UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15666
CNL INCOME FUND, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Florida 59-2666264
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
400 East South Street, Suite 500
Orlando, Florida 32801
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
Registrant's telephone number, including area code: (407) 422-1574
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS: NAME OF EXCHANGE ON WHICH REGISTERED:
None Not Applicable
Securities registered pursuant to section 12(g) of the Act:
Units of limited partnership interest ($500 per Unit)
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE
REGISTRANT: The registrant registered an offering of units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market for such Units. Each Unit was originally sold at $500 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART I
ITEM 1. BUSINESS
CNL Income Fund, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on November 26, 1985. The general partners of the Partnership are Robert
A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on April 16, 1986, the
Partnership offered for sale up to $15,000,000 in limited partnership interests
(the "Units") (30,000 Units at $500 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended. The
offering terminated on December 31, 1986, as of which date the maximum offering
proceeds of $15,000,000 had been received from investors who were admitted to
the Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of selected national and regional fast-food restaurant chains (the
"Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totalled
$13,284,970, and were used to acquire 20 Properties, including interests in
three Properties owned by joint ventures in which the Partnership is a
co-venturer. During 1992 and 1994, the Partnership sold a Property in San Dimas,
California, and a Property in Fairfield, California, respectively. The sale of
the Property in Fairfield, California, was made pursuant to the tenant's
exercise of its option to purchase the Property in accordance with the terms of
its lease. In addition, during 1996, the Partnership sold a small, undeveloped
portion of land relating to its Property in Mesquite, Texas. This sale of land
had no bearing on the operations of the Property or the restaurant business. As
a result of the above transactions, the Partnership currently owns 18
Properties, including interests in three Properties owned by joint ventures in
which the Partnership is a co-venturer. Generally, the Properties are leased on
a triple-net basis with the lessee responsible for all repairs and maintenance,
property taxes, insurance and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to repurchase Properties, generally at
the Property's then fair market value after a specified portion of the lease
term has elapsed. In general, the General Partners plan to seek the sale of the
remaining Properties commencing seven to 15 years after their acquisition. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property or joint venture
purchase options granted to certain lessees.
LEASES
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
joint ventures in which the Partnership is a co-venturer provide for initial
lease terms, ranging from five to 20 years (the average being 16 years), and
expire between 1999 and 2016. Generally, the leases are on a triple-net basis,
with the lessee responsible for all repairs and maintenance, property taxes,
insurance and utilities. The leases of the Properties provide for minimum base
annual rental payments (payable in monthly installments) ranging from
approximately $16,000 to $117,000. Generally, the leases provide for percentage
rent, based on sales in excess of a specified amount, to be paid annually. In
addition, certain leases provide for increases in the annual base rent during
the lease term.
Generally, the leases of the Properties provide for two or three
five-year renewal options subject to the same terms and conditions as the
initial lease. Certain lessees also have been granted options to purchase
Properties at the Property's then fair market value, or pursuant to a formula
based on the original cost of the Property, after a specified portion of the
lease term has elapsed. Additionally, certain leases provide the lessee the
option to purchase up to a 49 percent joint venture interest in the Property,
after a specified portion of the lease term has elapsed, at
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an option purchase price similar to those described above multiplied by the
percentage interest in the Property with respect to which the option is being
exercised.
The leases also provide that, in the event the Partnership wishes to
sell the Property subject to that lease, the Partnership first must offer the
lessee the right to purchase the Property on the same terms and conditions, and
for the same price, as any offer which the Partnership has received for the sale
of the Property.
In August 1996, the Partnership entered into a lease amendment with the
tenant of the Property in Mesquite, Texas, to provide for lower initial base
rent and to provide scheduled rent increases over the term of the lease,
effective March 1996.
In addition, in January 1997, the Partnership entered into a lease
amendment with the tenant of the Property in Oklahoma City, Oklahoma, to provide
for reduced annual rents and to provide for a change in the percentage rent
calculation. The Partnership does not anticipate that these reduced rents will
have a material effect on operations.
MAJOR TENANTS
During 1996, three lessees of the Partnership, Golden Corral
Corporation, Wendy's International, Inc. and Restaurant Management Services,
Inc. each contributed more than ten percent of the Partnership's total rental
income (including the Partnership's share of the rental income from three
Properties owned by joint ventures). As of December 31, 1996, Golden Corral
Corporation was the lessee under leases relating to five restaurants, Wendy's
International, Inc. was the lessee under leases relating to three restaurants
and Restaurant Management Services, Inc. was the lessee under leases relating to
two restaurants. It is anticipated that these three lessees each will continue
to contribute ten percent or more of the Partnership's total rental income in
1997 and subsequent years. In addition, three Restaurant Chains, Golden Corral
Family Steakhouse Restaurants ("Golden Corral"), Wendy's Old Fashioned Hamburger
Restaurants ("Wendy's") and Popeye's Famous Fried Chicken ("Popeye's"), each
accounted for more than ten percent of the Partnership's total rental income in
1996 (including the Partnership's share of the rental income from three
Properties owned by joint ventures). In subsequent years, it is anticipated that
these three Restaurant Chains each will continue to account for more than ten
percent of the total rental income to which the Partnership is entitled under
the terms of its leases. Any failure of these lessees or Restaurant Chains could
materially affect the Partnership's income.
