                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|8. |  | Legal Proceedings                                                                                                                                                                                                                                                                                                                         
|  
|   |  | In the ordinary course of business the Partnership has a legal proceeding brought
against them. Management does not expect the outcome of this proceeding to
have a material effect on the financial position or results of operations.                                                                                                   
|  
|9. |  | Subsequent Event                                                                                                                                                                                                                                                                                                                          
|  
|   |  | Based upon the results of operations for the three-month period ended
December 31, 2002, the Partnership declared distributions of $775,000 to its
limited partners on January 15, 2003.                                                                                                                                                  
|  
|   |  | In February 2003, the Partnership agreed, subject to various contingencies,
to acquire a real property leased to a Taco Bell franchisee for a purchase
price of $1,150,000. The Partnership anticipates funding this acquisition
with cash and proceeds from a new bank loan to be closed simultaneously with
the closing of the purchase.

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##### Table of Contents






SCHEDULE III
PROPERTIES AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2002



|                 |                    |          |            |          |       |  |              |           |  |            |   |              |             |  |            |   |  |   |             |  | 
|---------------- | ------------------ | -------- | ---------- | -------- | ----- |  | ------------ | --------- |  | ---------- | - | ------------ | ----------- |  | ---------- | - |  | - | ----------- |  | 
|                 |                    |          |            |          |       |  |              |           |  |            |   |              |             |  |            |   |  |   | Cost        | 
|                 |                    |          |            |          |       |  |              |           |  |            |   |              |             |  |            |   |  |   | Capitalized | 
|                 |                    |          |            |          |       |  |              |           |  |            |   |              |             |  |            |   |  |   | Subsequent  | 
|                 |                    |          | Type of    |          | State |  |              |           |  |            |   | Initial Cost |             |  | To         |  
|Concept          |                    | Property |            | Location |       |  | Encumbrances |           |  | To Company |   |              | Acquisition | 
|                 |                    |          |            |          |       |  |              |           |  |            |   |              |             | 
|                 | Boston Market      |          | Restaurant |          | MN    |  | $            |          |  |            | $ | 1,012,200    |             |  | $          |  | 
|                 | Hollywood Video    |          | Retail     |          | OH    |  |              | 736,836   |  |            |   | 1,455,300    |             |  |            |  | 
|                 | Blockbuster Video  |          | Retail     |          | GA    |  |              | 590,078   |  |            |   | 1,170,000    |             |  |            |  | 
|                 | Italian Oven       |          | Restaurant |          | TX    |  |              | 883,177   |  |            |   | 1,680,000    |             |  |            |  | 
|                 | Arbys             |          | Restaurant |          | OH    |  |              | 398,136   |  |            |   | 819,000      |             |  |            |  | 
|                 | Hollywood Video    |          | Retail     |          | OH    |  |              | 762,912   |  |            |   | 1,454,880    |             |  |            |  | 
|                 | Steak & Ale        |          | Restaurant |          | MI    |  |              | 1,028,261 |  |            |   | 2,100,000    |             |  |            |  | 
|                 | Steak & Ale        |          | Restaurant |          | PA    |  |              | 1,196,139 |  |            |   | 2,441,250    |             |  |            |  | 
|                 | Bennigans         |          | Restaurant |          | VA    |  |              | 796,226   |  |            |   | 1,627,500    |             |  |            |  | 
|                 | Taco Bell          |          | Restaurant |          | MI    |  |              | 385,541   |  |            |   | 766,500      |             |  |            |  | 
|                 | Taco Bell          |          | Restaurant |          | MI    |  |              | 385,541   |  |            |   | 766,500      |             |  |            |  | 
|                 | Arbys             |          | Restaurant |          | MI    |  |              | 381,371   |  |            |   | 840,000      |             |  |            |  | 
|                 | Tony Romas        |          | Restaurant |          | TX    |  |              | 951,803   |  |            |   | 1,942,500    |             |  |            |  | 
|                 | Del Taco           |          | Restaurant |          | CA    |  |              | 654,981   |  |            |   | 1,239,000    |             |  |            |  | 
|                 | Kona Steakhouse    |          | Restaurant |          | TX    |  |              | 750,000   |  |            |   | 1,801,622    |             |  |            |  | 
|                 | Carinos            |          | Restaurant |          | TX    |  |              | 750,000   |  |            |   | 1,675,622    |             |  |            |  | 
|                 | Wingers            |          | Restaurant |          | AZ    |  |              |          |  |            |   | 941,850      |             |  |            |  | 
|                 | Wingers            |          | Restaurant |          | AZ    |  |              | 499,998   |  |            |   | 948,150      |             |  |            |  | 
|                 | Arbys             |          | Restaurant |          | IA    |  |              |           |  |            |   | 987,000      |             |  |            |   | 
|                 | United Supermarket |          | Retail     |          | TX    |  |              | 3,738,450 |  |            |   | 5,077,906    |             |  |            |  | 
|                 |                    |          |            |          |       |  |              |           |  |            |   |              |             |  |            |   |  |  
|Total Properties |                    |          |            |          |       |  |              |           |  |            |   |              |             |  | 30,746,780 |   |  | $ |            | 
