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

                                    FORM 10-K

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

For the fiscal year ended December 31, 1995

                                       OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
       OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to               .

                          Commission File Number 1-9496

                          BODDIE-NOELL PROPERTIES, INC.
             (Exact name of registrant as specified in its charter)

  Delaware                                             56-1574675
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

3710 One First Union Center, Charlotte, NC                          28202-6032
(Address of principal executive offices)                            (Zip Code)

Registrant's telephone number, including area code  704/333-1367

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

 Title of each class                 Name of each exchange on which registered:

Common Stock, Par Value $.01 per share         American Stock Exchange

     Securities registered pursuant to Section 12(g) of the Act: None

     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

     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 the Form 10-K or any amendment to this
Form 10-K. [ X ]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the Registrant at March 15, 1996 was approximately $36,171,000.

     The number of shares of Registrant's  Common Stock outstanding on March 15,
1996 was 3,016,740

Index to Exhibits at Page  40                    Total number of Pages    115



<PAGE>


                          BODDIE NOELL PROPERTIES, INC.

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>


Item No.     FINANCIAL INFORMATION                                      Page No.

<S>  <C>                                                                     <C> 
      PART I
 1    Business ...........................................................     3
 2    Properties .........................................................     6
 3    Legal Proceedings ..................................................     8
 4    Submission of Matters to a Vote of Security Holders ................     8
 X    Executive Officers of the Registrant ...............................     8

      PART II
 5    Market for Registrant's Common Equity and Related Stockholder
      Matters ............................................................    10
 6    Selected Financial Data ............................................    10
 7    Management's Discussion and Analysis of Financial Condition
      and Results of Operations ..........................................    12
 8    Financial Statements and Supplementary Data ........................    17
 9    Changes in and Disagreements With Accountants on Accounting
      and Financial Disclosure ...........................................    18

      PART III
10    Directors and Executive Officers of the Registrant .................    19
11    Executive Compensation .............................................    19
12    Security Ownership of Certain Beneficial Owners and Management......    19
13    Certain Relationships and Related Transactions .....................    19

      PART IV
14    Exhibits, Financial Statement Schedules, and Reports on Form
      8-K ................................................................    20

</TABLE>


<PAGE>


                                     PART I

ITEM 1.  BUSINESS

History and Development of Boddie-Noell Properties, Inc.

Boddie-Noell   Properties,   Inc.,  (the   "Company")  is  a  self-advised   and
self-managed equity real estate investment trust ("REIT"). The Company, formerly
known as Boddie-Noell  Restaurant  Properties,  Inc., was formed in 1987 with an
initial  public  offering of 2,850,000  shares of common  stock.  The  Company's
shares are listed on the American  Stock  Exchange.  Its  executive  offices are
located at 3710 One First Union Center,  Charlotte,  North  Carolina  28202-6032
(704-333-1367).

From its inception through 1992 the Company's investment strategy was limited to
the purchase and  ownership of 47 restaurant  properties  leased on a triple net
basis to Boddie-Noell Enterprises,  Inc. ("BNE"). During this period the Company
operated as an advised REIT with all  management  and  administrative  functions
being  performed by BNE  Advisory  Group,  Inc.  (an  affiliate of BNE) under an
advisory  contract.  While the Company was able to maintain a relatively  stable
dividend  throughout  this  period,  it  experienced  virtually no growth in its
operating  results,  and its  common  stock did not  perform  as well as that of
larger,  self-managed,  self-advised REITs holding other types of properties and
having more emphasis on long-term growth.

In 1992,  the  Company  began to explore  ways to  increase  shareholder  value.
Following an extensive review of its options,  the Company concluded that it was
in the best interest of its  shareholders  to change the focus of the Company to
emphasize  apartment  properties;  reorganize into a self-managed,  self-advised
REIT;  and to  implement a long-term  growth  strategy  of  acquiring  apartment
properties  with a goal of  increasing  funds from  operations  ("FFO")  and its
annual dividend payment.  To this end, the Company,  in December 1992, entered a
letter of intent to acquire  BT Venture  Corporation  ("BTVC")  and its  managed
properties (the "roll-up"  transaction).  BTVC was a fully integrated  apartment
management and development company located in Charlotte,  North Carolina,  which
owned one apartment  property and managed nine other  apartment  properties  for
limited  partnerships  (collectively  the  "managed  properties"),  the  general
partner of which was an affiliate of BTVC and an affiliate of certain principals
of BNE.  Under the proposed  transaction  the owners of BTVC and the  affiliated
limited partnerships would have received shares of the Company's common stock in
exchange  for  their  respective  ownership  interests  in BTVC and the  managed
properties.  Management of the Company believed that this transaction would have
resulted  in the  Company  achieving  a  number  of  its  goals.  Following  the
transaction  over two-thirds of its assets would have been apartments and, using
personnel  obtained  with the  purchase of BTVC,  the Company  would have become
self-managed and self-advised.  Management  believed that this transaction would
have placed the Company in a better position to attain  long-term  growth in its
operating results.

As  proposed,  the  transaction  constituted  a  "roll-up"  as  defined  by  the
Securities and Exchange  Commission  ("SEC") and was subject to a special set of
rules  governing  the  merger of  multiple  limited  partnerships  into a single
publicly traded entity (the roll-up  rules).  These rules govern and specify the
type and extent of disclosure  required and mandate certain terms and conditions
for  transactions  such as that  contemplated  by the  Company.  At the time the
Company  entered this  transaction,  there had not been a transaction  completed
under the SEC's roll-up rules.

In May 1993,  the  Company  entered  into a contract  to  purchase  BTVC and the
managed properties and, in August 1993, filed a registration  statement together
with  supporting  documents  with the SEC.  With the passage of time,  it became
clear that, due to the complexity of the roll-up rules and changes in the market
for apartment properties,  the difficulty,  time and cost required to complete a
roll-up  transaction such as that  contemplated by the Company was significantly
more than originally  estimated.  In early 1994 the Company's Board of Directors
came to the conclusion  that, as a result of changes in the apartment  sector of
the real  estate  industry  and the  burden of  compliance  with the  disclosure
requirements, it was highly unlikely that the proposed roll-up transaction could
be completed in an  acceptable  period of time and at an  acceptable  cost. As a
result of this determination, the Company withdrew its registration statement in
March 1994.



<PAGE>


Subsequent to the withdrawal of the Registration Statement, the Company explored
alternatives  to the original  roll-up  transaction  that would help the Company
achieve  its goals  without  the cost,  time and  uncertainty  attendant  to the
roll-up  transaction.  As a result, in June 1994, the Company entered a contract
to purchase BTVC in a private  transaction  for a combination of stock and cash.
Pursuant to a Proxy  Statement  filed June 15,  1994,  the  purchase of BTVC was
approved by the  Company's  shareholders  on August 4, 1994.  The  purchase  was
completed  on October 1, 1994.  As part of the  purchase  of BTVC,  the  Company
acquired  Latitudes  Apartments,  a  448-unit  apartment  community  located  in
Virginia Beach, Virginia; management rights and responsibility for ten apartment
communities located in North Carolina and Virginia  (containing a total of 1,947
apartments)  and three shopping  centers  located in North Carolina and Virginia
(containing  a total  of  238,550  square  feet);  and the  employees  of  BTVC,
including all  administrative  and  management  staff.  Simultaneously  with the
acquisition of BTVC, the Company  changed its name to  Boddie-Noell  Properties,
Inc., and moved its corporate  headquarters from Rocky Mount, North Carolina, to
Charlotte, North Carolina.

Throughout  the time that the Company was involved with the roll-up  transaction
and the  subsequent  purchase  of  BTVC,  the  Company  was  pursuing  apartment
acquisitions.  In June 1993, the Company  acquired Paces Commons  Apartments,  a
336-unit  apartment  community located in Matthews,  North Carolina (a suburb of
Charlotte).  In June 1994, the Company acquired Oakbrook Apartments,  a 162-unit
apartment  community located in Charlotte,  North Carolina.  These  acquisitions
were identified by and were made with the assistance of BTVC personnel.

Subsequent to the  acquisition of BTVC, in December  1994, the Company  acquired
Harris Hill Apartments,  a 184-unit  apartment  community  located in Charlotte,
North Carolina.

Current Operations

As a result of these acquisitions, the Company now owns 47 restaurant properties
and four apartment communities,  containing a total of 1,130 apartments. Through
its  unconsolidated  subsidiary,  BNP  Management,  Inc., the Company manages an
additional nine apartment  communities,  containing a total of 1,713 apartments,
and two shopping centers,  containing a total of 113,800 square feet. All of the
properties  presently  owned or managed by the Company are located in the states
of North Carolina and Virginia, with multi-family  residential operations in the
North Carolina cities of Raleigh,  Durham, Cary, Chapel Hill, and Charlotte,  as
well as Virginia Beach, Virginia.

The Company has 80 employees, including administrative,  management, accounting,
legal, acquisitions,  development, property management, leasing, and maintenance
personnel. The Company operates as a self-advised and self-managed REIT.

With the addition of four apartment  properties in June 1993 and June,  October,
and December 1994, apartment rental income accounts for a significant portion of
revenues,  totaling  $8.5  million in 1995  compared to $3.9 million in 1994 and
$1.2 million in 1993. 1995 apartment rental income  represents  approximately 62
percent of total revenues.

Each  apartment  community is operated by an on-site  manager  assisted by staff
trained by the Company in sales, management,  accounting,  maintenance and other
procedures.  On-site  managers report directly to property  managers who operate
from the  Company's  corporate  offices.  This flat  organization  provides  for
efficient staffing levels,  reduces overhead expenses and enables the Company to
be responsive to the needs of residents and on-site employees.  Employees of the
Company  supervise all  renovation  and repair  activities,  which are generally
completed by outside contractors.

Restaurant  properties are leased on a triple net basis to BNE, a privately held
company,  which is the second largest  Hardee's  franchisee in the United States
with  approximately  365 stores.  The Company's  lease  agreement  with BNE (the
"master  lease"),  as amended in  December  1995,  has a primary  term  expiring
December 2007,  grants BNE three five-year renewal options and provides for rent
equal to 9.875  percent of  restaurant  sales as  defined,  subject to a minimum
annual rent of $4,500,000 per year.  Under the terms of the master lease, BNE is
responsible  for all  aspects of the  operation,  maintenance  and upkeep of the
restaurant  properties.  Restaurant  rental income  totaled $4.6 million in 1995
compared  to $5.0  million  in 1994 and $5.2  million in 1993.  1995  restaurant
rental income represents

<PAGE>


approximately 34 percent of total revenues. (See Item 7, Management's Discussion
and Analysis of Financial  Condition and Results of Operations for discussion of
restaurant sales trends.)

Business Strategy

Building upon the  acquisition of its four apartment  communities  and BTVC, the
Company intends to continue to acquire high quality  apartment  properties.  The
Company currently has no plans to add to or dispose of its restaurant properties
and will not seek additional  third-party management contracts except as part of
a plan to acquire additional properties.

The Company  believes that its strategy of combining the  restaurant  properties
with increasing  investment in apartment  communities will provide for growth in
FFO and enhance shareholder value. The Company will seek to acquire multi-family
properties located primarily in the states of North Carolina, South Carolina and
Virginia  from  unaffiliated  third  parties  and as  well as some or all of the
affiliated  properties it currently  manages.  The Company will also selectively
consider  opportunities  for  development  of  new  apartment  communities.  The
Company's  management  has developed  781 apartment  units and believes that its
development  experience will enable it to build additional apartment communities
at such time as economic  conditions  and  available  capital  make  development
attractive.

In evaluating  potential  properties for acquisition,  the Company will consider
such  factors as (1) the current and  anticipated  cash flow of the property and
its adequacy to meet operational  needs and other  obligations and to facilitate
the Company's ability to pay dividends;  (2) the geographic area and demographic
profile;  (3) the location,  construction  quality,  condition and design of the
property  (generally  properties will be or have the potential to become Class A
apartment  communities);  (4) the potential for increasing cash flow by means of
increasing rental rates and reducing operating  expenses;  (5) the potential for
capital  appreciation;  (6) the growth,  tax and  regulatory  environment of the
community in which the  property is located;  (7)  occupancy  and demand for the
property;  and (8)  prospects for eventual sale or  refinancing.  Generally,  an
apartment  property will be acquired only where the operating  history indicates
that the property will  contribute  immediately  to the cash flow of the Company
and there is a strong likelihood of increasing cash flow.

Prior  to  acquiring  its  first  apartment  community,  the  Company's  capital
requirements  were minimal as all capital  expenses  related to the  restaurants
were borne by BNE under the terms of the master lease. In order to acquire Paces
Commons,  Oakbrook,  BTVC,  Latitudes and Harris Hill,  the Company has incurred
additional debt and issued additional common stock. The additional debt consists
of first  mortgages  secured by the  acquired  apartment  communities  and draws
against  the  Company's  credit  lines.  In order for the Company to continue to
acquire apartment  properties,  it is essential that it obtain additional equity
capital.  The Company is actively exploring available sources of equity capital.
It is likely that the Company will incur  additional  long-term  debt as part of
any apartment  acquisitions.  While short-term variable rate debt may be used to
facilitate an acquisition,  the preferred permanent financing will be long-term,
fixed rate, and self-amortizing.

The Company is committed to reducing  its  exposure to variable  rate debt.  The
Company converted $31.1 million and $29.3 million of variable rate debt to fixed
rates during 1994 and 1995, respectively.

The Company has  elected  and expects to be taxed as a REIT under  Sections  856
through  860 of the  Internal  Revenue  Code of 1986,  as  amended.  As such the
Company  generally  will not be subject to federal or state  income taxes on net
income.  REITs  are  subject  to a  number  of  organizational  and  operational
requirements,  including a requirement that they currently distribute 95 percent
of their  ordinary  taxable  income as  dividends.  The  Company  intends to pay
dividends quarterly,  expects that these dividends will substantially exceed the
95 percent taxable income test, and anticipates  that all dividends will be paid
from current funds from operations.

In addition to the 95 percent  taxable  income test, the Company is subject to a
"non-qualifying" income test which requires that no more than 5 percent of total
revenue come from sources deemed to be "non-qualifying."  Failure to comply with
this  requirement  may result in the loss of the Company's REIT status.  Revenue
from third-party  property  management  contracts  assumed at the acquisition of
BTVC in  1994 is  considered  to be  non-qualifying  income.  As a  result,  the
Company, in 1994, had non-qualifying  income of approximately 3 percent of total
revenue. To ensure that

<PAGE>


non-qualifying  income  does not exceed 5 percent of its total  revenue,  in May
1995 the Company  transferred  the third-party  management  contracts to a newly
formed  unconsolidated  management  subsidiary,  BNP Management,  Inc., which is
subject to federal and state income  taxes.  This  structure is currently  being
used by a number of other REITs.