JOINT VENTURE ARRANGEMENTS
The Partnership has entered into three separate joint venture
arrangements, Sand Lake Road Joint Venture, Orange Avenue Joint Venture and
Seventh Avenue Joint Venture, with various unaffiliated entities to purchase and
hold three of the Properties through such joint ventures. The joint venture
arrangements provide for the Partnership and its joint venture partner to share
equally in all costs and benefits associated with the joint venture. The
Partnership and its joint venture partner are jointly and severally liable for
all debts, obligations and other liabilities of the joint venture.
Each joint venture has an initial term of 20 years, and, after the
expiration of the initial term, continues in existence from year to year unless
terminated at the option of either joint venturer or by an event of dissolution.
Events of dissolution include the bankruptcy, insolvency or termination of any
joint venturer, sale of the Property owned by the joint venture and mutual
agreement of the Partnership and its joint venture partner to dissolve the joint
venture.
The Partnership has management control of each joint venture in which
it participates. The joint venture agreements restrict each venturer's ability
to sell, transfer or assign its joint venture interest without first offering it
for sale to the joint venture partner, either upon such terms and conditions as
to which the venturers may agree or, in the event the venturers cannot agree, on
the same terms and conditions as any offer from a third party to purchase such
joint venture interest.
Net cash flow from operations of each joint venture is distributed 50
percent to each joint venture partner. Any liquidation proceeds, after paying
joint venture debts and liabilities and funding reserves for contingent
liabilities, will be distributed first to the joint venture partners with
positive capital account balances in proportion
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to such balances until such balances equal zero, and thereafter in proportion to
each partner's percentage interest in the joint venture.
PROPERTY MANAGEMENT
CNL Investment Company, an affiliate of the General Partners, acted as
manager of the Partnership's Properties pursuant to a property management
agreement with the Partnership through December 31, 1994. Under this agreement,
CNL Investment Company was responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Investment Company also assisted the General Partners in
negotiating the leases. For these services, the Partnership had agreed to pay
CNL Investment Company an annual fee of one-half of one percent of Partnership
assets (valued at cost) under management, not to exceed the lesser of one
percent of gross rental revenues or competitive fees for comparable services.
Under the property management agreement, the property management fee is
subordinated to receipt by the Limited Partners of an aggregate, ten percent,
noncumulative, noncompounded annual return on their adjusted capital
contributions (the "10% Preferred Return"), calculated in accordance with the
Partnership's limited partnership agreement (the "Partnership Agreement"). In
any year in which the Limited Partners do not receive a 10% Preferred Return, no
property management fee will be paid.
Effective January 1, 1995, certain officers and employees of CNL
Investment Company became officers and employees of CNL Income Fund Advisors,
Inc., an affiliate of the General Partners, and CNL Investment Company assigned
its rights in, and its obligations under, the property management agreement with
the Partnership to CNL Income Fund Advisors, Inc. In addition, effective October
1, 1995, CNL Income Fund Advisors, Inc. assigned its rights in, and its
obligations under, the property management agreement with the Partnership to CNL
Fund Advisors, Inc. All of the terms and conditions of the property management
agreement, including the payment of fees, as described above, remain unchanged.
The property management agreement continues until the Partnership no
longer owns an interest in any Properties unless terminated at an earlier date
upon 60 days' prior notice by either party.
COMPETITION
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
At the time the Partnership elects to dispose of its Properties, other
than as a result of the exercise of tenant options to purchase Properties, the
Partnership will be in competition with other persons and entities to locate
purchasers for its Properties.
EMPLOYEES
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who may
also perform certain services for the Partnership.
ITEM 2. PROPERTIES
As of December 31, 1996, the Partnership owned, either directly or
through joint venture arrangements, 18 Properties, located in nine states.
Reference is made to the Schedule of Real Estate and Accumulated Depreciation
filed with this report for a listing of the Properties and their respective
costs, including acquisition fees and certain acquisition expenses.
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DESCRIPTION OF PROPERTIES
LAND. The Partnership's Property sites range from approximately 16,000
to 95,000 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
BUILDINGS. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. The buildings
generally are rectangular and are constructed from various combinations of
stucco, steel, wood, brick and tile. Building sizes range from approximately
1,900 to 5,500 square feet. All buildings on Properties acquired by the
Partnership are freestanding and surrounded by paved parking areas. Buildings
are suitable for conversion to various uses, although modifications may be
required prior to use for other than restaurant operations.
