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

Form 10-Q

For the quarterly period ended               June 30, 2003

OR

For the transition period from         to        

Commission file number: 333-9371

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

Delaware
(State or other jurisdiction of incorporation or organization)

38-3304096
(IRS Employer Identification Number)

24 Frank Lloyd Wright Drive, Lobby L, 4th Floor
P.O. Box 544, Ann Arbor, Michigan 48106-0544
(Address of principal executive offices, including zip code)

(734) 994-5505
(Issuer’s telephone number)

Not Applicable
(Former name, former address and former fiscal year, if changed since last year)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes  X No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court: Not applicable

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest
practicable date: Not applicable

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

Index to Form 10-Q

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Captec Franchise Capital Partners L.P. IV
Balance Sheets

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Captec Franchise Capital Partners L.P. IV
Statements of Operations
(Unaudited)

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

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Captec Franchise Capital Partners L.P. IV
Statement of Changes in Partners’ Capital
for the six months ended June 30, 2003
(Unaudited)

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

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Captec Franchise Capital Partners L.P. IV
Statement of Cash Flows
for the six months ended June 30, 2003 and 2002
(Unaudited)

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

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

1.  THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:

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

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

The Partnership commenced a public offering (the “Offering”) of up to 30,000 limited partnership units (the “Units”), priced at $1,000 per Unit, registered under the Securities Act of 1933, as amended, by means of a Registration Statement filed on Form S-11 which was declared effective by the Securities and Exchange Commission on December 23, 1996. The Partnership accepted subscriptions for the minimum number of Units on March 5, 1997 and immediately commenced operations. The Offering reached final funding in December 1998 having received subscriptions for the entire 30,000 Units. Since 1999, 768 Units have been repurchased by the Partnership pursuant to the terms of the Repurchase Plan set forth in the Partnership’s December 23, 1996 prospectus with respect to the Offering. At June 30, 2003, the Partnership had 29,232 Units issued and outstanding.

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

Allocation of profits, losses and cash distributions from operations and cash distributions from sale or refinancing are made pursuant to the terms of the Partnership Agreement. Profits and losses from operations are allocated among the limited partners based upon the number of Units owned.

Net income per limited partnership interest is calculated using the weighted average number of limited partnership Units outstanding during the period and the limited partners’ allocable share of the net income.

Distributions per limited partnership Unit is calculated using the actual distributions disbursed during the period to the weighted average number of limited partnership Units during the period. Actual individual limited partner distributions realized may vary from this calculation as a result of a variety of factors including: (i) actual distributions are computed based on quarterly operating results and outstanding limited partnership Units, which are disbursed in the subsequent quarter; (ii) certain limited partners have elected to receive monthly distribution versus quarterly distributions which creates timing differences between comparative calculations, and (iii) the calculation ignores the timing of repurchases.

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The balance sheet of the Partnership as of June 30, 2003, the statements of operations and cash flows for the periods ending June 30, 2003 and June 30, 2002 and the statements of changes in partners’ capital for the period ending June 30, 2003 have not been audited. In the opinion of Management, these unaudited financial statements contain all adjustments necessary to present fairly the financial position and results of operations and cash flows of the Partnership for the periods then ended. Results of operations for the interim periods are not necessarily indicative of results for the full year. These unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2002 filed with the United States Securities and Exchange Commission on March 31, 2003.

2.   LAND AND BUILDING SUBJECT TO OPERATING LEASES:

The net investment in operating leases as of June 30, 2003 and December 31, 2002 is composed of the following:

3.   NET INVESTMENT IN FINANCING LEASES:

The net investment in financing leases as of June 30, 2003 and December 31, 2002 is composed of the following:

4.   NOTES PAYABLE:

In December 1998, the Partnership entered into a $6.4 million term note. The note has a ten-year term, is collateralized by certain properties subject to operating leases, and bears interest at a rate of 8.13% per annum.

In March 1999, the Partnership entered into an additional $3.3 million term note. The note has a ten-year term, is collateralized by certain properties subject to operating leases, and bears interest at a rate of 8.5% per annum.