The Company  expects to meet its  short-term  liquidity  requirements  generally
through net cash provided by operations and  utilization  of credit  facilities.
The Company  believes that its net cash provided by operations  will be adequate
and  anticipates  that it will  continue to be  adequate to meet both  operating
requirements  and payment of  dividends by the Company in  accordance  with REIT
requirements  in both the  short  and the long  term.  The  Company  anticipates
funding its acquisition activities, if any, primarily by using short-term credit
facilities or secured debt. The Company expects to meet certain of its long-term
liquidity  requirements,  such as scheduled  debt  maturities  and  repayment of
short-term  financing  of  possible  property  acquisitions,  through  long-term
secured  and  unsecured  borrowings  and  the  issuance  of debt  securities  or
additional  equity  securities of the Company.  The Company believes that it has
sufficient resources to meet its short- and long-term liquidity requirements.


ITEM 2.  PROPERTIES

The Company owns 47 restaurant properties and four apartment communities. All of
the  Company's  properties  are  located  in the  states of North  Carolina  and
Virginia.  The properties  are held subject to loans,  discussed in Notes to the
Financial Statements included in Item 14 of this Annual Report.

Restaurant Properties

The locations of the Company's 47 restaurant  properties  are listed in Schedule
III included in Item 14 of this Annual  Report.  The  restaurant  properties are
leased on a triple  net basis to BNE  pursuant  to a master  lease.  The  master
lease,  as  amended in  December  1995,  provides  for a primary  term  expiring
December 2007,  grants BNE three five-year renewal options and provides for rent
equal to 9.875  percent of  restaurant  sales as  defined,  subject to a minimum
annual rent of $4,500,000.  The average price for the restaurant  properties was
approximately $920,000 per property. Under the terms of the master lease, BNE is
responsible  for all  aspects of the  operation,  maintenance  and upkeep of the
restaurant properties. A copy of the master lease is included as Exhibit 10.1 to
this Annual Report.

The restaurant  properties are operated by BNE as Hardee's  restaurants pursuant
to franchise agreements. These agreements require that the properties conform to
a standard  design  specified by Hardee's Food Systems,  Inc.  ("Hardees").  The
current  design  consists of a one-story  brick,  stucco or wood  building  that
embodies a contemporary  style with  substantial  plate glass window areas.  The
buildings  average  3,300 square feet and are located on sites ranging from 1 to
1.3 acres.  The buildings are suitable for  conversion to a number of uses,  but
the  interiors   must  be   substantially   modified  prior  to  utilization  in
non-restaurant  applications.  Hardee's owns a design patent on certain elements
of the building and requires franchisees to make certain exterior  modifications
if the location is discontinued as a Hardee's restaurant.

Under the master lease BNE is responsible for all normal  maintenance and repair
of the restaurant  properties.  In addition,  BNE is responsible for the cost of
any  improvement,  expansion,  remodeling  or  replacement  required to keep the
properties  competitive or in conformity with Hardee's building  standards.  The
decision  to modify a  particular  restaurant  property  is based on a number of
factors,  including the date of its last  modification  and the number,  age and
design  features  of  competing  restaurants  located in the market  area of the
particular property.

Since the  Company's  inception in 1987,  16  restaurants  have been  renovated,
including one that was completely  rebuilt.  All  renovations  have been made at
BNE's expense.

Apartment Properties

The Company owns four apartment properties containing a total of 1,130 units. Of
these,  three  properties  containing a total of 682  apartments  are located in
Charlotte,  North  Carolina,  and one property with 448 apartments is located in
Virginia Beach, Virginia. Summary information concerning each apartment property
follows:

<PAGE>


Paces Commons Apartments.  Located in Charlotte,  North Carolina,  Paces Commons
was constructed in 1988 on 24.8 acres. The property consists of 18 two and three
story masonry and wood frame buildings containing 336 garden type apartments,  a
clubhouse,  a family  center,  two pools,  a whirlpool,  car wash and two tennis
courts.  The community  offers eight  different one, two and three bedroom floor
plans with an average size of 862 square feet.  The property was acquired by the
Company  on June 8, 1993,  for a contract  price of  $14,250,000.  The  property
appraised for $16,763,000 in August 1994. Occupancy statistics are summarized as
follows:
<TABLE>
<CAPTION>

                                                               December        December
                                   Average   Average Revenue    Average    Average Revenue
                                  Economic     per Occupied     Physical     per Occupied
                                 Occupancy*        Unit        Occupancy         Unit
<S>                                 <C>          <C>              <C>          <C>
Year ended December 31, 1995         94%          $655             93%          $679
Year ended December 31, 1994         95%          $611             95%          $646
June 8 thru December 31, 1993        95%          $576             94%          $589

</TABLE>
*Average  Economic  Occupancy  is defined as gross  potential  rent less vacancy
divided by gross potential rent.

Oakbrook  Apartments.   Located  in  Charlotte,  North  Carolina,  Oakbrook  was
constructed in 1985 on a 16.37 acre site. The property  consists of 17 two story
wood frame  buildings  with cedar siding and brick veneer  containing 162 garden
and townhouse  style apartment  units.  The property offers eight different one,
two and three bedroom floor plans  averaging 1,100 square feet. The property was
acquired by the Company on June 7, 1994, for a contract price of $9,250,000. The
property  appraised  for  $9,832,000  in April 1994.  Occupancy  statistics  are
summarized as follows:
<TABLE>
<CAPTION>

                                                                    December          December
                                 Average      Average Revenue       Average       Average Revenue
                                Economic        per Occupied        Physical        per Occupied
                               Occupancy*           Unit           Occupancy            Unit
<S>                                <C>            <C>                 <C>             <C>
Year ended December 31, 1995        98%            $750                97%             $765
June 7 thru December 31, 1994       98%            $711                97%             $740

</TABLE>
*Average  Economic  Occupancy  is defined as gross  potential  rent less vacancy
divided by gross potential rent.

Latitudes  Apartments.  Located  in  Virginia  Beach,  Virginia,  Latitudes  was
constructed  in 1989 on a 24.86 acre site.  The property  consists of 20 two and
three story wood frame  buildings with vinyl siding  containing 448 garden style
apartment  units.  The property  offers six different one, two and three bedroom
floor plans  averaging 800 square feet. The property was acquired by the Company
on  October  1, 1994,  as part of the  acquisition  of BTVC.  The  property  was
purchased by BTVC on December 3, 1992, for a contract price of $19,000,000.  The
property  appraised for  $22,150,000 in January 1994.  Occupancy  statistics are
summarized as follows:
<TABLE>
<CAPTION>

                                                                December       December
                                 Average     Average Revenue    Average    Average Revenue
                                Economic       per Occupied     Physical     per Occupied
                               Occupancy*          Unit        Occupancy         Unit
<S>                                <C>           <C>              <C>          <C>
Year ended December 31, 1995        95%           $613             93%          $614
Year ended December 31, 1994        93%           $606             96%          $610
Year ended December 31, 1993        90%           $593             85%          $585
</TABLE>

*Average  Economic  Occupancy  is defined as gross  potential  rent less vacancy
divided by gross potential rent.



<PAGE>


Harris Hill Apartments.  Located in Charlotte,  North Carolina,  Harris Hill was
constructed  in 1988 on a 18.37 acre site.  The property  consists of 19 two and
three story wood frame  buildings  with wood siding  containing 184 garden style
apartment  units.  The property  offers four different one and two bedroom floor
plans  averaging  912 square  feet.  The property was acquired by the Company on
December 28, 1994, at a contract price of $8,900,000. The property appraised for
$9,500,000 in October 1994. Occupancy statistics are summarized as follows:

<TABLE>
<CAPTION>
                                                              December       December
                                 Average    Average Revenue   Average    Average Revenue
                                Economic      per Occupied    Physical     per Occupied
                               Occupancy*         Unit       Occupancy         Unit
<S>                                <C>          <C>             <C>          <C>
Year ended December 31, 1995        96%          $683            92%          $741
December, 1994                                                   95%          $641

</TABLE>

*Average  Economic  Occupancy  is defined as gross  potential  rent less vacancy
divided by gross potential rent.


ITEM 3.  LEGAL PROCEEDINGS

The Company is a party to a variety of legal proceedings arising in the ordinary
course  of its  business.  In  addition,  the  Company  has  become a  successor
party-in-interest to certain legal proceedings as a result of its acquisition of
BTVC. These matters arose in the ordinary course of BTVC's business either as an
owner of an apartment  community  or as a property  management  company.  All of
these  matters,  individually  and in  aggregate,  are  not  expected  to have a
material adverse impact on the Company.

In the event a claim were successful, the Company believes that it is adequately
covered by insurance and indemnification  agreements.  The Company has insurance
coverage  on  each  of  its  apartment  properties.   The  Company's  restaurant
properties are subject to an indemnification  agreement whereby BNE, the lessee,
is responsible for all claims arising from a restaurant  property.  In addition,
BNE  is  required  to  provide  insurance  on  each  restaurant  property  which
identifies the Company as a named insured.  Each property which is managed,  but
not owned by the  Company,  is covered by an  insurance  policy  under which the
Company  is a named  insured.  As to claims to which the  Company  has  become a
successor  party-in-interest  to  BTVC,  the  Company  received,  as part of the
acquisition  of BTVC,  an  indemnification  agreement  from B. Mayo  Boddie  and
Nicholas  B.  Boddie  (the sole  shareholders  of BTVC)  whereby the Company is,
subject to certain  limitations,  indemnified  from loss  arising out of a claim
against BTVC.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of fiscal year 1995.


ITEM X.  EXECUTIVE OFFICERS OF THE REGISTRANT

Set  forth  below is a  listing  and brief  biography  of each of the  executive
officers of the Company at March 15, 1996.



<PAGE>

<TABLE>
<CAPTION>

------------------------------ ------------------------------------------------ --------------
Name                    Age    Position                                         Officer Since
------------------------------ ------------------------------------------------ --------------
<S>                     <C>   <C>                                              <C>                 
D. Scott Wilkerson       38    President and Chief Executive Officer            October, 1994
Philip S. Payne          44    Executive Vice President, Treasurer and Chief    October, 1994
                               Financial Officer
Douglas E. Anderson      48    Vice President, Secretary                        1987
W. Craig Worthy          43    Vice President                                   1987
Lisa K. McCourt          32    Vice President for Property Management Services  October, 1994
Pamela B. Novak          42    Vice President, Controller                       October, 1994

------------------------------ ------------------------------------------------ --------------
</TABLE>

D. Scott Wilkerson - President and Chief Executive  Officer.  From 1980 to 1986,
Mr. Wilkerson was with Arthur Andersen LLP, Charlotte,  North Carolina,  serving
as tax manager from 1985 to 1986. His  specialization  was in the representation
of real estate syndicators,  developers and management  companies.  He joined BT
Venture  Corporation  ("BTVC")  in 1987 and  served  in  various  officer  level
positions,  including  vice  president  of  administration  and finance and vice
president for acquisitions and development  before becoming president in January
1994.  He was named Chief  Executive  Officer of the Company in April 1995.  Mr.
Wilkerson  received a B.S.  degree in  accounting  from the  University of North
Carolina at Charlotte in 1980. He is a licensed C.P.A.  and licensed real estate
broker.  He has been  active  in  various  professional,  civic  and  charitable
activities.

Philip S.  Payne -  Executive  Vice  President,  Treasurer  and Chief  Financial
Officer.  Mr.  Payne  joined BTVC in 1990 as vice  president  of capital  market
activities and became  executive vice president and chief  financial  officer in
January 1993. He was named  Treasurer of the Company in April 1995. From 1987 to
1990 he was a principal in Payne Knowles  Investment Group, a financial planning
firm. From 1983 to 1987 he was a registered  representative with Legg Mason Wood
Walker.  From 1978 to 1983, Mr. Payne  practiced law. He received a B.S.  degree
from the College of William and Mary in 1973 and a J.D.  degree in 1978 from the
same institution.

Douglas E. Anderson - Vice President and Secretary.  Mr.  Anderson has served as
Vice  President and Secretary of the Company since its inception in 1987. He has
been with BNE since 1977 and is currently a director,  executive  vice president
and secretary of BNE. Mr. Anderson is also president of BNE Land and Development
Company, the real estate development division of BNE. He serves as a director of
Wachovia Bank of Rocky Mount, North Carolina,  the Educational Foundation of the
University  of North  Carolina  and is a former  director of Golden  Corral Real
Estate  Investment  Trust.  He  received a B.S.  degree in  accounting  from the
University of North Carolina at Chapel Hill in 1970.

W. Craig Worthy - Vice President. Mr. Worthy has served as Vice President of the
Company  since its inception in 1987 and served as Treasurer of the Company from
its inception until April 1995. He is a licensed certified public accountant and
has been  employed  by BNE since  1979.  Mr.  Worthy is  currently  senior  vice
president and chief  financial  officer of BNE. He serves as a director of First
Union Bank of Rocky Mount,  North  Carolina.  He received a B.A. degree from the
University  of  Virginia  in 1974 and a Master of  Accountancy  and of  Business
Administration from the University of South Carolina in 1977.

Lisa K. McCourt - Vice  President,  Property  Management  Services.  Ms. McCourt
joined BTVC in 1989 as a community manager and was promoted to regional property
manager  and  oversaw  all  apartment  and  shopping  center  operations  in the
Raleigh-Durham-Chapel  Hill area of North Carolina and Virginia Beach, Virginia;
she became vice president of property  management in 1993.  Prior to joining the
Company,  she worked for eight years in  property  management  with  fee-managed
properties for Boyd & Hassell Property Management Company.

Pamela B. Novak - Vice President and  Controller.  A licensed  certified  public
accountant, Ms. Novak joined BTVC in 1993 as controller.  From 1984 to 1993, she
was employed by Ernst & Young,  as an audit manager from 1987 through 1993.  She
received a B.S. in accounting from the University of North Carolina at Charlotte
in 1984.



<PAGE>


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's  Common Stock has been traded on the American Stock Exchange under
the symbol "BNP". There were approximately 1,610 shareholders of record at March
15,  1996.  The table  below sets forth for the periods  indicated  the range of
high,  low and  closing  sale  prices of the  Common  Stock as  reported  by the
American  Stock  Exchange.  As of  March  15,  1996,  the  closing  price of the
Company's Common Stock was $13.50 per share.