Generally, a lessee is required, under the terms of its lease
agreement, to make such capital expenditures as may be reasonably necessary to
refurbish buildings, premises, signs and equipment so as to comply with the
lessee's obligations, if applicable, under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.
LEASES WITH MAJOR TENANTS. The terms of each of the leases with the
Partnership's major tenants as of December 31, 1996 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Golden Corral Corporation leases five Golden Corral restaurants. The
initial term of each lease is 15 years (expiring 2001) and the average minimum
base annual rent is approximately $90,500 (ranging from approximately $77,600 to
$109,300).
Wendy's International, Inc. leases three Wendy's restaurants. The
initial term of two of the leases is 20 years (expiring in 2006) and one is 17
years (expiring in 2006) and the average minimum base annual rent for all three
is approximately $81,900 (ranging from $75,300 to $88,400).
In addition, Restaurant Management Services, Inc. leases two Popeye's
restaurants. The initial term of one lease is 15 years (expiring 2001) and the
term of the other lease is 17 years (expiring 2003) and the average minimum base
annual rent is approximately $62,200 (ranging from $59,400 to $64,900).
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties, is a party to, or
subject to, any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of February 28, 1997, there were 1,074 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. Limited Partners
who wish to sell their Units may offer the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wish to have their distributions used to acquire additional Units (to the
extent Units are available for purchase), may do so pursuant to such Plan. The
General Partners have the right to prohibit transfers of Units. As of January 1,
1995, due primarily to the Partnership's sale of its Property in Fairfield,
California, the price paid for any Unit transferred pursuant to the Plan has
been $422 per Unit. The price to be paid for any Unit transferred other than
pursuant to the Plan is subject to negotiation by the purchaser and the selling
Limited Partner. The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1996 and 1995 other than
pursuant to the Plan, net of commissions (which ranged from zero to 10.24%).
<TABLE>
<CAPTION>
1996 (1) 1995 (1)
--------------------------------- -----------------------------
High Low Average High Low Average
---- --- ------- ----- --- -------
<S> <C>
First Quarter $422 $422 $422 $444 $363 $404
Second Quarter 422 422 422 535 439 487
Third Quarter 500 500 500 500 368 452
Fourth Quarter 469 377 422 444 422 429
</TABLE>
(1) A total of 255 and 382 Units were transferred other than pursuant to
the Plan for the years ended December 31, 1996 and 1995, respectively.
The capital contribution per Unit was $500. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For the years ended December 31, 1996 and 1995, the Partnership
declared cash distributions of $1,264,884 and $1,264,883, respectively, to the
Limited Partners. As a result of returns of capital in prior years, the amount
of the Limited Partners' adjusted capital contributions (which generally is the
Limited Partners' capital contributions, less distributions from the sale of a
Property that are considered to be a return of capital) was decreased;
therefore, the amount of the Limited Partners' adjusted capital contributions on
which the 10% Preferred Return is calculated was lowered to $13,314,525 as of
December 31, 1994. No amounts distributed to partners for the years ended
December 31, 1996 and 1995, are required to be or have been treated by the
Partnership as a return of capital for purposes of calculating the Limited
Partners' return on their adjusted capital contributions. No distributions have
been made to the General Partners to date.
As indicated in the chart below, distributions in the following amounts
were declared to the Limited Partners at the close of each of the Partnership's
calendar quarters during 1996 and 1995.
Quarter Ended 1996 1995
------------- --------- --------
March 31 $316,221 $316,220
June 30 316,221 316,221
September 30 316,221 316,221
December 31 316,221 316,221
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C>
Year ended December 31:
Revenues (1) $ 1,389,308 $ 1,290,567 $ 1,358,871 $ 1,412,327 $ 1,452,761
Net income (2) 1,083,109 962,102 1,208,576 1,039,545 1,306,021
Cash distributions
declared (3) 1,264,884 1,264,883 2,279,123 1,417,622 2,413,812
Net income per Unit (2) 35.75 31.75 39.91 34.31 43.14
Cash distributions
declared per Unit (3) 42.16 42.16 75.97 47.25 80.46
At December 31:
Total assets $ 9,479,777 $ 9,668,878 $10,857,414 $10,930,600 $10,949,223
Partners' capital 9,045,177 9,226,952 9,529,733 10,480,280 10,858,357
</TABLE>
(1) Revenues include equity in earnings of joint ventures.
(2) Net income for the years ended December 31, 1996, 1994 and 1992,
includes $19,000, $182,384 and $214,488, respectively, from gains on
sale of land and buildings.