In October 2000, the Partnership assumed a $3.75 million term note in connection with the acquisition of a property. The note has a ten-year term and bears interest at a rate of 8.35% per annum.

In November 2001, the Partnership entered into an additional $1.5 million term note. The note has a two-year term, is collateralized by certain properties subject to operating leases, and bears interest at a rate of prime plus 2% per annum. The General Partner intends to refinance the loan upon maturity.

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In April 2003, the Partnership entered into two term notes for $862,500 and $57,500 in connection with the acquisition of a property from an affiliate. The notes each have a five-year term and bear interest at a rate of 6.25% and 4.75 per annum, respectively.

Aggregate debt issuance costs of $634,710 were incurred in connection with the issuance of the notes, and are being amortized to interest expense over the term of the notes using the straight-line method.

ITEM 2.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
                         CONDITION AND RESULTS OF OPERATIONS

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

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

RESULTS OF OPERATIONS

Three Months Ended June 30, 2003. During the three months ended June 30, 2003, total operating revenue increased 0.8% to approximately $927,000, as compared to approximately $919,000 for the three months ended June 30, 2002. In comparison to the same quarter in 2002, income for the three months ended June 30, 2003 included an increase in rental income of approximately $34,000 due to the acquisition of a Taco Bell property in April 2003, partially offset by a decrease in earned income from financing leases of approximately $26,000 due to the amortization of principal balances, and the termination of two equipment leases, and the disposition of an equipment lease in April 2003.

Operating expenses decreased 2.7% to approximately $484,000 for the three months ended June 30, 2003, as compared to approximately $497,000 for the three months ended June 30, 2002. The decrease in operating expenses is primarily due to a decrease in general and administrative expenses as a result of reduced professional fees, partially offset by an increase in depreciation expense due to the acquisition of the Taco Bell property in April 2003 and an increase in interest expense due to the issuance of additional debt in connection with the purchase of that property.

Other income for the three months ended June 30, 2003 was approximately 20,000 due to the disposition of an equipment lease in April 2003 for net cash proceeds of approximately $88,000, resulting in a gain of approximately $20,000.

As a result of the foregoing, the Partnership’s net income increased 9.5% to $463,000 for the three months ended June 30, 2003, as compared to $423,000 for the three months ended June 30, 2002.

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The Partnership announced second quarter distributions of $660,000, of which $574,654 was distributed to its limited partners on July 15, 2003 and the remaining $85,346 of which will be distributed to limited partners who have elected to receive distributions on a monthly basis.

Six Months Ended June 30, 2003. During the six months ended June 30, 2003, total operating revenue decreased 1.5% to approximately $1,826,000, as compared to approximately $1,854,000 for the six months ended June 30, 2002. Rental revenue from operating leases for the six months ended June 30, 2003 increased 2.0% to approximately $1,716,000 as compared to approximately $1,682,000 for the six months ended June 30, 2002, due to the purchase of the Taco Bell property in April 2003. Earned income from financing leases for the six months ended June 30, 2003 decreased 35.9% to approximately $110,000, as compared to approximately $172,000 for the six months ended June 30, 2002 due to the amortization of principal balances, and the termination of two equipment leases, and the disposition of an equipment lease in April 2003.

Operating expenses decreased 1.9% to approximately $952,000 for the six months ended June 30, 2003 as compared to approximately $970,000 for six months ended June 30, 2002. The decrease in operating expenses is primarily due to a decrease in general and administrative expenses as a result of reduced professional fees.

Other income for the six months ended June 30, 2003 was approximately $20,000 due to the disposition of an equipment lease in April 2003 for net cash proceeds of approximately $88,000, resulting in a gain of approximately $20,000.

As a result of the foregoing, the Partnership’s net income increased 1.1% to approximately $895,000 for the six months ended June 30, 2003 as compared to approximately $885,000 for the six months ended June 30, 2002.

LIQUIDITY AND CAPITAL COMMITMENTS

In December 1996, the Partnership commenced its Offering of up to 30,000 Units. The Offering reached final funding in December 1998 with subscriptions for the entire 30,000 Units. Net proceeds after Offering expenses were approximately $26.1 million.