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------
                                Stock Price                   Dividends
                   High            Low         Close       Paid Per Share
-----------------------------------------------------------------------------
<S>                <C>            <C>          <C>              <C>
1995
First quarter       $13 7/8        $12 1/8      $13 3/8          $  .31
Second quarter       13 5/8         11 1/4       12 7/8             .31
Third quarter        13 5/8         12 1/4       12 7/8             .31
Fourth quarter       13 1/8         12 1/8       12 1/2             .31
                                                                  $1.24

1994
First quarter        15 3/4         13 5/8       13 7/8          $  .31
Second quarter       14 3/8         13 1/2       14 1/4             .31
Third quarter        14 3/8         13 1/2       14 1/4             .31
Fourth quarter       14 1/2         12 1/2       12 1/2             .31
                                                                  $1.24

-----------------------------------------------------------------------------
</TABLE>

The  Company  has a  dividend  reinvestment  plan  which  is  available  to  all
shareholders  of record.  Under this plan, the plan  administrator,  First Union
National  Bank of North  Carolina,  will  reinvest  dividends  on behalf of plan
participants  by buying  shares of the  Company's  stock on the open market.  In
addition, shareholders who participate in the plan may elect to supplement their
reinvestment  program with cash  contributions  of any amount from $25 to $3,000
per quarter.

The Company  has  elected  and  expects to be taxed as a real estate  investment
trust ("REIT") under the Internal Revenue Code. REITs are subject to a number of
organizational and operational  requirements,  including a requirement that they
currently  distribute at least 95 percent of their  ordinary  taxable  income as
dividends.  The Company intends to pay dividends  quarterly,  expects that these
dividends  will  substantially  exceed the 95 percent  taxable  income test, and
anticipates that all dividends will be paid from current funds from operations.


ITEM 6.  SELECTED FINANCIAL DATA

From its inception through 1992 the Company's investment strategy was limited to
the purchase and  ownership of 47 restaurant  properties  leased on a triple net
basis. In June 1993, the Company acquired Paces Commons  Apartments,  a 336-unit
apartment community.  In June 1994, the Company acquired Oakbrook Apartments,  a
162-unit apartment community. In October 1994, the Company acquired by merger BT
Venture Corporation ("BTVC"),  including a fully integrated apartment management
and  development  operation  and  Latitudes  Apartments,  a  448-unit  apartment
community.  In December 1994, the Company  acquired  Harris Hill  Apartments,  a
184-unit  apartment  community.  (See  discussion of History and  Development of
Boddie-Noell Properties, Inc. included in Item 1 of this Annual Report.)



<PAGE>

<TABLE>
<CAPTION>


----------------------------------- -----------------------------------------------------------------------------
                                                          For the years ended December 31,
                                         1995            1994            1993            1992           1991
----------------------------------- --------------- --------------- --------------- --------------- --------------
<S>                                   <C>              <C>             <C>             <C>            <C>  
Operating Data
Revenues                               $13,725,638      $9,258,246      $6,425,852      $5,373,305     $5,108,207
Net income (1)                           1,628,268       2,301,919       2,455,451       3,158,521      2,924,242

Net income per share                          $.54            $.80            $.86           $1.11          $1.03
Weighted average number of shares
                                         3,005,809       2,885,248       2,850,000       2,850,000      2,850,000
Distributions per share:
     Ordinary income                        $  .60          $  .63           $1.09           $1.11          $1.03
     Return of capital                         .64             .61             .15             .13            .27
          Total                              $1.24           $1.24           $1.24           $1.24          $1.30

Balance Sheet Data (at year end)
Total assets                           $94,351,776     $95,954,214     $54,642,613     $40,465,345    $40,837,589
Notes payable                           67,161,785      66,883,556      26,894,378      12,000,000     12,000,000
Shareholders' equity                    26,199,938      27,967,909      27,251,996      28,330,545     28,706,024

Other Data
Funds from operations (2)               $4,449,671      $4,291,439      $4,028,885      $3,943,175     $3,717,646

----------------------------------- --------------- --------------- --------------- --------------- --------------
</TABLE>

(1)  1995,  1994 and 1993 net  income  includes  a special  charge of  $321,000,
$377,000 and $600,000, respectively, to write off certain acquisition costs .

(2) The Company  considers  funds from  operations  ("FFO") to be an appropriate
measure of the  performance of an equity REIT.  FFO is generally  defined as net
income (loss) plus certain non-cash items, primarily  depreciation.  Adjustments
for all  periods  shown  consisted  only  of  depreciation,  amortization  of an
intangible asset related to acquisition of management operations,  and write-off
of  deferred  acquisition  and  financing  costs.  All FFO  amounts  reflect the
definition  recommended by the National  Association  of Real Estate  Investment
Trusts,  as modified in 1995 to  eliminate  amortization  of deferred  financing
costs  previously  added back to net income when  computing  FFO. The  following
table  reflects the effect of this change in definition  and  reconciles  FFO as
previously defined to FFO amounts identified above.

<TABLE>
<CAPTION>

                      FFO, as                                 FFO, as
                    previously           Effect of           currently
                      defined            revision             defined
<S>                <C>                 <C>                  <C>
 1995:
 First quarter      $1,045,523          $  (53,883)          $  991,640
 Second quarter      1,193,473             (34,715)           1,158,758
 Third quarter       1,106,745             (29,060)           1,077,685
 Fourth quarter      1,251,031             (29,443)           1,221,588
                     4,596,722            (147,101)           4,449,671

 1994:
 First quarter         902,755             (37,128)             865,627
 Second quarter      1,090,308             (38,100)           1,052,208


<PAGE>


 Third quarter       1,139,076             (48,794)           1,090,282
 Fourth quarter      1,335,916             (52,594)           1,283,322
                     4,468,055            (176,616)           4,291,439
 
 1993                4,121,286             (92,401)           4,028,885

 1992                3,957,023             (13,848)           3,943,175

 1991                3,731,494             (13,848)           3,717,646

</TABLE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following  discussion should be read in conjunction with the Balance Sheets,
Statements of  Operations  and  Statements of Cash Flows  included in Item 14 of
this Report.

Results of Operations

Revenues.  The  Company's  revenues  come from two primary  sources - restaurant
rental income and apartment rental income.  Prior to 1993 the Company's  primary
source of revenue  was  restaurant  rental  income.  In June 1993,  the  Company
acquired Paces Commons  Apartments,  which generated  apartment rental income of
$1.2 million in seven months. Revenues in 1994 were $9.3 million, an increase of
44 percent over 1993,  primarily  attributable  to the impact of acquisitions of
BTVC property management  operations and three apartment communities during 1994
(Oakbrook Apartments--June 1994; Latitudes  Apartments--October 1994, and Harris
Hill  Apartments--December  1994)  and full  year  operations  of Paces  Commons
Apartments.  For the year 1995,  revenues increased 48 percent to $13.7 million,
again  primarily  attributable  to the impact of  acquisitions  of and continued
improvements  in  operations  at  the  Company's  four  apartment   communities.
Apartment  rental  income  accounts  for 62  percent of total  revenues  in 1995
compared  to 42  percent  in 1994  and 20  percent  in 1993,  indicative  of the
Company's  focus on  growth  in  apartment  operations.  Increases  in  revenues
attributable  to the  Company's  apartment  operations  were offset  somewhat by
declines  in  restaurant  rental  income in 1994 and 1995 and the  creation of a
property management subsidiary in May 1995.

Revenues from Company-owned  apartments increased 212 percent and 118 percent in
1994 and 1995,  respectively.  While this increase is primarily  attributable to
acquisitions,  apartment  operations  reflect continued  improvement.  Occupancy
remained  consistently  high at an average of approximately 95 percent since the
first  apartment  acquisition in mid-1993.  Average monthly revenue per occupied
unit grew from $613 in January 1995 to $676 in December 1995.
(See discussion of Apartment Properties included in Item 2 of this Report.)

Restaurant  rental  income  payments are  comprised of the greater of minimum or
percentage  rent based on food  sales of 47  restaurants  under a single  master
lease. Until 1992,  restaurant rental income had remained  generally  consistent
since the  inception of the Company in 1987. In 1992,  restaurant  rental income
increased by 5 percent over 1991, primarily  attributable to the introduction by
Boddie-Noell  Enterprises,  Inc.  ("BNE"),  the lessee,  of fried chicken at the
Company's  properties.  Restaurant  rental  income  subsequently  declined  by 3
percent in 1993 and 2 percent in 1994. The 1993 decline  reflected the return to
a more normal sales level following the 1992 increase occasioned by introduction
of new products,  while the 1994 decline was attributed  primarily to closing of
seven restaurants at various times during the year for remodeling.

The Company continued to experience  negative  comparisons for restaurant rental
income in 1995,  with an 8 percent  decline from 1994.  "Same-store"  restaurant
sales for  locations  open for the full  periods  in both  years  declined  by 9
percent  for  the  year.   The  difference  in  trends  for  rental  income  and
"same-store"  sales can be attributed to 1994 closings for scheduled  remodeling
(all stores were open  throughout  1995).  Widespread  price  discounting in the
quick-service  restaurant industry and the lack of a strong hamburger product on
the  Hardee's  menu  appear  to be the  principal  reasons  for the  decline  in
restaurant  sales  volume and  related  rental  income.  BNE and  Hardee's  Food
Systems, the

<PAGE>


restaurant franchisor,  are taking aggressive steps to improve restaurant sales.
This  includes a new  advertising  campaign,  introduction  of several  new food
items,  and a return to the charbroil  cooking  method for  hamburger  products.
While  it is too  early to judge  the  impact  of  these  steps,  management  is
cautiously  optimistic  that, by the end of 1996,  the Company will begin to see
improving restaurant sales.

Effective  December  22,  1995,  the Company and BNE entered into a modified and
restated  master  lease which  increases  the  required  minimum rent from $3.46
million per year to $4.5  million per year and extends the primary term from May
2002 to December 2007. The percentage rent remains set at 9.875 percent of gross
food sales.  The  modified  master  lease  effectively  limits the impact of any
further   decline  in  restaurant   sales  to  a  maximum   further  decline  of
approximately $150,000, or 3 percent, in restaurant rental income.

As part  of the  acquisition  of BTVC in  October  1994,  the  Company  received
third-party  property  management  contracts for ten apartment  communities  and
three shopping  centers.  In May 1995, the Company  established  BNP Management,
Inc.  (the  "Management  Company"),  a subsidiary in which the Company owns a 95
percent  economic  interest and a 1 percent  voting  interest.  As of October 1,
1995, the Company has transferred all third-party  management  contracts to this
subsidiary,  and all third-party  management activities are now conducted by the
Management Company. On November 1, 1995, one of the managed apartment properties
was sold, and the management  contract was terminated.  In February 1996, one of
the managed shopping centers was sold, and that management contract was likewise
terminated.  As the Company expects to receive  significantly  all net income of
the  subsidiary,  management  does not expect the  formation or operation of the
management  subsidiary to have a significant effect on the financial position or
operating  results of the Company.  Management  fees  totaled  $276,000 in three
months of 1994 and $515,000 in nine months of 1995.  Equity in the income of the
Management Company totaled  approximately  $48,000 in 1995. The Company accounts
for its  investment  in the  Management  Company  using  the  equity  method  of
accounting;  therefore,  95 percent of the net income of the Management  Company
flows through to the Company's financial statements as a single line item.

Expenses.  For the years 1988 through 1992, total expenses  remained  relatively
constant  at  approximately  $2.2  million  per year.  In 1993,  total  expenses
increased  to $4.0  million,  primarily  attributable  to  acquisition  of Paces
Commons.  For 1994, total expenses were $7.0 million,  an increase of 75 percent
over 1993,  due to the  inclusion of Paces Commons for the entire period and the
acquisition of BTVC and Oakbrook,  Latitudes and Harris Hill  apartments.  Total
expenses were $12.1 million in 1995,  reflecting a full year's operations of all
four apartment communities and administrative functions.

Increases  in  depreciation  and  amortization  over the  three-year  period are
directly  attributable to the impact of acquisitions of apartment  properties in
1993 and 1994 and an intangible  asset recorded in conjunction  with acquisition
of  management  operations  in October  1994.  Restaurant  rental  property ($43
million) and related depreciation charges (approximately $800,000 per year) were
unchanged throughout the three-year period, while apartment rental property grew
from  none  at the end of 1992 to over  $55  million  by the end of  1995,  with
related 1995  depreciation of  approximately  $1.4 million.  Amortization of the
intangible related to management operations totaled $56,000 in 1994 and $258,000
in 1995; the balance of amortization expense relates to loan costs.

Operating expenses at the Company's apartment  properties were generally in line
with management's  expectations.  Increases in apartment  operations expenses of
206 percent in 1994 and 125 percent in 1995  reflect full year's  operations  of
Paces Commons  (acquired  June 1993) and  acquisitions  of Oakbrook (June 1994),
Latitudes  (October 1994), and Harris Hill (December 1994).  Operating  expenses
relating to restaurant  properties are  insignificant  because of the restaurant
properties' triple net lease arrangement.

Increases in  administrative  expenses of 153 percent in 1994 and 106 percent in
1995 are due primarily to implementation  of directors' and officers'  insurance
coverage  effective  October 1993 and  assumption  of  management  activities in
October 1994. These costs declined in the last half of 1995 ($538,000 during the
last six months compared to $748,000 during the first six months),  a trend that
management  expects will  continue in 1996, as expenses  related to  third-party
property management operations were transferred to the Management Company.



<PAGE>


Throughout  1993 and through  third  quarter of 1994,  the Company paid property
management fees (5 percent of rental revenues  collected) to BTVC for management
of its  apartment  properties  and  advisory  fees  (4.65  percent  of net  cash
available for distribution as defined by the advisory agreement) to BNE Advisory
Group.  With the  acquisition  of BTVC,  the  Company  terminated  its  advisory
contract and became  self-advised and self-managed,  thereby  eliminating future
property management and advisory fees.

Increases  in interest  expense  are  primarily  attributable  to  increases  in
outstanding  indebtedness  incurred in  connection  with  acquisitions  of Paces
Commons in 1993 ($14.9  million)  and BTVC's  management  operations,  Oakbrook,
Latitudes,  and Harris  Hill in 1994  ($40.0  million)  and the impact of higher
variable  interest  rates in 1994.  During  fourth  quarter  of 1994 and  second
quarter  of 1995 the  Company  refinanced  all  variable  rate debt  related  to
apartment  properties  to fixed rate loans,  and in December  1995,  the Company
refinanced its variable rate credit  facility to a fixed rate loan. (See further
discussion below included in discussion of Liquidity and Capital Resources.)