(3) Distributions for the years ended December 31, 1994 and 1992, include
$861,500 and $955,000, respectively, as a result of the distribution of
a portion of the net sales proceeds from the sale of a Property in each
of these years.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Partnership was organized on November 26, 1985, to acquire for
cash, either directly or through joint venture arrangements, both newly
constructed and existing restaurant Properties, as well as land upon which
restaurant Properties were to be constructed, which are leased primarily to
operators of selected national and regional fast-food Restaurant Chains. The
leases are triple-net leases, with the lessee generally responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of December
31, 1996, the Partnership owned 18 Properties, either directly or indirectly
through joint venture arrangements.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary source of capital for the years ended
December 31, 1996, 1995 and 1994, was cash from operations (which includes cash
received from tenants, distributions from joint ventures and interest received,
less cash paid for expenses). Cash from operations was $1,132,688, $1,182,514
and $1,279,201 for the years ended December 31, 1996, 1995 and 1994,
respectively. The decrease in cash from operations during 1996 and 1995, each as
compared to the prior year, is primarily a result of changes in income and
expenses as discussed in "Results of Operations" below, and as a result of
changes in the Partnership's working capital during each of the respective
years.
In August 1996, the Partnership entered into a lease amendment with the
tenant of the Property in Mesquite, Texas, to provide for lower initial base
rent with scheduled rent increases retroactively effective March 1996. In
anticipation of entering into this lease amendment, the Partnership accepted a
promissory note in March 1996, in the amount of $156,308, for past due rental
and other amounts, and real estate taxes previously paid by the Partnership on
behalf of the tenant. Payments were due in 60 monthly installments of $3,492,
including interest at a rate of 11 percent per annum, and collections commenced
on June 1, 1996. Receivables at December 31, 1996, included
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$150,787 of such amounts, including accrued interest of $5,657 and late fees of
$1,222. During January 1997, the Partnership collected the full amount of the
promissory note.
Other sources and uses of capital included the following during the
years ended December 31, 1996, 1995 and 1994.
During 1994, the Partnership also received cash from the sale of its
Property in Fairfield, California, of $1,018,490, net of closing costs and
excluding a deferred, subordinated, real estate disposition fee payable to an
affiliate of the General Partners of $31,500. In connection with the sale of
this Property, the Partnership declared distributions in 1994 of $861,500 of the
net sales proceeds which were paid to the Limited Partners during 1995. The
balance of the funds was retained by the Partnership and used to meet the
Partnership's working capital and other needs.
In June 1996, the Partnership sold a small, undeveloped portion of the
land relating to its Property in Mesquite, Texas. In connection therewith, the
Partnership received net sales proceeds of $20,000, and recognized a gain for
financial reporting purposes, of $19,000. Proceeds from the sale will be used
for operating activities of the Partnership.
In 1996, the Partnership entered into various promissory notes with the
corporate general partner for loans totalling $83,100 in connection with the
operations of the Partnership. The loans were uncollateralized, non-interest
bearing and due on demand. As of December 31, 1996, the Partnership had repaid
the loans in full to the corporate general partner. In addition, in January
1997, the Partnership entered into another promissory note with the corporate
general partner for a loan in the amount of $81,000 in connection with the
operations of the Partnership. The note is uncollateralized, non-interest
bearing and due on demand. As of February 28, 1997, the Partnership had repaid
the loan in full to the corporate general partner.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership, in which event such contributions will be
returned to the General Partners from distributions of net sales proceeds at the
same time that their initial capital contributions of $1,000 are returned.
During the year ended December 31, 1994, the corporate General Partner
contributed $120,000 in connection with the operations of the Partnership. No
such contributions were made during the years ended December 31, 1996 and 1995.
None of the Properties owned by the Partnership or any joint venture in
which the Partnership owns an interest is or may be encumbered. Subject to
certain restrictions on borrowings from the General Partners, however, the
Partnership may borrow, in the discretion of the General Partners, for the
purpose of maintaining the operations of the Partnership. The Partnership will
not encumber any of the Properties in connection with any borrowings or
advances. The Partnership will not borrow for the purpose of returning capital
to the Limited Partners. The Partnership also will not borrow under
circumstances which would make the Limited Partners liable to creditors of the
Partnership. Affiliates of the General Partners from time to time incur certain
operating expenses on behalf of the Partnership for which the Partnership
reimburses the affiliates without interest.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments pending
the Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At December 31, 1996, the Partnership had
$159,379 invested in such short-term investments as compared to $271,575 at
December 31, 1995. The funds remaining at December 31, 1996, will be used for
the payment of distributions and other liabilities.
During 1996, 1995 and 1994, affiliates of the General Partners incurred
on behalf of the Partnership $40,510, $50,300 and $60,965, respectively, for
certain operating expenses. As of December 31, 1996 and 1995, the Partnership
owed $28,262 and $8,389, respectively, to affiliates for such amounts and
accounting and administrative services. In addition, as of December 31, 1996,
the Partnership had incurred a total of $66,750 in real estate disposition fees
due to affiliates as a result of services rendered in connection with the sale
of two Properties. The payment of such fees is deferred until the Limited
Partners have received the sum of their cumulative 10% Preferred Return and
their adjusted capital contributions.