|                 |                    |          |            |          |       |  |              |           |  |            |   |              |             |  |            |   |  |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                 |                    |           |              |           |              |             |           |              |              |         |              |              |  |              |              |  |          |  |  |  | 
|---------------- | ------------------ | --------- | ------------ | --------- | ------------ | ----------- | --------- | ------------ | ------------ | ------- | ------------ | ------------ |  | ------------ | ------------ |  | -------- |  |  |  | 
|                 |                    |           | Gross Amount |           |              |             |           |              |              |         |              |              |  |              |              |  |          |  |  | 
|                 |                    |           | At Which     |           |              |             |           |              |              |         |              |              |  |              |              |  |          |  |  | 
|                 |                    |           | Carried At   |           |              |             |           |              |              | Date of |              |              |  |              |              |  |          |  | 
|                 |                    |           | Close        |           |              | Accumulated |           |              | Acquisition/ |         |              | Acquisition/ |  |              |              |  |         
|Concept          |                    | Of Period |              |           | Depreciation |             |           | Construction |              |         | Construction |              |  | Depreciation |             
|                 |                    |           |              |           |              |             |           |              |              |         |              |              |  |              |             
|                 | Boston Market      |           | $            | 1,012,200 |              |             | $         | 92,676       |              |         |              | 1997         |  |              | Acquisition  |  | 40 Years
|                 | Hollywood Video    |           |              | 1,455,300 |              |             |           | 109,992      |              |         |              | 1997         |  |              | Acquisition  |  | 40 Years
|                 | Blockbuster Video  |           |              | 1,170,000 |              |             |           | 104,200      |              |         |              | 1997         |  |              | Acquisition  |  | 40 Years
|                 | Italian Oven       |           |              | 1,680,000 |              |             |           | 71,094       |              |         |              | 1997         |  |              | Acquisition  |  | 40 Years
|                 | Arbys             |           |              | 819,000   |              |             |           | 44,912       |              |         |              | 1998         |  |              | Construction |  | 40 Years
|                 | Hollywood Video    |           |              | 1,454,880 |              |             |           | 112,436      |              |         |              | 1998         |  |              | Acquisition  |  | 40 Years
|                 | Steak & Ale        |           |              | 2,100,000 |              |             |           | 115,408      |              |         |              | 1998         |  |              | Acquisition  |  | 40 Years
|                 | Steak & Ale        |           |              | 2,441,250 |              |             |           | 106,135      |              |         |              | 1998         |  |              | Acquisition  |  | 40 Years
|                 | Bennigans         |           |              | 1,627,500 |              |             |           | 143,877      |              |         |              | 1998         |  |              | Acquisition  |  | 40 Years
|                 | Taco Bell          |           |              | 766,500   |              |             |           | 42,525       |              |         |              | 1998         |  |              | Acquisition  |  | 40 Years
|                 | Taco Bell          |           |              | 766,500   |              |             |           | 49,350       |              |         |              | 1998         |  |              | Acquisition  |  | 40 Years
|                 | Arbys             |           |              | 840,000   |              |             |           | 56,875       |              |         |              | 1998         |  |              | Acquisition  |  | 40 Years
|                 | Tony Romas        |           |              | 1,942,500 |              |             |           | 115,500      |              |         |              | 1998         |  |              | Acquisition  |  | 40 Years
|                 | Del Taco           |           |              | 1,239,000 |              |             |           | 47,910       |              |         |              | 1998         |  |              | Construction |  | 40 Years
|                 | Kona Steakhouse    |           |              | 1,801,622 |              |             |           | 120,994      |              |         |              | 1998         |  |              | Construction |  | 40 Years
|                 | Carinos            |           |              | 1,675,622 |              |             |           | 91,353       |              |         |              | 1999         |  |              | Construction |  | 40 Years
|                 | Wingers            |           |              | 941,850   |              |             |           | 57,256       |              |         |              | 1999         |  |              | Acquisition  |  | 40 Years
|                 | Wingers            |           |              | 948,150   |              |             |           | 58,552       |              |         |              | 1999         |  |              | Acquisition  |  | 40 Years
|                 | Arbys             |           |              | 987,000   |              |             |           | 56,464       |              |         |              | 1999         |  |              | Acquisition  |  | 40 Years
|                 | United Supermarket |           |              | 5,077,906 |              |             |           | 238,878      |              |         |              | 2000         |  |              | Acquisition  |  | 40 Years
|                 |                    |           |              |           |              |             |           |              |              |         |              |              |  |              |              |  |          | 
|Total Properties |                    |           | 30,746,780   |           |              | $           | 1,836,387 |              |              |         |              |              |  |              |              |  |          |  |  | 
|                 |                    |           |              |           |              |             |           |              |              |         |              |              |  |              |              |  |          | 