During the  fourth  quarters  of 1993,  1994,  and 1995,  the  Company  recorded
write-offs of $600,000,  $377,000,  and $321,000 related to deferred acquisition
costs.  Significantly  all of these costs arose in 1992 and 1993 in  conjunction
with  the  "roll-up"  transaction  the  Company  began  in 1993  and  ultimately
abandoned  in  December  1995.  All  deferred  costs  related  to the  "roll-up"
transaction  have now been expensed.  (See discussion of History and Development
of Boddie-Noell Properties, Inc. included in Item 1 of this Report.)

Summary Results of Operations.  Funds from operations  ("FFO") is defined by the
National  Association of Real Estate Investment Trusts ("NAREIT") as "net income
(computed  in  accordance  with  generally  accepted   accounting   principles),
excluding  gains (losses) from debt  restructuring  and sales of property,  plus
depreciation  and  amortization,   and  after  adjustments  for   unconsolidated
partnerships and joint ventures".  In 1995 NAREIT provided  additional  guidance
for interpretation of this definition which specifies that only depreciation and
amortization  of real  estate  assets  should  be added  back to net  income  in
calculating   FFO.  At  December  31,   1995,   the  Company  has  adopted  this
interpretation and restated FFO amounts previously reported.

The Company considers FFO in evaluating property  acquisitions and its operating
performance and believes that FFO should be considered along with, but not as an
alternative  to,  net  income  and cash  flows  as a  measure  of the  Company's
operating performance and liquidity.  FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs.

A reconciliation of net income, funds from operations,  and net cash provided by
operating activities is as follows (all amounts in thousands):
<TABLE>
<CAPTION>

                                                   1995        1994      1993
<S>                                             <C>         <C>       <C>
Net income                                       $1,628      $2,301    $2,455
Depreciation                                      2,204       1,415       973
Amortization of management intangible               258          56         -
Write-off deferred loan costs at refinancing         38         142         -
Write-off deferred acquisition costs                321         377       600
Funds from operations                             4,450       4,291     4,029
Equity in income of Management Company              (48)          -         -
Amortization of deferred financing costs            147         177        92
Changes in operating assets and liabilities         (73)         28       (55)
Net cash provided by operating activities        $4,476      $4,496    $4,066

</TABLE>

To a large  extent,  the addition of apartment  properties  and  improvement  in
apartment  operations  have  offset the  decline in  restaurant  rental  income,
producing  increases  in FFO of 7  percent  in 1994 and 4  percent  in 1995.  As
expected,  net  income  declined  6  percent  in 1994  and 29  percent  in 1995,
reflecting the effect of non-cash  charges for  depreciation and amortization of
assets related to apartment  property  acquisitions in 1993 and 1994. Changes in
operating  assets and  liabilities  reflect timing of rent receipts and payments
for trade payables, taxes, and escrow funds, etc.


<PAGE>


Dividends.  The Company  paid  dividends of $1.24 per share in 1993,  1994,  and
1995. The Company's dividend payout ratio (the ratio of dividends paid to FFO on
a per share basis) was 88 percent in 1993, 83 percent in 1994, and 84 percent in
1995.

Liquidity and Capital Resources

Capitalization.  Prior to acquiring its first apartment community, the Company's
capital  requirements  were  minimal  as all  capital  expenses  related  to the
restaurants  were borne by BNE under the terms of the master lease.  In order to
acquire Paces Commons,  Oakbrook,  BTVC,  Latitudes and Harris Hill, the Company
incurred additional debt and issued additional common stock. The additional debt
consists of first mortgages  secured by the acquired  apartment  communities and
draws against the Company's  credit lines.  As the Company  continues to acquire
apartment  properties,  it is likely  that the  Company  will  incur  additional
long-term debt and seek additional equity capital.

At December 31, 1995, the Company's total book capitalization was $93.4 million,
comprised of $26.2 million of shareholders' equity and $67.2 million of debt. At
December 31, 1994, the Company's  total book  capitalization  was $94.9 million,
comprised of $28.0 million of shareholders' equity and $66.9 million of debt. At
December 31, 1993, the Company had 2,850,000 shares of common stock outstanding.
On October 1, 1994, an additional 140,990 shares were issued in conjunction with
the  acquisition  of BTVC. In March,  April and July 1995,  the Company issued a
total of 25,750  shares of  common  stock to the  former  BTVC  shareholders  in
conjunction with an earn-out provision of that acquisition agreement.  Under the
terms  of the  acquisition  agreement,  the  former  BTVC  shareholders  are due
additional  consideration totaling $283,000 as of December 31, 1995. The Company
may, at its election, make this payment in cash or up to 22,645 shares of common
stock.  At December 31, 1995,  assuming the full  contingent  purchase  price is
earned and paid in common stock, it is anticipated  that the Company could issue
approximately  100,000 additional shares of common stock in conjunction with the
acquisition.

Consistent with management's  plan to reduce the Company's  exposure to variable
rate debt, during fourth quarter of 1994 and second quarter of 1995, the Company
refinanced  $37.6 million in variable rate debt related to apartment  properties
to fixed rate loans with  maturities in 2000 through 2020. On December 27, 1995,
the Company  established  a credit line with  SouthTrust  Bank of Alabama in the
amount  of $25.5  million  at a fixed  rate of 8.0  percent  for a term of three
years. The Company used an initial draw of $23.25 million to retire its existing
short-term variable rate credit facility. The balance of the credit line will be
available for general  corporate  purposes.  With the  implementation of the new
credit  facility the Company's  only exposure to variable rate loans is two term
notes payable to affiliates  totaling $7,056,000 which are capped at an interest
rate of 8.0 percent and due in full May,  1999.  As of December  31,  1995,  the
Company has no loans which  mature in less than three years or which are subject
to material interest rate adjustments in less than two years.

A summary of long-term  debt as of December 31, 1995 and 1994 has been  included
in the Notes to the Financial  Statements included in Item 14 of this Report. At
December 31, 1995, the weighted  average  interest rate on debt  outstanding was
8.1 percent.  A 1 percent  increase in variable  interest rates would impact the
Company by increasing  interest  expense by  approximately  $49,000 on an annual
basis;  conversely, a 1 percent decrease in variable interest rates would impact
the Company by decreasing interest expense by approximately $71,000 on an annual
basis.

In addition to the credit facility,  the Company had an unsecured revolving line
of credit of $2.0 million with BNE.  Draws  totaling  $1.1 million were made and
repaid in full during 1994. In conjunction with modification of the master lease
agreement, this line of credit was terminated in December 1995.

Cash Flow and Liquidity Requirements. For the years 1988 through 1992, cash flow
from  operating  activities  was generally  consistent,  at  approximately  $3.8
million in all years except 1991, in which cash flow from  operating  activities
was approximately $3.4 million.  In each of those years the Company utilized its
cash flow principally to fund dividend payments.

During  1993,  the  Company  generated  $4.1  million  of net cash  provided  by
operating  activities,  an increase of 6 percent  over 1992.  The  increase  was
primarily  attributable to the  acquisition of Paces Commons  Apartments in June
1993.

<PAGE>


Net cash  provided  by  operating  activities  increased  by 11  percent to $4.5
million in 1994.  The increase was  attributable  to Paces  Commons  having been
included  for the entire  period and cash flow from the  properties  acquired in
1994 (BTVC and Oakbrook,  Latitudes and Harris Hill apartments)  which more than
offset a $119,000  decrease in restaurant rental income. In 1995 the Company was
able to  maintain  $4.5  million in net cash  provided by  operating  activities
despite a $398,000 decline in restaurant  rental income,  again  attributable to
favorable performance of apartment properties.

The company  applied cash generated by operating  activities to pay dividends of
$3.5  million,  $3.6  million,  and  $3.7  million  in  1993,  1994,  and  1995,
respectively.  Dividends paid per share remained  stable at $1.24.  As discussed
above,  during 1994 and 1995 the Company  issued  166,740 shares of common stock
under the earn-out provision of the BTVC acquisition agreement. Also in 1995 the
Company applied $150,000 to advances to the Management Company subsidiary formed
mid-year.

During  1993,  the  Company  applied  $14.7  million net  proceeds of  financing
transactions to $16.2 million in apartment  acquisition  activity.  In 1994, the
Company  applied $18.6 million net proceeds of financing  transactions  to $18.7
million of acquisition activity and additions to apartment properties.  Payments
for  acquisition  activities  and  additions  to  apartment  properties  totaled
$682,000 in 1995,  with cash payments for debt  reduction  and  financing  costs
exceeding net proceeds by $166,000.

Subsequent  to December  31,  1995,  the Company  entered  into an  agreement to
purchase an additional  apartment  community.  The Company has placed a $150,000
at-risk binder in an escrow account held by a title insurance company.
The Company is currently exploring various financing options.

The Company has  elected  and expects to be taxed as a REIT under  Sections  856
through  860 of the  Internal  Revenue  Code of 1986,  as  amended.  As such the
Company  generally  will not be subject to federal or state  income taxes on net
income.  REITs  are  subject  to a  number  of  organizational  and  operational
requirements,  including a requirement that they currently distribute 95 percent
of their  ordinary  taxable  income as  dividends.  The  Company  intends to pay
dividends quarterly,  expects that these dividends will substantially exceed the
95 percent taxable income test and  anticipates  that all dividends will be paid
from current FFO.

The  Company  continues  to  produce  sufficient  cash flow to fund its  regular
dividend and has  positioned  itself for future growth.  The Company  expects to
meet its short-term liquidity  requirements  generally through net cash provided
by operations and utilization of credit  facilities.  The Company  believes that
its net cash provided by  operations  will be adequate and  anticipates  that it
will continue to be adequate to meet both operating  requirements and payment of
dividends by the Company in accordance with REIT requirements in both the short-
and the long term. The Company anticipates  funding its acquisition  activities,
if any,  primarily by using  short-term  credit  facilities or secured debt. The
Company expects to meet certain of its long-term liquidity requirements, such as
scheduled  debt  maturities  and repayment of  short-term  financing of possible
property  acquisitions,  through long-term secured and unsecured  borrowings and
the issuance of debt securities or additional  equity securities of the Company.
The Company  believes  that it has  sufficient  resources to meet its short- and
long-term liquidity requirements.

Approximately  34 percent of the  Company's  1995 revenue was derived from BNE's
payment of rent for the use of the Company's restaurant properties. In addition,
BNE is  responsible  for all of the cost  associated  with the  maintenance  and
operations of these  properties.  As a result,  the financial  well being of the
Company  is,  to a  large  extent,  dependent  on  BNE's  ability  to  meet  its
obligations  under the terms of the master lease.  The ability of BNE to satisfy
the  requirements  of the  master  lease  depend on its  liquidity  and  capital
resources.  Historically,  BNE has been able to meet its liquidity needs through
cash flow generated from operations and through reliance on its credit facility.

BNE's principal line of business is the operation of approximately  365 Hardee's
restaurants,  47 of which are owned by the  Company.  The  continued  decline in
restaurant  sales (see  "Revenues"  above)  has had a  material  impact on BNE's
operating  cash  flow.   Management  has  reviewed  BNE's  unaudited   financial
statements,  cash flow analysis,  restaurant contribution analysis,  sales trend
analysis  and  projections  and believes  that with the  refinance of its credit
facility  (discussed  below)  BNE will have  sufficient  liquidity  and  capital
resources to meet its obligations  under the master lease and credit facility as
well as its general corporate operating needs.

<PAGE>


The  principal  debt  facility  on which BNE has relied has been a $140  million
credit  agreement.  This  facility  matured on December 31,  1995,  but has been
temporarily extended pending renewal. BNE has received and executed a commitment
from the bank group issuing the facility  specifying the terms and conditions of
a renewal, and BNE is currently assembling the required documentation.  Both BNE
and  representatives  of the bank  group  have  indicated  that they  expect the
facility to be renewed and that a final closing of the renewal will occur in the
near future.

The table below sets forth certain information with respect to the liquidity and
capital  resources  of BNE.  The  information  is derived  from BNE's  unaudited
financial  statements for the fiscal year ended December 31, 1995,  available as
of March 8, 1996.  BNE is an S  Corporation  for  federal  and state  income tax
purposes;  therefore, its cash flow generated from operations does not include a
deduction for corporate income tax payments.
<TABLE>
  <S>                                                        <C>
   Current assets                                             $  13,350,000
   Total assets                                                 296,339,000
   Current liabilities                                           37,732,000
   Total debt, including current portion of $8,291,000          140,346,000
   Shareholders' equity                                          92,117,000
   Net cash provided by operating activities                     13,766,000
</TABLE>

Capitalization  of Fixed  Assets and  Property  Improvements.  The  Company  has
established a policy of capitalizing  those  expenditures  relating to acquiring
new  assets,   materially   enhancing  the  value  of  an  existing   asset,  or
substantially  extending the useful life of an existing asset. In 1994 and 1993,
apartment carpet,  vinyl and wallpaper  replacements were generally  expensed as
incurred ($23,000 in 1994 and none in 1993), except when those replacements were
made in conjunction with a plan of acquisition. In 1995, the Company capitalized
all apartment carpet, vinyl and wallpaper replacements. Management believes that
such capitalization of carpet, vinyl and wallpaper, depreciated over five years,
more  appropriately  reflects the useful life of these assets and is  consistent
with prevailing industry practice.

A  summary  of  capitalized  apartment  property  additions,   replacements  and
improvements has been included in the Notes to the Financial Statements included
in Item 14 of this Report.

Inflation.  Management  does not believe that inflation poses a material risk to
the Company.  The leases at the Company's apartment properties are short-term in
nature.  The majority of the apartment leases are for terms of one year or less,
with none longer than two years.  All  apartment  leases  allow,  at the time of
renewal,  for  adjustments  in the rent payable  thereunder  and thus enable the
Company to seek  increases  in rents to  compensate  for  increases  in expenses
brought about by inflation. In addition, the apartment lease agreements give the
Company  the  right  to  terminate  any  lease at the end of its term on 60 days
notice. The restaurant properties are leased on a triple-net basis, which places
the risk of rising operating and maintenance cost on the lessee.

Environmental  matters. Phase I environmental studies have been performed on the
Company's apartment properties. Such studies found ground water contamination at
sites near  Latitudes  and Paces  Commons,  but none  determined to exist on the
properties.  The Company  believes that the matters  raised by such reports will
not have a material  adverse  effect on the  Company's  results  of  operations,
liquidity or capital resources.  Environmental transaction screens were obtained
for each of the restaurant  properties in 1995. These environmental  reports did
not indicate  existence of any  environmental  problems that  warranted  further
investigation.  BNE has  indemnified  the  Company  for  environmental  problems
associated  with the  restaurant  properties  under its  master  lease  with the
Company.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial  statements and supplementary data are listed under Item 14(a) and
filed as part of this Annual Report on the pages indicated.