7
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Amounts payable to other parties, including distributions payable,
decreased to $318,877 at December 31, 1996, from $329,589 at December 31, 1995.
Liabilities at December 31, 1996, to the extent they exceed cash and cash
equivalents at December 31, 1996, will be paid from future cash from operations,
or, in the event the General Partners elect to make additional contributions or
loans to the Partnership, from future General Partner contributions or loans.
Based primarily on current and anticipated future cash from operations
and, for the year ended December 31, 1994, proceeds received from the sale of
the Property in Fairfield, California, and to a lesser extent additional capital
contributions and loans received from the General Partners, the Partnership
declared distributions to Limited Partners of $1,264,884, $1,264,883 and
$2,279,123 for the years ended December 31, 1996, 1995 and 1994, respectively.
This represents distributions of $42.16 per Unit for each of the years ended
December 31, 1996 and 1995, and $75.97 per Unit for the year ended December 31,
1994. The distribution for the year ended December 31, 1994, included $861,500
as a result of the distribution of net sales proceeds from the sale of the
Property in Fairfield, California. This amount was treated as a return of
capital for purposes of calculating the Limited Partners' 10% Preferred Return.
As a result of this return of capital, the amount of the Limited Partners'
Invested capital contributions (which generally is the Limited Partners' capital
contributions, less distributions from the sale of a Property that are
considered to be a return of capital) was decreased; therefore, the amount of
the Limited Partners' invested capital contributions on which the 10% Preferred
Return is calculated was lowered accordingly. No amounts distributed to the
Limited Partners for the years ended December 31, 1996, 1995 and 1994, except
for $861,500 as described above, are required to be or have been treated by the
Partnership as a return of capital for purposes of calculating the limited
partners' return on their adjusted capital contributions. The Partnership
intends to continue to make distributions of cash available for distribution to
the Limited Partners on a quarterly basis.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
The Partnership's investment strategy of acquiring Properties for cash
and generally leasing them under triple-net leases to operators who generally
meet specified financial standards minimizes the Partnership's operating
expenses. The General Partners believe that the leases will continue to generate
cash flow in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners do not believe that working capital reserves are necessary at this
time. In addition, because the leases for the Partnership's Properties are
generally on a triple-net basis, it is not anticipated that a permanent reserve
for maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purposes, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.
RESULTS OF OPERATIONS
During the year ended December 31, 1994, the Partnership owned and
leased 16 wholly owned Properties (including one Property in Fairfield,
California, which was sold in October 1994) and during the years ended December
31, 1995 and 1996, the Partnership owned and leased 15 wholly owned Properties.
In addition, during the years ended December 31, 1996, 1995 and 1994, the
Partnership was a co-venturer in three separate joint ventures that each owned
and leased one Property. As of December 31, 1996, the Partnership owned, either
directly or through joint venture arrangements, 18 Properties which are, in
general, subject to long-term, triple net leases. The leases of the Properties
provide for minimum base annual rental amounts (payable in monthly installments)
ranging from approximately $16,000 to $117,000. Generally, the leases provide
for percentage rent based on sales in excess of a specified amount. In addition,
certain leases provide for increases in the annual base rent during the lease
terms. For further description of the Partnership's leases and Properties, see
Item 1. Business - Leases and Item 2. Properties, respectively.
During the years ended December 31, 1996, 1995 and 1994, the
Partnership earned $1,115,530, $1,129,406 and $1,180,678, respectively, in base
rental income from the Partnership's wholly owned Properties described above.
8
<PAGE>
The decrease in rental income during 1996, as compared to 1995, was partially
attributable to the fact that the Partnership only received approximately $5,700
during 1996, as compared to $71,700 during 1995, from the former tenant of three
Properties. The rental payments from this former tenant represented the
difference between (i) the original leases entered into between the Partnership
and the former tenant and (ii) the current leases on the Properties between the
Partnership and the new tenants (two of which were re-leased to the corporate
franchisor). Effective February 1, 1996, the Partnership ceased receiving any
additional rental amounts from this former tenant; therefore, rental income
during 1996 decreased, and in future years will decrease, accordingly.
In addition, rental income decreased approximately $7,000 during 1996,
as compared to 1995, due to the fact that during 1996, the Partnership wrote-off
as uncollectible approximately $7,000 of rental income relating to the Property
in Oklahoma City, Oklahoma. In addition, effective January 1, 1997, the
Partnership entered into a lease amendment with the tenant of this Property to
provide for lower base rental income and a change in the percentage rent
calculation. The Partnership does not anticipate that these reduced rents will
have a material adverse effect on operating results.