In December 1998, the Partnership entered into a $6.4 million term note. The Partnership entered into an additional $3.3 million term note in March 1999. Proceeds from the notes were used to acquire additional properties. The notes have a ten-year term, are collateralized by certain properties subject to operating leases, and bear interest at a rate of 8.13% and 8.5% per annum, respectively.

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

In November 2001, the Partnership entered into an additional $1.5 million term note. The note has a two-year term, is collateralized by certain properties subject to operating leases and bears interest at a rate of prime plus 2% per annum. Proceeds from this note were used to repay approximately $700,000 of short-term borrowings and to provide working capital intended to be used to fund Unit repurchases and potential property acquisitions. The General Partner intends to refinance the loan upon maturity.

In April 2003, the Partnership entered into two term notes for $862,500 and $57,500. The notes each have a five-year term and bear interest at a rate of 6.25% and 4.75% per annum, respectively. Proceeds from these notes were used to purchase a property for approximately $1.2 million from an affiliate.

Debt issuance costs of approximately $635,000 incurred in connection with the issuance of the notes are being amortized into interest expense over the life of the notes using the straight-line method.

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In April 2003 the Partnership acquired a property located in Harrison, Ohio subject to an existing lease with a Taco Bell franchisee. The property was purchased from an affiliate for a price of $1,150,000, which the Partnership funded with $230,000 of cash and $920,000 of proceeds from two term notes issued in connection with the purchase. The lease is an absolute net lease that expires in September 2019. Under the terms of the lease, annual rent is presently $115,000 and will increase 10.4% in September 2004 and every five years thereafter.

As of June 30, 2003, the Partnership had a portfolio of 22 properties located in 11 states, with a cost basis of $33.0 million, 14 performing equipment leases, with an original investment of $4.7 million, and one repossessed equipment package related to a defaulted equipment contract. The remaining net investment in the Partnership’s leased equipment is $799,000, net of $3.8 million of aggregate principal collections on financing leases during the life of those investments. Inclusive of the above amount, the Partnership has received approximately $6.5 million of aggregate principal collections on its financing leases during the life of those investments. As of June 30, 2003, the Partnership occupying those properties has two properties for which rental payments have been delinquent for approximately 240 days. The tenant experienced financial difficulties that resulted in the stores’ recent closure. The Partnership is actively seeking to re-tenant the property as well as pursuing rights and remedies under the leases to collect all the amounts owed. The General Partner does not have sufficient evidence at this time to believe impairment exists.

The Partnership semi-annually considers written requests to repurchase Units pursuant to the terms of the Repurchase Plan set forth in the Partnership’s December 23, 1996 prospectus with respect to the Offering. Since 1999, 768 Units have been repurchased by the Partnership. At June 30, 2003, the Partnership had 29,232 Units issued and outstanding. The Partnership expects to fund any future Unit repurchases out of working capital reserves and Net Sale or Refinancing Proceeds, but may also fund such repurchases out of Cash Flow. The Partnership is not obligated to accept Unit repurchase requests if the Partnership does not have the liquidity to fund such requests and/or if the Partnership does not have sufficient Cash Flow to distribute the 10% Current Preferred Return.

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

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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ITEM 4.   CONTROLS AND PROCEDURES

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

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

PART II — OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS. On November 19, 2002, the Partnership was named as one of the defendants in a personal injury and liability suit relating to an allegedly unsafe walkway at a property. The General Partner and Partnership have denied any wrongdoing and intend to vigorously contest the matter. The Partnership has insurance, which would cover any amounts, less retention, that may ultimately be paid.

ITEM 2.		CHANGES IN SECURITIES.  None.
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES.    None.
ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.    None.
ITEM 5.		OTHER INFORMATION.    None
ITEM 6.		EXHIBITS AND REPORTS ON FORM 8-K.

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

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	(b) Reports on Form 8-K:

	During the six months ended June 30, 2003, the Partnership filed a Current Report on Form 8-K dated April 30, 2003 reporting the Partnership 2002 operating results.

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SIGNATURES

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

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EXHIBIT INDEX