<PAGE>


ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.



<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The section under the heading "Election of Directors" of the Proxy Statement for
Annual Meeting of Stockholders to be held May 23, 1996, (the "Proxy  Statement")
is  incorporated  herein  by  reference  for  information  on  Directors  of the
Registrant. See Item X in Part I of this Annual Report for information regarding
Executive Officers of the Registrant.


ITEM 11.  EXECUTIVE COMPENSATION

The section under the heading "Election of Directors" entitled  "Compensation of
Directors"  of  the  Proxy  Statement  and  the  section   entitled   "Executive
Compensation" of the Proxy Statement are incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The section under the heading "Security  Ownership of Certain  Beneficial Owners
and Management" of the Proxy Statement is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The section entitled  "Certain  Relationships  and Related  Transactions" of the
Proxy Statement is incorporated herein by reference.



<PAGE>


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. and 2.  Financial Statements and Schedules

The financial  statements  and schedules  listed below are filed as part of this
Annual Report on the pages indicated.

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                                  PAGE
<S>                                                                               <C>
Financial Statements and Notes:
  Report of Independent Accountants                                                23
  Balance Sheets as of December 31, 1995 and 1994                                  24
  Statements of Operations for the Years Ended December 31, 1995, 1994, and 1993   25
  Statements of Shareholders' Equity for the Years Ended
     December 31, 1995, 1994, and 1993                                             26
  Statements of Cash Flows for the Years Ended December 31, 1995, 1994, and 1993   27
  Notes to Financial Statements                                                    28
Schedules:
  Schedule III - Real Estate and Accumulated Depreciation                          37

</TABLE>

The  financial  statements  and schedule  are filed as part of this report.  All
other  schedules  are omitted  because they are not  applicable  or the required
information is included in the financial statements or notes thereto.

(a) 3.  Exhibits

The Registrant  agrees to furnish a copy of all agreements  related to long-term
debt upon request of the Commission.

  Exhibit
    No.

    2*       Agreement and Plan of Merger between BT Venture Corporation and 
             Boddie-Noell Restaurant Properties, Inc. (filed as Exhibit (2)-2 to
             Boddie-Noell Properties, Inc. Current Report on Form 8-K dated 
             October 1, 1994, and incorporated herein by reference)
    3.1*     Articles of Incorporation (filed as Exhibit 3(a) to Registration 
             Statement No. 33-13155 on Form S-11 and incorporated herein by 
             reference)
    3.2      By-Laws
   10.1      Amended and Restated Master Lease Agreement dated December 21, 1995
             between Boddie-Noell Properties, Inc. and Boddie-Noell Enterprises,
             Inc.
   10.2      Loan Agreement dated December 27, 1995 between Boddie-Noell 
             Properties, Inc. and SouthTrust Bank of Alabama, N.A.
   10.3*     Acquisition   Agreement  by  and  among   Boddie-Noell   Restaurant
             Properties, Inc., BT Venture Corporation and Related Entities dated
             June  7,  1994  (filed  as an  exhibit  in  Schedule  14A of  Proxy
             Statement dated June 15, 1994 and incorporated herein by reference)
   10.4*     Boddie-Noell Restaurant Properties, Inc. 1994 Stock Option and 
             Incentive Plan effective August 4, 1994 (filed as an exhibit in 
             Schedule 14A of Proxy Statement dated June 15, 1994 and 
             incorporated herein by reference)
   10.5*     Form and  description of Incentive  Stock Option  Agreements  dated
             October 17, 1994 between the Company and certain officers (filed as
             Exhibit 10.8 to Boddie-Noell Properties, Inc. Annual Report on Form
             10-K dated December 31, 1994 and incorporated herein by reference)


<PAGE>



   10.6*     Form and description of Nonqualified  Stock Option Agreements dated
             October 17, 1994 between the Company and certain officers (filed as
             Exhibit 10.9 to Boddie-Noell Properties, Inc. Annual Report on Form
             10-K dated December 31, 1994 and incorporated herein by reference)
   10.7*     Form and description of Employment Agreements dated October 1, 1994
             between the Company and certain officers (filed as Exhibit 10.10 to
             Boddie-Noell  Properties,  Inc.  Annual  Report on Form 10-K  dated
             December 31, 1994 and incorporated herein by reference)
   11        Computation of Per Share Earnings
   21        Subsidiaries of the Registrant
   27        Financial Data Schedule (electronic filing)


*  Incorporated herein by reference

Exhibits 10.4 through 10.7 are management contracts or compensatory plans.

(b)  Reports on Form 8-K.

None



<PAGE>


                                   SIGNATURES

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

                            BODDIE-NOELL PROPERTIES, INC.


Date:  March 25, 1996       /s/ Philip S. Payne
                            Philip S. Payne
                            Executive Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the registrant and in the
capacities and on the dates indicated.

Signature:                    Title:                            Date:


/s/ D. Scott Wilkerson        President and                     March 25, 1996
D. Scott Wilkerson            Chief Executive Officer


/s/ Philip S. Payne           Executive Vice President and      March 25, 1996
Philip S. Payne               Chief Financial Officer


/s/ Pamela B. Novak           Vice President and                March 25, 1996
Pamela B. Novak               Controller


/s/ B. Mayo Boddie            Chairman of the Board             March 25, 1996
B. Mayo Boddie


/s/ Nicholas B. Boddie        Vice Chairman of the Board and    March 25, 1996
Nicholas B. Boddie            Director


/s/ William H. Stanley        Director                          March 25, 1996
William H. Stanley


/s/ Richard A. Urquhart, Jr.  Director                          March 25, 1996
Richard A. Urquhart, Jr.


/s/ Donald R. Pesta, Jr.      Director                          March 25, 1996
Donald R. Pesta, Jr.          



<PAGE>


                               Arthur Andersen LLP







Report of Independent Public Accountants



To the Shareholders of
Boddie-Noell Properties, Inc.:

We have audited the accompanying balance sheets of Boddie-Noell Properties, Inc.
(a  Delaware  corporation)  as of December  31,  1995 and 1994,  and the related
statements of  operations,  shareholders'  equity and cash flows for each of the
three years in the period ended December 31, 1995.  These  financial  statements
and the  schedule  referred  to above are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Boddie-Noell  Properties,  Inc.
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period  ended  December  31,  1995,  in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements  taken as a whole.  The schedule  listed in Item 14 is presented  for
purposes of complying with the Securities and Exchange Commission's rules and is
not a required  part of the basic  financial  statements.  The schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements  and, in our  opinion,  fairly  states in all  material  respects the
financial  data  required  to be set forth in  relation  to the basic  financial
statements taken as a whole.



                                         /s/ Arthur Andersen LLP

                                         ARTHUR ANDERSEN LLP


Charlotte, North Carolina,
   January 31, 1996.



<PAGE>



BODDIE-NOELL PROPERTIES, INC.
------------------------------------------------------------------------------
Balance Sheets
<TABLE>
<CAPTION>


                                                                                     December 31,
                                                                               1995                1994
                                                                         ------------------  ------------------
<S>                                                                           <C>                 <C>
Assets
Real estate investments at cost:
   Restaurant properties                                                       $43,205,075         $43,205,075
   Apartment properties                                                         55,315,686          54,723,503
                                                                         ------------------  ------------------
                                                                                98,520,761          97,928,578
   Less accumulated depreciation                                                (9,020,948)         (6,827,337)
                                                                         ------------------  ------------------
                                                                                89,499,813          91,101,241
Cash and cash equivalents                                                          700,863             952,363
Accounts receivable under restaurants master lease                                 236,121             388,293
Apartments rent and other receivables                                                8,696             105,013
Prepaid expenses and other assets                                                  165,655             226,565
Security deposit funds held in trust                                               127,894             140,188
Investment in and advances to Management Company                                   326,767                   -
Other assets, net of applicable amortization:
   Intangible related to acquisition of management operations                    2,560,254           2,318,335
   Deferred acquisition costs                                                            -             255,999
   Deferred financing costs                                                        725,713             466,217
                                                                         ==================  ==================
         Total assets                                                          $94,351,776         $95,954,214
                                                                         ==================  ==================

Liabilities and Shareholders' Equity
Mortgage and other notes payable                                               $60,105,485         $59,827,256
Notes payable to affiliates                                                      7,056,300           7,056,300
Accounts payable and accrued expenses                                              129,908             447,271
Accrued interest on mortgage and other notes payable                               269,373             257,575
Accrued interest on notes payable to affiliates                                    132,231             122,392
Additional consideration due to former BTVC shareholders                           283,334              49,648
Escrowed security deposits and deferred revenue                                    175,207             225,863
                                                                         ------------------  ------------------
      Total liabilities                                                         68,151,838          67,986,305
                                                                         ------------------  ------------------

Commitments and contingencies - Note 11 Shareholders' equity:
   Common stock, $.01 par value, 10,000,000 shares authorized,  3,016,740 shares
      issued and outstanding at December 31, 1995,  2,990,990  shares issued and
      outstanding at December 31, 1994                                              30,167              29,910
   Additional paid-in capital                                                   33,785,335          33,452,611
   Dividends distributed in excess of net income                                (7,615,564)         (5,514,612)
                                                                         ------------------  ------------------
      Total shareholders' equity                                                26,199,938          27,967,909
                                                                         ------------------  ------------------
         Total liabilities and shareholders' equity                            $94,351,776         $95,954,214
                                                                         ==================  ==================
</TABLE>

The  accompanying  notes to financial  statements  are an integral part of these
balance sheets.


<PAGE>



BODDIE-NOELL PROPERTIES, INC.
-------------------------------------------------------------------------------
Statements of Operations
<TABLE>
<CAPTION>


                                                                         Years ended December 31,
                                                                1995               1994              1993
                                                           ----------------   ----------------  ----------------
<S>                                                        <C>                <C>               <C>  
Revenues
Restaurant rental income                                    $    4,649,250     $    5,046,837        $5,165,432
Apartment rental income                                          8,476,268          3,889,277         1,244,803
Management fees                                                    514,872            276,157                 -
Equity in income of Management Company                              48,063                  -                 -
Interest and other income                                           37,185             45,975            15,617
                                                           ----------------   ----------------  ----------------
                                                            $   13,725,638     $    9,258,246    $    6,425,852
                                                           ----------------   ----------------  ----------------

Expenses
Depreciation                                                     2,204,199          1,414,800           973,434
Amortization                                                       405,182            232,856            92,401
Apartment operations                                             2,480,920          1,101,370           360,447
Administrative                                                   1,285,509            622,605           245,660
Property management and advisory fees                                    -            264,322           256,793
Interest on notes payable to affiliates                            540,572            139,973                 -
Interest - other                                                 4,821,865          2,661,921         1,441,666
Write-off of deferred loan costs upon refinancing                   37,723            141,582                 -
Write-off of deferred acquisition costs                            321,400            376,898           600,000
                                                           ----------------   ----------------  ----------------
                                                                12,097,370          6,956,327         3,970,401
                                                           ----------------   ----------------  ----------------
Net income                                                  $    1,628,268     $    2,301,919    $    2,455,451
                                                           ================   ================  ================
Net income per share                                        $         0.54     $         0.80    $         0.86
                                                           ================   ================  ================

Weighted average number of shares outstanding                    3,005,809          2,885,248         2,850,000
                                                           ================   ================  ================

</TABLE>

The  accompanying  notes to financial  statements  are an integral part of these
statements.




<PAGE>



BODDIE-NOELL PROPERTIES, INC.
------------------------------------------------------------------------------
Statements of Shareholders' Equity
<TABLE>
<CAPTION>


                                                                                      Dividends
                                                                    Additional       distributed
                                         Common Stock                paid-in         in excess of
                                    Shares          Amount           capital          net income           Total
                                 -------------   -------------   ----------------  ----------------   --------------
<S>                                <C>          <C>             <C>               <C>                <C>
Balance at December 31, 1992        2,850,000    $    28,500     $   31,462,322    $   (3,160,277)    $  28,330,545

Net income                                                                               2,455,451        2,455,451
Dividends paid
   ($1.24 per share)                                                                    (3,534,000)      (3,534,000)
                                 -------------   -------------   ----------------  ----------------   --------------
Balance at December 31, 1993        2,850,000          28,500         31,462,322        (4,238,826)      27,251,996

Net income                                                                               2,301,919        2,301,919
Common stock issued                   140,990           1,410          1,990,289                          1,991,699
Dividends paid
   ($1.24 per share)                                                                    (3,577,705)      (3,577,705)
                                 -------------   -------------   ----------------  ----------------   --------------
Balance at December 31, 1994        2,990,990          29,910         33,452,611        (5,514,612)      27,967,909

Net income                                                                               1,628,268        1,628,268
Common stock issued                    25,750             257            332,724                            332,981
Dividends paid
   ($1.24 per share)                                                                    (3,729,220)      (3,729,220)
                                 =============   =============   ================  ================   ==============
Balance at December 31, 1995        3,016,740    $     30,167     $   33,785,335   $   (7,615,564)    $  26,199,938
                                 =============   =============   ================  ================   ==============

</TABLE>

The  accompanying  notes to financial  statements  are an integral part of these
statements.