Notes:



| |  | The changes in total properties for the years ended December 31, 2002 and 2001 are as follows:
| |  | ----------------------------------------------------------------------------------------------

|                           |  |      |            |  |      |   |            | 
|-------------------------- |  | ---- | ---------- |  | ---- | - | ---------- | 
|                           |  | 2002 |            |  | 2001 |  
|                           |  |      |            |  |      |  
|Balance, beginning of year |  | $    | 30,746,780 |  |      | $ | 30,732,780 | 
|Acquisitions               |  |      |           |  |      |   |           | 
|Dispositions and other     |  |      |           |  |      |   |           | 
|Costs Capitalized          |  |      |           |  |      |   | 14,000     | 
|                           |  |      |            |  |      |  
|Balance, end of year       |  | $    | 30,746,780 |  |      | $ | 30,746,780 | 
|                           |  |      |            |  |      |  



| |  | The changes in accumulated depreciation for the years ended December 31, 2002 and 2001 are as follows:
| |  | ------------------------------------------------------------------------------------------------------

|                           |  |      |           |  |      |   |           | 
|-------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                           |  | 2001 |           |  | 2001 |  
|                           |  |      |           |  |      |  
|Balance, beginning of year |  | $    | 1,346,411 |  |      | $ | 863,458   | 
|Depreciation expense       |  |      | 489,976   |  |      |   | 482,953   | 
|Dispositions and other     |  |      |          |  |      |   |          | 
|                           |  |      |           |  |      |  
|Balance, end of year       |  | $    | 1,836,387 |  |      | $ | 1,346,411 | 
|                           |  |      |           |  |      |  

F-11



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##### Table of Contents



|       |  |                                                                                                                                                                                                                               
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Exhibit Index                                                                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                               
|      
|
|4      |  | Amended Agreement of Limited Partnership of Registrant.
(Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-K for the fiscal year ended December 31, 1998)                                    
|       |  |                                                                                                                                                                                                                               
|10.1   |  | Promissory Note dated December 17, 1998 between Registrant and
National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrants Form 10-K for the fiscal
year ended December 31, 1998)
|       |  |                                                                                                                                                                                                                               
|10.2   |  | Promissory Note dated March 30, 1999 between Registrant and
National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrants Form 10-Q for the quarter
ended March 31, 1999)          
|       |  |                                                                                                                                                                                                                               
|99     |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley act of 2002