The decrease in rental income during 1996, as compared to 1995, was
partially offset by the fact that during 1996, the Partnership recognized as
income approximately $62,000 under the promissory note with the tenant of the
Property in Mesquite, Texas, for which the Partnership had previously
established an allowance for doubtful accounts, as discussed above in "Liquidity
and Capital Resources".
Rental income decreased in 1995, as compared to 1994, as a result of
the sale of the Property in Fairfield, California, in October 1994.
During the years ended December 31, 1996, 1995 and 1994, the
Partnership also earned $56,409, $35,176 and $45,216, respectively, in
contingent rental income. The increase in contingent rental income during 1996,
as compared to 1995, is primarily due to the fact that during 1996, the
Partnership recognized approximately $27,800 in contingent rental income under
the promissory note with the tenant of the Property in Mesquite, Texas, for
which the Partnership had previously established an allowance for doubtful
accounts, as discussed above in "Liquidity and Capital Resources". The decrease
in contingent rental income during 1995, as compared to 1994, is primarily
attributable to the sale of the Property in Fairfield, California, in October
1994.
During the years ended December 31, 1996, 1995 and 1994, the
Partnership also earned $101,293, $13,011 and $20,817, respectively, in interest
and other income. The increase in interest and other income during 1996, as
compared to 1995, is primarily attributable to the fact that during 1996, the
Partnership recognized approximately $73,200 in interest and other income under
the promissory note with the tenant of the Property in Mesquite, Texas, for
which the Partnership had previously established an allowance for doubtful
accounts, as discussed above in "Liquidity and Capital Resources."
In addition, during the years ended December 31, 1996, 1995 and 1994,
the Partnership earned $116,076, $112,974 and $112,160, respectively,
attributable to net income earned by the three joint ventures in which the
Partnership is a co-venturer.
During the year ended December 31, 1996, three of the Partnership's
lessees, Golden Corral Corporation, Wendy's International, Inc. and Restaurant
Management Services, Inc., each contributed more than ten percent of the
Partnership's total rental income (including the Partnership's share of the
rental income from three Properties owned by joint ventures). As of December 31,
1996, Golden Corral Corporation was the lessee under leases relating to five
restaurants, Wendy's International, Inc. was the lessee under leases relating to
three restaurants and Restaurant Management Services, Inc. was the lessee under
leases relating to two restaurants. It is anticipated that these three lessees
each will continue to contribute ten percent or more of the Partnership's total
rental income during 1997 and subsequent years. In addition, three Restaurant
Chains, Golden Corral Family Steakhouse Restaurants ("Golden Corral"), Wendy's
Old Fashioned Hamburger Restaurants ("Wendy's") and Popeye's Famous Fried
Chicken ("Popeye's"), each accounted for more than ten percent of the
Partnership's total rental income in 1996 (including the Partnership's share of
the rental income from three Properties owned by joint ventures). In subsequent
years, it is anticipated that these three Restaurant Chains each will continue
to account for more than ten percent of the total rental income to which the
Partnership is entitled under the terms of its leases. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income.
9
<PAGE>
Operating expenses, including depreciation and amortization expense,
were $325,199, $328,465 and $332,679 for the years ended December 31, 1996, 1995
and 1994, respectively. The decrease in operating expenses during 1996, as
compared to 1995, is primarily attributable to a decrease in real estate tax
expense due to the fact that during 1995, the Partnership accrued real estate
taxes relating to the Property in Mesquite, Texas, due to financial difficulties
that the tenant was experiencing. Due to the fact that the tenant paid the 1995
real estate taxes during 1996, the Partnership reversed approximately $9,200 of
amounts previously accrued by the Partnership and recorded these amounts as
other income during 1996. The decrease in operating expenses during 1995, as
compared to 1994, is primarily attributable to a decrease in depreciation and
amortization expense as a result of the sale of the Property in Fairfield,
California, in October 1994.
The decrease in operating expenses during 1996 and 1995, as compared to
the previous year, was partially offset by an increase in accounting and
administrative expenses associated with operating the Partnership and its
Properties and an increase in insurance expense as a result of the general
partners' obtaining contingent liability and property coverage for the
Partnership, as discussed above in "Liquidity and Capital Resources."
As a result of the sale of the portion of land related to the Property
in Mesquite, Texas, as described above in "Liquidity and Capital Resources," the
Partnership recognized a gain of $19,000 for financial reporting purposes for
the year ended December 31, 1996. In addition, as a result of the sale of the
Property in Fairfield, California, the Partnership recognized a gain of $182,384
for the year ended December 31, 1994. No Properties were sold during the year
ended December 31, 1995.
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement
requires that an entity review long-lived assets and certain identifiable
intangibles, to be held and used, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. Adoption of this standard had no material effect on the
Partnership's financial position or results of operations.