<PAGE>



BODDIE-NOELL PROPERTIES, INC.
------------------------------------------------------------------------------
Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                         Years ended December 31,
                                                                1995               1994              1993
                                                           ----------------   ----------------  ----------------
<S>                                                        <C>                <C>               <C> 
Cash flows from operating activities:
Net income                                                  $   1,628,268      $   2,301,919     $   2,455,451
Adjustments to reconcile net income to
   net cash provided by operations:
   Equity in income of Management Company                         (48,063)                 -                 -
   Depreciation and amortization                                2,609,381          1,647,656         1,065,835
   Write-off of deferred loan costs                                37,723            141,582                 -
   Write-off of deferred acquisition costs                        321,400            376,898           600,000
   Changes in operating assets and liabilities:
      Rent and other receivables                                  248,489            (78,046)           56,398
      Prepaid expenses and other assets                           (66,088)            (5,584)         (225,899)
      Accounts payable and accrued expenses                      (204,726)           150,443            84,114
      Escrowed security deposits and deferred revenue             (50,656)           (38,407)           30,325
                                                           ----------------   ----------------  ----------------
Net cash provided by operating activities                       4,475,728          4,496,461         4,066,224
                                                           ----------------   ----------------  ----------------

Cash flows from investing activities:
Acquisitions of apartment properties                                    -        (18,055,659)      (14,302,078)
Acquisition of BT Venture Corp., net of cash payment                    -            164,838                 -
Additions to apartment properties                                (525,516)          (161,294)          (50,090)
Payment of deferred acquisition costs                            (156,401)          (677,006)       (1,804,827)
Advances to Management Company                                   (150,000)                 -                 -
                                                           ----------------   ----------------  ----------------
Net cash used in investing activities                            (831,917)       (18,729,121)      (16,156,995)
                                                           ----------------   ----------------  ----------------

Cash flows from financing activities:
Payment of dividends                                           (3,729,220)        (3,577,705)       (3,534,000)
Proceeds from notes payable                                    33,925,000         53,600,000        18,950,000
Principal payments on notes payable                           (33,646,771)       (34,449,203)       (4,055,622)
Payment of deferred financing costs                              (444,320)          (509,599)         (208,689)
                                                           ----------------   ----------------  ----------------
Net cash provided by (used in) financing activities            (3,895,311)        15,063,493        11,151,689
                                                           ----------------   ----------------  ----------------

Increase (decrease) in cash and cash equivalents                 (251,500)           830,833          (939,082)
Cash and cash equivalents at beginning of year                    952,363            121,530         1,060,612
                                                           ----------------   ----------------  ----------------

Cash and cash equivalents at end of year                    $     700,863      $     952,363     $     121,530
                                                           ================   ================  ================

Supplemental disclosures of cash flow information: 
  Cash payments for interest:
     To affiliates                                                530,733             17,581                 -
     Other                                                      4,810,067          2,539,445         1,402,257
                                                           ----------------   ----------------  ----------------
     Total                                                  $   5,340,800      $   2,557,026     $   1,402,257
                                                           ================   ================  ================
</TABLE>

The  accompanying  notes to financial  statements  are an integral part of these
statements.


<PAGE>


BODDIE-NOELL PROPERTIES, INC.
------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1995


Note 1.  Organization  and  Summary  of  Significant  Accounting  and  Reporting
Policies

Organization  and  History.   Boddie-Noell  Restaurant  Properties,   Inc.  (the
"Company")  was  incorporated  on April 1, 1987. On October 1, 1994, the Company
changed its name to Boddie-Noell Properties, Inc.

In April 1987, the Company acquired 47 existing Hardee's  restaurant  properties
located in Virginia and North Carolina,  operated by  Boddie-Noell  Enterprises,
Inc.  ("BNE") under  franchise  agreements  with  Hardee's  Food  Systems,  Inc.
Simultaneously  with their  purchase,  the properties were leased to BNE under a
master lease agreement.

In June  1993,  the  Company  acquired  Paces  Commons  Apartments,  a  336-unit
apartment  property in  Charlotte,  North  Carolina.  In June 1994,  the Company
acquired Oakbrook Apartments, a 162-unit apartment property in Charlotte,  North
Carolina.  Effective  October 1, 1994, the Company acquired by merger BT Venture
Corporation  ("BTVC"),  an integrated  real estate  management,  development and
acquisition company and owner of the Latitudes Apartments,  a 448-unit apartment
property  in  Virginia  Beach,  Virginia.  As of October 1,  1994,  the  Company
succeeded to BTVC's  third-party  management  business,  terminated its advisory
agreement  with  BNE  Advisory   Group,   Inc.,   and  began   operations  as  a
self-administered  and self-managed  real estate  investment  trust. In December
1994, the Company acquired Harris Hill Apartments, a 184-unit apartment property
in Charlotte, North Carolina.

In May 1995, the Company formed BNP Management, Inc. (the "Management Company").
The Company has a 1 percent voting  interest and 95 percent  economic  interest.
This investment is recorded using the equity method of accounting.

Capital Stock. In June 1995, the Company's  shareholders  approved amendments to
the Company's  bylaws and  certificate  of  incorporation  to allow the Board of
Directors to authorize the issuance of up to an additional  90,000,000 shares of
Common Stock and 10,000,000  shares of Preferred  Stock,  issuable in series the
characteristics of which would be set by the Board of Directors.  As of December
31, 1995, no such shares have been authorized or issued.

Real  Estate  Investments.   Restaurant  properties,  which  include  only  real
property,  are  carried at cost.  Cost of repairs  and  maintenance  and capital
improvements  are borne by BNE.  Depreciation of the buildings is computed using
the  straight-line  method  over the  estimated  useful  lives (40 years) of the
respective properties.

Apartment properties are carried at cost. Ordinary repairs and maintenance costs
are  expensed  as  incurred  while  significant  improvements,  renovations  and
replacements are capitalized.  Depreciation is computed using the  straight-line
method over the estimated useful lives of the related assets, which are 40 years
for  buildings,  20 years for land  improvements,  and 10 years for fixtures and
equipment, and five years for carpet, vinyl, and wallpaper replacements.

Cash and Cash Equivalents.  The Company considers all highly liquid  investments
with maturities of three months or less when purchased to be cash equivalents.

Deferred  Costs.  The intangible  asset related to the acquisition of management
operations acquired by merger is amortized using the straight-line method over a
period of ten years. Accumulated amortization on this asset totaled $314,000 and
$56,000 at December 31, 1995 and 1994, respectively.

Deferred  acquisition  costs  represent  costs  incurred in connection  with the
proposed acquisition of properties and the associated offering costs. Such costs
are deferred until such time as the acquisition is consummated.  Upon completion
of the  acquisition,  the costs will be  capitalized  to the  underlying  assets
and/or charged to shareholders' equity. At such time as an acquisition is deemed
not probable, the costs are charged to expense.



<PAGE>


Financing costs are deferred and amortized using the  straight-line  method over
the terms of the related notes. Accumulated amortization on these assets totaled
$61,000 and $205,000 at December 31, 1995 and 1994, respectively.

Income  Taxes.  The Company  operates as and elects to be taxed as a Real Estate
Investment  Trust ("REIT")  under the Internal  Revenue Code.  Accordingly,  the
Company  will not be  subject  to  Federal  or  state  income  taxes on  amounts
distributed to shareholders,  provided it distributes at least 95 percent of its
REIT taxable  income and meets certain other  requirements  for  qualifying as a
REIT. Accordingly, no provision has been made for federal or state income taxes.

Net Income Per Share.  Net  income per share for the years  ended  December  31,
1995,  1994,  and 1993 is  calculated  based on the weighted  average  number of
shares outstanding during the respective periods.

Fair Values of Financial Instruments.  The following methods and assumptions are
used by the  Company in  estimating  its fair value  disclosures  for  financial
instruments.

Cash and cash equivalents: The carrying amount reported on the balance sheet for
cash and cash equivalents approximates fair value.

Notes  payable:  The fair value of the Company's  fixed rate  mortgage  notes is
estimated using  discounted cash flow analysis,  based on the Company's  current
incremental  borrowing rates.  The carrying amounts of the Company's  borrowings
under its variable rate notes payable approximate fair value.

Reclassifications.  Certain  amounts in the 1994 and 1993  financial  statements
have been reclassified to conform to the 1995 presentation.


Note 2.  Real Estate Investments

Real estate investments consist of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>

                                                      1995               1994
<S>                                               <C>              <C>
Restaurants
Land                                               $12,068,737      $12,068,737
Buildings and land improvements                     31,136,338       31,136,338
less accumulated depreciation                       (6,778,604)      (6,000,196)
                                                    36,426,471       37,204,879
Apartments
Land                                                 6,642,291        6,642,291
Buildings and land improvements                     46,517,150       46,205,625
Fixtures, equipment, and other personal property     2,156,245        1,875,587
less accumulated depreciation                       (2,242,344)        (827,141)
                                                    53,073,342       53,896,362
                                                   $89,499,813      $91,101,241
</TABLE>

The Company has established a policy of capitalizing those expenditures relating
to acquiring new assets, materially enhancing the value of an existing asset, or
substantially  extending  the  useful  life of an  existing  asset.  In 1995 the
Company capitalized all apartment carpet, vinyl and wallpaper  replacements.  In
1994 and 1993 apartment carpet, vinyl, and wallpaper replacements were generally
expensed  as  incurred  ($23,000  in 1994 and none in 1993),  except  when these
replacements were made in conjunction with a plan of acquisition.



<PAGE>


Capitalized  apartment  property  additions,  replacements  and improvements are
summarized as follows:
<TABLE>
<CAPTION>

                                              1995          1994        1993
<S>                                         <C>        <C>          <C>  
Property acquisitions through purchase       $    ---   $18,243,374  $14,302,078
Property acquisitions through merger              ---    21,950,000        ---
Allocation of additional consideration
   for property acquisitions through merger    66,668        16,667        ---
Capitalized carpet, vinyl, and
     wallpaper replacements                   210,430        91,434       24,274
Other property additions and improvements     315,085        53,193       25,816
                                             $592,183   $40,354,668  $14,352,168
</TABLE>


Note 3.  Investment in and Advances to Management Company

In May 1995, the Management Company was formed to provide management services to
non-Company owned properties.  The Company contributed  approximately  $119,000,
primarily in office  equipment,  to the formation of the Management  Company and
transferred the rights to certain  third-party  property  leasing and management
contracts  to the  Management  Company for a 1 percent  voting  interest  and 95
percent economic  interest.  The remaining interest in the Management Company is
held  by  certain  officers  of  the  Company.  Because  the  Company  exercises
significant   influence  over  the  financial  and  operating  policies  of  the
Management  Company,  it is reflected in the accompanying  financial  statements
using the equity method.  At December 31, 1995, the Management  Company provides
leasing and property management services to nine apartment  properties and three
shopping  centers  owned by  limited  partnerships  of which  Boddie  Investment
Company ("BIC") is the general partner.

During 1995 the Company advanced a total of $150,000 to the Management  Company.
These advances accrued  interest at 12 percent.  1995 interest on these advances
totaled $9,736 and was outstanding at December 31, 1995.

Summary  financial  information of the Management  Company at December 31, 1995,
and for the eight months then ended is as follows:
<TABLE>
  <S>                                                              <C>
   Current assets                                                   $221,758
   Property and equipment, net                                       122,430
   Other assets                                                        7,028
            Total assets                                            $351,216

   Current liabilities                                              $ 21,919
   Advances and accrued interest due to
      Boddie-Noell Properties, Inc.                                  159,736
   Shareholders' equity                                              169,561
            Total liabilities and shareholders' equity              $351,216

   Revenues                                                         $327,488
   Operating expenses                                               (254,659)
   Interest                                                           (9,736)
            Net income before income taxes                            63,093
   Provision for income taxes                                         12,500
            Net income                                              $ 50,593

</TABLE>

Note 4.  Notes Payable

Notes payable consist of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>

                                                                                    1995              1994
<S>                                                                               <C>               <C>          
Note payable to a bank in the  principal sum of up to  $25,500,000  due December
1998,  interest  on the  outstanding  principal  balance  payable  monthly at an
effective rate of 8.11%,  secured by deeds of trust on 47 restaurant  properties
and  assignment of rents under the Amended and Restated  Master Lease  Agreement
for those  restaurants.  The  principal  balance of the loan may be prepaid,  in
whole or part, subject to certain
restrictions and penalties.                                                        $23,250,000       $       ---

Fixed rate notes  payable  comprised  of four loans at December  31, 1995 (three
loans  at  December  31,  1994),  payable  in  monthly   installments   totaling
approximately  $292,000  including  principal and interest at rates ranging from
7.86% to 8.55%,  with maturities in 2000 (balloon of approximately  $12,500,000)
through 2020. The notes are secured by deeds of
trust and assignments of rents of four apartment properties.                        36,855,485        31,077,256

Variable rate revolving line of credit,  originally at $15,000,000  increased to
$24,000,000,  retired December,  1995. Interest was charged and payable monthly,
at the Company's option, at LIBOR plus 1.625%,  floating CD rate plus 1.625%, or
prime rate. Lender had the right to require Boddie-Noell
Enterprises, Inc. to purchase 24 restaurants in the event of a default.                    ---        18,250,000

8.625% note, payable in equal annual installments plus interest payable monthly,
secured by a mortgage on 14 restaurant  properties  and assignment of the master
lease as it related to such properties. The note was retired
June, 1995.                                                                                ---         4,000,000

Variable rate note, payable in monthly principal installments based on a 25-year
amortization schedule  (approximately $7,000) plus interest at 30-day LIBOR plus
1.85%, secured by a deed of trust and assignment of rents
of an apartment property.  The note was retired May, 1995.                                 ---         6,500,000

Variable rate notes payable to affiliates  comprised of two loans due May, 1999,
interest at the lower of 30-day  LIBOR plus 1.5% (7.3% at December  31, 1995) or
8%, payable quarterly. Liability for these notes was assumed at
the acquisition of BTVC.                                                             7,056,300         7,056,300
                                                                                   $67,161,785       $66,883,556

</TABLE>

As of December 31, 1995,  scheduled  principal  payments  are  approximately  as
follows:  1996  -  $476,000;  1997  -  $517,000;  1998  -  $23,811,000;  1999  -
$7,665,000; 2000 - $12,906,000; thereafter - $21,787,000.

The loan agreement  related to the  $25,500,000  note payable to a bank includes
covenants and restrictions relating to, among other things,  specified levels of
debt service coverage, leverage and net worth.

During  1995 the  Company  applied  $29,425,000  proceeds of fixed rate loans to
retire a fixed rate  mortgage note and pay off variable rate notes payable and a
variable rate revolving line of credit totaling approximately $29,250,000. In

<PAGE>


conjunction  with  these  refinancing  transactions,  unamortized  loan costs of
approximately $38,000 were charged to expense.

During 1994 the Company applied  $31,100,000  proceeds of three fixed rate loans
to pay off variable rate notes payable totaling  approximately  $30,300,000.  In
conjunction  with  these  refinancing  transactions,  unamortized  loan costs of
approximately $142,000 were charged to expense.

At December  31,  1995,  the Company has recorded  deferred  financing  costs of
approximately  $266,000  related to the $25,500,000 term loan which was executed
December 29, 1995.  Management  anticipates that financing costs associated with
this loan will total approximately $410,000, to be amortized over the three-year
term of the loan.


Note 5.  Dividends

Dividends  of $1.24 per  share  were  paid  during  1995,  1994,  and 1993.  The
allocation of these dividends between  non-taxable return of capital and taxable
ordinary dividend income to shareholders was as follows.
<TABLE>
<CAPTION>

                                                1995        1994        1993
<S>                                            <C>         <C>         <C>
 Non-taxable return of capital                  51.8%       49.3%       12.5%
 Taxable ordinary dividend income               48.2        50.7        87.5

</TABLE>

A regular  quarterly  dividend  of $.31 per share was  declared  by the Board of
Directors on January 16, 1996,  payable on February 15, 1996, to shareholders of
record on February 1, 1996.


Note 6.  Rental Operations

Restaurant  Properties  -  Master  Lease  Agreement.  In  conjunction  with  the
$25,500,000  loan agreement  with a bank, in December 1995, the Company  entered
into an Amended and Restated  Master Lease Agreement with BNE which extended the
term of the  original  lease to an  initial  term  ending in  December  2007 and
increased  minimum  annual rent to  $4,500,000.  Prior to amendment,  the master
lease required the lessee to pay minimum annual rent equal to an annualized rate
of 8.0 percent of the aggregate purchase price of the properties  ($3,459,433 in
1995, 1994, and 1993 respectively),  and percentage rent of 9.875 percent of the
quarterly aggregate net sales from restaurant  operations on the properties less
the aggregate minimum rent payable for such calendar quarter.

As amended, the lease requires the lessee to pay monthly installments of minimum
annual  rent  equal to  $4,500,000,  and  percentage  rent at 9.875  percent  of
quarterly aggregate net sales from restaurant  operations on the properties less
minimum rent paid for such calendar quarter, subject to an annual calculation of
the greater of minimum or percentage  rent.  The lessee is  responsible  for all
taxes,  utilities,  renovations,  insurance and maintenance expenses relating to
the operation of the restaurant properties.  The lessee may extend the lease for
up to a maximum of three five-year  renewal terms.  Under certain  conditions as
defined in the agreement,  BNE and the Company each have the right to substitute
another  restaurant  property  for a property  covered by the lease.  The master
lease  provides that after December 31, 2007 (the beginning of the first renewal
period),  BNE has the  right to  terminate  the  lease on up to five  restaurant
properties  per year by offering  to purchase  them under  specified  terms.  In
addition,  the Company and BNE have  entered  into a separate  agreement  which,
after  December 31, 1997,  allows BNE to purchase  under  specified  terms up to
seven restaurant properties deemed to be uneconomic.



<PAGE>


The components of rental income were as follows:
<TABLE>
<CAPTION>

                                 1995              1994             1993
<S>                           <C>              <C>               <C>
 Minimum rent                  $3,459,433       $3,459,433        $3,459,433
 Percentage rent                1,189,817        1,587,404         1,705,999
                               $4,649,250       $5,046,837        $5,165,432
</TABLE>

Future  minimum  rentals to be received by the  Company  under the master  lease
agreement  are  $4,500,000  per year through  2007.  These  amounts above do not
include percentage rentals which may be received in addition to minimum rent.

Approximately  34 percent of the  Company's  1995 revenue was derived from BNE's
payment of rent for the use of the Company's restaurant properties. In addition,
BNE is  responsible  for all of the cost  associated  with the  maintenance  and
operation of these  properties.  As a result,  the  financial  well being of the
Company is to a large extent  dependent on BNE's ability to meet its obligations
under  the  terms  of the  master  lease.  The  ability  of BNE to  satisfy  the
requirements of the master lease depend on its liquidity and capital  resources.
Historically,  BNE has been able to meet its  liquidity  needs through cash flow
generated from operations and through reliance on its credit facility.

BNE's principal line of business is the operation of approximately  365 Hardee's
restaurants,  47 of which are owned by the  Company.  The  continued  decline in
restaurant  sales  has had a  material  impact  on BNE's  operating  cash  flow.
Management  has  reviewed  BNE's  unaudited  financial  statements,   cash  flow
analysis, restaurant contribution analysis, sales trend analysis and projections
and  believes  that with the  refinance  of its  credit  facility  BNE will have
sufficient  liquidity and capital  resources to meet its  obligations  under the
master  lease and credit  facility  as well as its general  corporate  operating
needs.  The  principal  debt  facility  on  which  BNE  has  relied  has  been a
$140,000,000  credit agreement.  This facility matured on December 31, 1995, but
has been temporarily  extended pending renewal.  BNE has received and executed a
commitment  from the bank group  issuing the facility  specifying  the terms and
conditions  of  a  renewal,   and  BNE  is  currently  assembling  the  required
documentation.  Both BNE and  representatives  of the bank group have  indicated
that they  expect the  facility  to be renewed  and that a final  closing of the
renewal will occur in the near future.

Apartment  Properties.  The  Company  leases its  residential  apartments  under
operating  leases with  monthly  payments  due in advance.  The  majority of the
apartment  leases are for terms of one year or less,  with none  longer than two
years. Rental and other revenues are recorded as earned.


Note 7.  Related Party Transactions

Certain  directors and officers of the Company hold similar  positions  with BNE
and BNE Advisory Group,  Inc. (an affiliate of BNE), and held similar  positions
with BTVC.

The Company  purchased  the 47 Hardee's  restaurant  properties  from BNE Realty
Partners, Limited Partnership (an affiliate of BNE) for $43,243,000 in 1987.

The  Company  had an  agreement  through  September  30,  1994,  under which BNE
Advisory Group,  Inc. provided all  administrative  services and was responsible
for the  day-to-day  operations  of the  Company.  The  agreement  provided  for
compensation to BNE Advisory Group,  Inc. at an annual fee equal to 4.65 percent
of the  Company's  net  cash  available  for  distribution  (as  defined  in the
agreement)  before the advisory fee.  Advisory fee expense totaled  $153,000 and
$201,000 in 1994, and 1993,  respectively.  Effective with the merger of BTVC on
October 1, 1994, the agreement with BNE Advisory Group, Inc. was terminated.

Prior to the Company's  acquisition  of BTVC, the Company paid BTVC $112,000 and
$56,000 for property management services in 1994 and 1993, respectively.


<PAGE>


BNE had  extended to the  Company an  unsecured  revolving  line of credit up to
$2,000,000.  Draws totaling $1,100,000 were made and repaid in full during 1994.
At December 31, 1994, there was no obligation  outstanding.  In conjunction with
modification of the master lease agreement (see Note 6), this line of credit was
terminated in December 1995.


Note 8.  Acquisitions

On June 8, 1993, the Company  acquired Paces Commons  Apartments,  a residential
apartment  community  located in Charlotte,  North Carolina for a total purchase
cost of  $14,302,000.  The  purchase  was  financed  primarily  through bank and
mortgage borrowings.  The results of operations of Paces Commons are included in
the financial statements from June 8, 1993.

On June 7,  1994,  the  Company  acquired  Oakbrook  Apartments,  a  residential
apartment  community  located in Charlotte,  North Carolina for a total purchase
cost of  $9,372,000.  The  purchase  was  financed  primarily  through  bank and
mortgage  borrowings.  The results of operations of Oakbrook are included in the
financial statements from June 7, 1994.

On October 1, 1994,  the Company  acquired by merger BTVC,  including  Latitudes
Apartments, for an initial purchase price including $91,000 in cash, $21,251,000
through  assumption of liabilities,  and 134,610 shares of the Company's  common
stock valued at $1,899,000.  The acquisition  agreement  provides for contingent
purchase  price  payments  ("additional  consideration")  of up to $1,700,000 if
certain future financial targets are attained.  The additional  consideration is
payable in shares of common stock or cash,  at the option of the  Company,  on a
quarterly  basis over a period of up to 14 quarters  commencing with the quarter
ended  December 31, 1994.  The  acquisition  was  accounted  for by the purchase
method of accounting,  and the total  acquisition cost of $26,326,000  (assuming
full earn-out of additional consideration and including approximately $1,385,000
in  acquisition   costs)   approximates  the  fair  value  of  assets  acquired.
Significant  assets acquired include the Latitudes  Apartments and an intangible
related  to  management  operations,   initially  recorded  at  $21,950,000  and
$2,250,000,  respectively.  Additional  consideration payments will be allocated
primarily to the intangible related to management  operations and amortized over
ten years. The results of operations of Latitudes and management  operations are
included in the financial statements from October 1, 1994.

On December 28, 1994, the Company acquired Harris Hill Apartments, a residential
apartment  community  located in Charlotte,  North Carolina for a total purchase
cost of  $8,871,000.  The  purchase  was  financed  primarily  through  bank and
mortgage  borrowings.  The results of  operations of Harris Hill are included in
the financial statements from December 28, 1994.

In conjunction with the BTVC acquisition and based on an earlier  estimate,  the
Company  issued  140,990  shares,  including  6,380 "excess  shares" to the BTVC
shareholders  in October,  1994.  During the fourth  quarter of 1994 and in each
quarter of 1995 the  financial  target  for  additional  consideration  was met.
During 1995 the  Company  recorded  additional  consideration  of  approximately
$567,000, paid in part by issuance of 25,750 shares of common stock. At December
31,  1995,  the BTVC  shareholders  are due  additional  consideration  totaling
$283,334.  At  December  31,  1994 the  BTVC  shareholders  were due  additional
consideration  of $49,648  ($141,667 less the value of excess shares  previously
issued),  subsequently  paid in the form of 3,712  shares of common stock during
the first quarter of 1995.

At December 31, 1995,  assuming the full contingent purchase price is earned and
paid  in  common  stock,  it  is  anticipated   that  the  Company  could  issue
approximately  100,000 additional shares of common stock in conjunction with the
acquisition.

The following  unaudited pro forma summary presents the results of operations as
if the acquisitions had occurred at the beginning of periods  presented and does
not purport to be indicative  of what would have  occurred had the  acquisitions
been made as of those dates or of results which may occur in the future.



<PAGE>
<TABLE>
<CAPTION>


                                              1994             1993
<S>                                      <C>               <C>
 Total revenues                           $13,994,000       $13,401,000
 Net income                                $2,160,000        $2,452,000

 Net income per common share                    $0.72             $0.82

</TABLE>

Note 9.  Profit Sharing Plan

The employees of the Company are  participants in a profit sharing plan pursuant
to Section 401 of the Internal  Revenue Code. The Company makes limited matching
contributions based on the level of employee participation as defined.


Note 10.  Stock Option and Incentive Plan

In 1994 the Company  established  an employee  Stock Option and  Incentive  Plan
under which  280,000  shares of the  Company's  common  stock are  reserved  for
issuance.  On October 17, 1994,  options to purchase 160,000 shares were granted
to  certain  eligible  employees  at $13.75  per  share,  the fair  value of the
Company's  stock on the date the options were granted.  The options vest and are
exercisable  one-fourth per year beginning  October 17, 1995, and expire October
17, 2004.  At December 31,  1995,  options for 40,000  shares have vested and no
options have been  exercised.  Subsequent to December 31, 1995, the options were
repriced at $12.50,  the fair value of the Company's common stock on the date of
repricing.

In October 1995, the Financial  Accounting  Standards Board issued SFAS No. 123,
"Accounting  for  Stock-Based   Compensation,"   which   establishes   financial
accounting  and reporting  standards for  stock-based  compensation  plans.  The
statement  defines a fair value based method of accounting for an employee stock
option or similar  equity  instrument and encourages the adoption of that method
of  accounting.  However,  the  statement  also  allows  entities to continue to
account  for such  plans  under  Accounting  Principles  Board  Opinion  No. 25.
Entities  electing  to remain  with the  accounting  in Opinion 25 must make pro
forma  disclosures  of net  income and  earnings  per share as if the fair value
based  method of  accounting  defined in the  statement  had been  applied.  The
Company has not decided if it will adopt SFAS No. 123 or continue to account for
stock-based  compensation plans under the provisions of Opinion 25. However, the
accounting  and disclosure  requirements  of SFAS No. 123 will have no impact on
recognition  of the options  which have been granted at December  31, 1995,  and
therefore no impact on the Company's financial position or results of operations
as of December 31, 1995.


Note 11.  Commitments and Contingencies

Subsequent  to December  31,  1995,  the Company  entered  into an  agreement to
purchase an additional  apartment  community.  The Company has placed a $150,000
at-risk binder in an escrow account held by a title insurance company.
The Company is currently exploring various financing options.

The Company has agreements with two of its executive  officers which provide for
cash  compensation  and other  benefits in the event that a change in control of
the Company occurs.

The Company is a party to a variety of legal proceedings arising in the ordinary
course of its  business.  Management  believes that such matters will not have a
material effect on the financial position of the Company.



<PAGE>


Note 12.  Quarterly Financial Data (Unaudited)

Set forth  below is  selected  financial  data  (unaudited)  for the years ended
December 31, 1995 and 1994:
<TABLE>
<CAPTION>

                                                 
                                                                 Net income
                              Revenues         Net income         per share
<S>                        <C>               <C>                   <C>
1995
First quarter               $  3,353,182      $   388,106           $0.13
Second quarter                 3,528,028          526,125            0.18
Third quarter                  3,530,374          467,140            0.16
Fourth quarter (1), (2)        3,314,054          246,897            0.07
                             $13,725,638       $1,628,268           $0.54

1994
First quarter                 $1,693,400      $   584,239           $0.20
Second quarter                 2,021,918          761,094            0.27
Third quarter                  2,279,216          641,049            0.22
Fourth quarter (1)             3,263,712          315,537            0.11
                              $9,258,246       $2,301,919           $0.80

</TABLE>

(1) Net income  includes a special  charge of $321,000 and $377,000 to write off
certain  deferred  acquisition  costs in 1995 and  1994,  respectively.  (2) Net
income   includes  an  adjustment  to   capitalize   approximately   $85,000  of
expenditures for carpet,  vinyl and wallpaper  previously  charged to expense in
the first three quarters of 1995.