The Partnership's leases as of December 31, 1996, are, in general,
triple-net leases and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Management expects that increases in restaurant
sales volumes due to inflation and real sales growth should result in an
increase in rental income over time. Continued inflation also may cause capital
appreciation of the Partnership's Properties. Inflation and changing prices,
however, also may have an adverse impact on the sales of the restaurants and on
potential capital appreciation of the Properties.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
10
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 12
Financial Statements:
Balance Sheets 13
Statements of Income 14
Statements of Partners' Capital 15
Statements of Cash Flows 16
Notes to Financial Statements 18
11
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund, Ltd.
We have audited the financial statements and the financial statement schedules
of CNL Income Fund, Ltd. (a Florida limited partnership) listed in Item 14(a) of
this Form 10-K. These financial statements and financial statement schedules are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits 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 that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund, Ltd. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
Orlando, Florida
January 24, 1997
12
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
ASSETS 1996 1995
------ ---------- -------
<S> <C>
Land and buildings on operating leases,
less accumulated depreciation $8,091,154 $8,298,860
Investment in and due from joint
ventures 990,307 1,007,527
Cash and cash equivalents 159,379 271,575
Receivables, less allowance for
doubtful accounts $1,413 and
of $122,136 180,248 29,143
Prepaid expenses 4,465 3,815
Lease costs, less accumulated
amortization of $19,375 and
$16,875 30,625 33,125
Accrued rental income 23,599 24,833
---------- ----------
$9,479,777 $9,668,878
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,131 $ 2,988
Accrued and escrowed real estate taxes
payable 525 10,380
Distributions payable 316,221 316,221
Due to related parties 95,012 75,139
Rents paid in advance and deposits 20,711 37,198
---------- ----------
Total liabilities 434,600 441,926
Partners' capital 9,045,177 9,226,952
---------- ----------
$9,479,777 $9,668,878
========== ==========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
<S> <C>
Revenues:
Rental income from
operating leases $1,115,530 $1,129,406 $1,180,678
Contingent rental income 56,409 35,176 45,216
Interest and other income 101,293 13,011 20,817
---------- ---------- ----------
1,273,232 1,177,593 1,246,711
---------- ---------- ----------
Expenses:
General operating and
administrative 92,462 84,700 66,383
Professional services 13,262 14,465 20,157
Bad debt expense - - 5,146
Real estate taxes 4,009 13,746 14,224
State and other taxes 5,260 5,357 4,342
Depreciation and
amortization 210,206 210,197 222,427
---------- ---------- ----------
325,199 328,465 332,679
---------- ---------- ----------
Income Before Equity in
Earnings of Joint Ventures
and Gain on Sale of Land
and Buildings 948,033 849,128 914,032
Equity in Earnings of Joint
Ventures 116,076 112,974 112,160
Gain on Sale of Land and
Buildings 19,000 - 182,384
---------- ---------- ----------
Net Income $1,083,109 $ 962,102 $1,208,576
========== ========== ==========
Allocation of Net Income:
General partners $ 10,641 $ 9,621 $ 11,333
Limited partners 1,072,468 952,481 1,197,243
---------- ---------- ----------
$1,083,109 $ 962,102 $1,208,576
========== ========== ==========
Net Income Per Limited
Partner Unit $ 35.75 $ 31.75 $ 39.91
========== ========== ==========
Weighted Average Number
of Limited Partner
Units Outstanding 30,000 30,000 30,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
General Partners Limited Partners
-------------------- ----------------------------------------------------------
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
-------- -------- ----------- ------------ ----------- ----------- --------
<S> <C>
Balance, December 31, 1993 $ 73,400 $ 85,187 $14,176,025 $(10,746,572) $ 8,555,380 $(1,663,140) $10,480,280
Contributions from general
partner 120,000 - - - - - 120,000
Distributions to limited
partners ($75.97 per
limited partner unit) - - (861,500) (1,417,623) - - (2,279,123)
Net income - 11,333 - - 1,197,243 - 1,208,576
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1994 193,400 96,520 13,314,525 (12,164,195) 9,752,623 (1,663,140) 9,529,733
Distributions to limited
partners ($42.16 per
limited partner unit) - - - (1,264,883) - - (1,264,883)
Net income - 9,621 - - 952,481 - 962,102
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 193,400 106,141 13,314,525 (13,429,078) 10,705,104 (1,663,140) 9,226,952
Distributions to limited
partners ($42.16 per
limited partner unit) - - - (1,264,884) - - (1,264,884)
Net income - 10,641 - - 1,072,468 - 1,083,109
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 $193,400 $116,782 $13,314,525 $(14,693,962) $11,777,572 $(1,663,140) $ 9,045,177
======== ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
----------- ----------- -----------
<S> <C>
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows from Operating
Activities:
Cash received from tenants $ 1,096,290 $ 1,152,159 $ 1,266,032
Distributions from joint
ventures 133,296 129,006 130,755
Cash paid for expenses (106,546) (110,488) (130,697)
Interest received 9,648 11,837 13,111
----------- ----------- -----------
Net cash provided by
operating activities 1,132,688 1,182,514 1,279,201
---------- ----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land
and buildings 20,000 - 1,018,490
----------- ----------- -----------
Net cash provided by
investing activities 20,000 - 1,018,490
----------- ----------- -----------
Cash Flows from Financing
Activities:
Proceeds from loan from
corporate general partner 83,100 - -
Repayment of loan from