<PAGE>



BODDIE-NOELL PROPERTIES, INC.
------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
Year Ended December 31, 1995
<TABLE>
<CAPTION>

                                                                            Costs                Gross Amount at Which
            Description          Encumb.      Initial Costs              Capitalized          Carried at Close of Period
                                                        Buildings &       Subsequent                 Buildings &             
                                          Land          Improvem'ts     to Acquisition       Land    Improvem'ts      Total  
<S>                               <C>      <C>          <C>               <C>            <C>         <C>           <C>
Hardee's Restaurant Properties:                                      
North Carolina:
Bessemer City                      (1)      $152,079     $391,060          $     -        $152,079    $391,060      $543,139 
Burlington                         (1)       162,411      417,629                -         162,411     417,629       580,040 
Chapel Hill                        (1)       273,556      703,430                -         273,556     703,430       976,986 
Denver                             (1)       275,484      708,387                -         275,484     708,387       983,871 
Eden                               (1)       253,282      651,296                -         253,282     651,296       904,578 
Fayetteville (Ramsey)              (1)       260,135      668,919                -         260,135     668,919       929,054 
Fayetteville (N.Eastern)           (1)       308,271      792,696                -         308,271     792,696     1,100,967 
Fayetteville (Bragg)               (1)       235,951      606,730                -         235,951     606,730       842,681 
Gastonia (E. Franklin)             (1)       230,421      592,511                -         230,421     592,511       822,932 
Gastonia (N. Chester)              (1)       199,133      512,055                -         199,133     512,055       711,188 
Hillsborough                       (1)       290,868      747,948                -         290,868     747,948     1,038,816 
Kinston (W. Vernon)                (1)       237,135      609,777                -         237,135     609,777       846,912 
Kinston (Richlands)                (1)       231,678      595,743                -         231,678     595,743       827,421 
Mt. Airy                           (1)       272,205      699,955                -         272,205     699,955       972,160 
Newton                             (1)       223,453      574,594                -         223,453     574,594       798,047 
Siler City                         (1)       268,312      689,945                -         268,312     689,945       958,257 
Spring Lake                        (1)       218,925      562,949                -         218,925     562,949       781,874 
Thomasville (E. Main)              (1)       253,716      652,411                -         253,716     652,411       906,127 
Thomasville (Randolph)             (1)       327,727      842,726                -         327,727     842,726     1,170,453 
                                        ----------------------------------------- -------------------------------------------
                                           4,674,742   12,020,761                -       4,674,742  12,020,761    16,695,503 
                                        ----------------------------------------- -------------------------------------------
Virginia:                                                                         
Ashland                            (1)       296,509      762,452                -         296,509     762,452     1,058,961 
Blackstone                         (1)       275,565      708,596                -         275,565     708,596       984,161 
Bluefield                          (1)       205,700      528,947                -         205,700     528,947       734,647 
Chester                            (1)       300,165      771,852                -         300,165     771,852     1,072,017 
Clarksville                        (1)       211,545      543,972                -         211,545     543,972       755,517 
Clintwood                          (1)       222,673      572,588                -         222,673     572,588       795,261 
Dublin                             (1)       364,065      936,168                -         364,065     936,168     1,300,233 
Franklin                           (1)       287,867      740,230                -         287,867     740,230     1,028,097 
Galax                              (1)       309,578      796,057                -         309,578     796,057     1,105,635 
Hopewell                           (1)       263,939      678,701                -         263,939     678,701       942,640 
Lebanon                            (1)       266,340      684,876                -         266,340     684,876       951,216 
Lynchburg (Langhorne)              (1)       249,865      642,509                -         249,865     642,509       892,374 
Lynchburg (Timberlake)             (1)       276,153      710,107                -         276,153     710,107       986,260 
Norfolk                            (1)       325,822      837,829                -         325,822     837,829     1,163,651 
Orange                             (1)       244,883      629,699                -         244,883     629,699       874,582 
Petersburg                         (1)       357,984      920,531                -         357,984     920,531     1,278,515 
Richmond (Forest Hill)             (1)       196,084      504,216                -         196,084     504,216       700,300    
                                                                                 
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                    
                                Accumulated     Date of      Date        Life     
            Description         Depreciation    Constr.     Acquired    (Years)   
<S>                             <C>            <C>         <C>            <C>                                                
Hardee's Restaurant Properties:                                                    
North Carolina:                      
Bessemer City                    $ 85,137       Nov-77      Apr-87         40      
Burlington                         90,920       Oct-85      Apr-87         40      
Chapel Hill                       153,142       Aug-64      Apr-87         40      
Denver                            154,221       Jul-83      Apr-87         40      
Eden                              141,792       Jun-73      Apr-87         40      
Fayetteville (Ramsey)             145,629       Oct-73      Apr-87         40      
Fayetteville (N.Eastern)          172,576       Sep-83      Apr-87         40      
Fayetteville (Bragg)              132,090       Jan-85      Apr-87         40      
Gastonia (E. Franklin)            128,994       Apr-63      Apr-87         40      
Gastonia (N. Chester)             111,478       Jan-78      Apr-87         40      
Hillsborough                      162,833       Mar-78      Apr-87         40      
Kinston (W. Vernon)               132,753       Jul-62      Apr-87         40      
Kinston (Richlands)               129,697       Dec-81      Apr-87         40      
Mt. Airy                          152,385       May-73      Apr-87         40      
Newton                            125,094       Mar-76      Apr-87         40      
Siler City                        150,206       May-79      Apr-87         40      
Spring Lake                       122,558       Mar-76      Apr-87         40      
Thomasville (E. Main)             142,035       Feb-66      Apr-87         40      
Thomasville (Randolph)            183,467       Apr-74      Apr-87         40      
                                ----------                                         
                                2,617,007                                          
                                ----------                                         
Virginia:                                                                          
Ashland                           165,992       Apr-87      Apr-87         40      
Blackstone                        154,267       Sep-79      Apr-87         40      
Bluefield                         115,155       Feb-85      Apr-87         40      
Chester                           168,038       May-73      Apr-87         40      
Clarksville                       118,427       Oct-85      Apr-87         40      
Clintwood                         124,656       Jan-81      Apr-87         40      
Dublin                            203,810       Jul-83      Apr-87         40      
Franklin                          161,154       Feb-75      Apr-87         40      
Galax                             173,307       Jun-74      Apr-87         40      
Hopewell                          147,758       Jun-78      Apr-87         40      
Lebanon                           149,103       Jun-83      Apr-87         40      
Lynchburg (Langhorne)             139,878       Sep-82      Apr-87         40      
Lynchburg (Timberlake)            154,595       Aug-83      Apr-87         40      
Norfolk                           182,401       Aug-84      Apr-87         40      
Orange                            137,090       Aug-74      Apr-87         40      
Petersburg                        200,407       Mar-74      Apr-87         40      
Richmond (Forest Hill)            109,772       Nov-74      Apr-87         40      




</TABLE>
                                                   

BODDIE-NOELL PROPERTIES, INC.
-------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
Year Ended December 31, 1995

<TABLE>
<CAPTION>
                                                                             Costs                    Gross Amount at Which
            Description        Encumb.            Initial Costs           Capitalized                Carried at Close of Period
                                                            Buildings &    Subsequent                     Buildings &               
                                              Land          Improvem'ts  to Acquisition       Land        Improvem'ts       Total   
<S>                             <C>          <C>            <C>          <C>          <C>             <C>            <C>   
Richmond (Midlothian)            (1)             270,736       696,179            -           270,736         696,179        966,915
Richmond (Myers)                 (1)             321,946       827,861            -           321,946         827,861      1,149,807
Roanoke (Hollins)                (1)             257,863       663,076            -           257,863         663,076        920,939
Roanoke (Abenham)                (1)             235,864       606,507            -           235,864         606,507        842,371
Rocky Mount                      (1)             248,434       638,829            -           248,434         638,829        887,263
Smithfield                       (1)             223,070       573,608            -           223,070         573,608        796,678
Staunton                         (1)             260,569       670,035            -           260,569         670,035        930,604
Verona                           (1)             191,631       492,765            -           191,631         492,765        684,396
Virginia Beach (Lynnhaven)       (1)             271,570       698,322            -           231,731         698,322        930,053
Virginia Beach (Holland)         (1)             277,943       714,710            -           277,943         714,710        992,653
Wise                             (1)             219,471       564,355            -           219,471         564,355        783,826
                                            ----------------------------------------------------------------------------------------
                                               7,433,834    19,115,577            -         7,393,995      19,115,577     26,509,572
                             -------------------------------------------------------------------------------------------------------
Total Restaurant Properties      23,250,000   12,108,576    31,136,338            -        12,068,737      31,136,338     43,205,075
                             -------------------------------------------------------------------------------------------------------

Apartment Properties:
North Carolina:
Paces Commons, Charlotte         10,834,150    1,430,157    12,871,424     334,175        1,430,157      13,205,599     14,635,756  
Oakbrook, Charlotte               6,568,683      848,835     8,523,384      90,791          848,835       8,614,175      9,463,010  
Harris Hill, Charlotte            6,152,385    1,003,298     7,867,857     180,392        1,003,298       8,048,249      9,051,547  
                                            ----------------------------------------------------------------------------------------
                                               3,282,290    29,262,665     605,358        3,282,290      29,868,023     33,150,313  
                                            ----------------------------------------------------------------------------------------
Virginia:
Latitudes, Virginia Beach        13,300,267    3,360,000    18,606,667     158,706        3,360,000      18,805,373     22,165,373  
                             -------------------------------------------------------------------------------------------------------
Total Apartment Properties       36,855,485    6,642,290    47,869,332     804,064        6,642,290      48,673,396     55,315,686  
                             -------------------------------------------------------------------------------------------------------
 Total Real Estate            $  60,105,485  $18,750,866   $79,005,670    $804,064     $ 18,711,027    $ 79,809,734   $ 98,520,761  
                              ======================================================================================================
</TABLE>

<TABLE>
<CAPTION>

            
                             Accumulated      Date of       Date        Life     
            Description      Depreciation     Constr.     Acquired    (Years)    
<S>                          <C>             <C>         <C>            <C>     
Richmond (Midlothian)           151,563       Jan-74      Apr-87         40  
Richmond (Myers)                180,231       Apr-83      Apr-87         40  
Roanoke (Hollins)               144,357       Feb-73      Apr-87         40  
Roanoke (Abenham)               132,041       Nov-82      Apr-87         40  
Rocky Mount                     139,077       May-80      Apr-87         40  
Smithfield                      124,878       Apr-77      Apr-87         40  
Staunton                        145,872       Sep-83      Apr-87         40  
Verona                          107,278       Jan-85      Apr-87         40  
Virginia Beach (Lynnhaven)      152,030       Jun-80      Apr-87         40  
Virginia Beach (Holland)        155,598       Aug-83      Apr-87         40  
Wise                            122,862       Jun-80      Apr-87         40  
                             -----------                                     
                              4,161,597                                      
                             -----------                                     
Total Restaurant Properties   6,778,604                                      
                             -----------                                     
                                                                             
Apartment Properties:                                                        
North Carolina:                                                              
Paces Commons, Charlotte        910,400         1988      Jun-93         40  
Oakbrook, Charlotte             367,058         1985      Jun-94         40  
Harris Hill, Charlotte          249,824         1988      Dec-94         40  
                             -----------                                     
                              1,527,282                                      
                             -----------                                     
Virginia:                     
Latitudes, Virginia Beach       715,062         1989      Oct-94         38  
                             -----------                                     
Total Apartment Properties    2,242,344                                      
                             -----------                                     
 Total Real Estate           $9,020,948                                      
                             ===========                                                                                        
                                                                                 
 </TABLE>


Notes:  (1) Indicates the 47 restaurants  encumbered by the bank term loan of up
to $25,500,000; $23,250,000 outstanding at 12/31/95


<PAGE>



BODDIE-NOELL PROPERTIES, INC.
------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>



                                                       Years ended December 31,
                                              1995             1994            1993
                                          --------------   --------------  ---------------
<S>                                       <C>               <C>              <C>
Real estate investments:
     Balance at beginning of year           $97,928,578      $57,557,243      $43,205,075
     Additions during year
        Acquisitions by merger                        -       21,966,667                -
        Other acquisitions                            -       18,243,374       14,301,581
        Improvements, etc.                      592,183          161,294           50,587
     Deductions during year                           -                -                -
                                          ==============   ==============  ===============
     Balance at close of year               $98,520,761      $97,928,578      $57,557,243
                                          ==============   ==============  ===============


Accumulated depreciation:
     Balance at beginning of year           $ 6,827,337      $ 5,416,818      $ 4,443,384
     Provision for depreciation               2,193,611        1,410,519          973,434
     Deductions during year                           -                -                -
                                          ==============   ==============  ===============
     Balance at close of year               $ 9,020,948      $ 6,827,337      $ 5,426,818
                                          ==============   ==============  ===============

</TABLE>



<PAGE>


                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>


  Exhibit
    No.                                                                                                Page
   <S>      <C>                                                                                         <C>   
    2*       Agreement and Plan of Merger between BT Venture Corporation and 
             Boddie-Noell Restaurant Properties, Inc. (filed as Exhibit (2)-2 
             to Boddie-Noell Properties, Inc. Current Report on Form 8-K dated 
             October 1, 1994, and incorporated herein by reference)
    3.1*     Articles of Incorporation (filed as Exhibit 3(a) to Registration
             Statement No. 33-13155 on Form S-11 and incorporated herein by 
             reference)
    3.2      By-Laws                                                                                     41
   10.1      Amended and Restated Master Lease Agreement dated December 21, 1995
             between Boddie-Noell Properties, Inc. and Boddie-Noell Enterprises,
             Inc.                                                                                        55
   10.2      Loan Agreement dated December 27, 1995 between Boddie-Noell 
             Properties, Inc. and SouthTrust Bank of Alabama, N.A.                                       84
   10.3*     Acquisition Agreement by and among Boddie-Noell Restaurant 
             Properties, Inc., BT Venture  Corporation and Related Entities 
             dated June 7, 1994 (filed as an exhibit in  Schedule  14A of Proxy
             Statement dated June 15, 1994 and incorporated herein by reference)
   10.4*     Boddie-Noell Restaurant Properties, Inc. 1994 Stock Option and 
             Incentive Plan effective August 4, 1994 (filed as an exhibit in 
             Schedule 14A of Proxy Statement dated June 15, 1994 and 
             incorporated herein by reference)
   10.5*     Form and  description of Incentive  Stock Option  Agreements  dated
             October 17, 1994 between the Company and certain officers (filed as
             Exhibit 10.8 to Boddie-Noell Properties, Inc. Annual Report on Form
             10-K dated December 31, 1994 and incorporated herein by reference)
   10.6*     Form and description of Nonqualified  Stock Option Agreements dated
             October 17, 1994 between the Company and certain officers (filed as
             Exhibit 10.9 to Boddie-Noell Properties, Inc. Annual Report on Form
             10-K dated December 31, 1994 and incorporated herein by reference)
   10.7*     Form and description of Employment Agreements dated October 1, 1994
             between the Company and certain officers (filed as Exhibit 10.10 to
             Boddie-Noell  Properties,  Inc.  Annual  Report on Form 10-K  dated
             December 31, 1994 and incorporated herein by reference)
   11        Computation of Per Share Earnings                                                          113
   21        Subsidiaries of the Registrant                                                             114
   27        Financial Data Schedule (electronic filing)                                                115

</TABLE>


*  Incorporated herein by reference