corporate general partner (83,100) - -
Contributions from general
partner - - 120,000
Distributions to limited
partners (1,264,884) (2,164,568) (1,417,623)
----------- ----------- -----------
Net cash used in
financing activities (1,264,884) (2,164,568) (1,297,623)
----------- ----------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents (112,196) (982,054) 1,000,068
Cash and Cash Equivalents at
Beginning of Year 271,575 1,253,629 253,561
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 159,379 $ 271,575 $ 1,253,629
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
----------- ----------- -----------
<S> <C>
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 1,083,109 $ 962,102 $ 1,208,576
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 207,706 207,697 218,827
Amortization 2,500 2,500 3,600
Equity in earnings of
joint ventures, net of
distributions 17,220 16,032 18,595
Gain on sale of land and
buildings (19,000) - (182,384)
Decrease (increase) in
receivables (151,105) (16,414) 32,052
Increase in prepaid
expenses (650) (1,252) (2,563)
Decrease (increase) in
accrued rental income 1,234 (2,081) (1,863)
Increase (decrease) in
accounts payable and
accrued expenses (11,712) 458 (21,294)
Increase in due to related
parties 19,873 8,389 -
Increase (decrease) in
rents paid in advance
and deposits (16,487) 5,083 5,655
----------- ----------- -----------
Total adjustments 49,579 220,412 70,625
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 1,132,688 $ 1,182,514 $ 1,279,201
=========== =========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at December 31 $ 316,221 $ 316,221 $ 1,215,906
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food restaurant chains.
The general partners of the Partnership are CNL Realty Corpor- ation
(the "Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have
responsibility for managing the day-to- day operations of the
Partnership.
Real Estate and Lease Accounting - The Partner-ship records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net basis, whereby the tenant is generally responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using the operating method. Under the operating method, land and
building leases are recorded at cost, revenue is recognized as rentals
are earned and depreciation is charged to operations as incurred.
Buildings are depreciated on the straight-line method over their
estimated useful lives of 30 years. When scheduled rentals vary during
the lease term, income is recognized on a straight-line basis so as to
produce a constant periodic rent over the lease term commencing on the
date the property is placed in service.
Accrued rental income represents the aggregate amount of income
recognized on a straight-line basis in excess of scheduled rental
payments to date.
When the properties are sold, the related cost and accumulated
depreciation plus any accrued rental income, will be removed from the
accounts and gains or losses from sales will be reflected in income.
The general partners of the Partnership review the properties for
impairment whenever events or changes in circumstances indicate that
the carrying amount of
18
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
the assets may not be recoverable through operations. The general
partners determine whether an impairment in value has occurred by
comparing the estimated future undiscounted cash flows, including the
residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, a loss will be
recorded for the amount by which the carrying value of the asset
exceeds its fair market value.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and the allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - The Partnership is a partner in three
joint ventures and accounts for its investments using the equity
method.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial institutions with high credit
standing; therefore, the Partnership believes it is not exposed to any
significant credit risk on cash and cash equivalents.
19
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
Lease Costs - Lease incentive costs and brokerage and legal fees
associated with negotiating new leases are amortized over the terms of
the new leases using the straight-line method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
New Accounting Standard - Effective January 1, 1996, the Partnership
adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The statement requires that an entity review
long-lived assets and certain identifiable intangibles, to be held and
used, for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable.
Adoption of this standard had no material effect on the Partnership's
financial position or results of operations.
2. Leases:
The Partnership leases its land and buildings primarily to operators of
national and regional fast-food restaurants. The leases are accounted
for under the provisions of Statement of Financial Accounting Standards
No. 13, "Accounting for Leases." The leases have been classified as
operating leases. Substantially all leases are for 15 to 20 years and
provide for minimum and contingent rentals. In addition, the tenant
20
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
2. Leases - Continued:
generally pays all property taxes and assessments, fully maintains the
interior and exterior of the building and carries insurance coverage
for public liability, property damage, fire and extended coverage. The
lease options generally allow tenants to renew the leases for two or
three successive five-year periods subject to the same terms and
conditions as the initial lease. Most leases also allow the tenant to
purchase the property at fair market value after a specified portion of
the lease has elapsed.
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
<TABLE>
<CAPTION>
1996 1995
----------- --------
<S> <C>
Land $ 3,973,607 $ 3,973,607
Buildings 6,226,321 6,226,321
----------- -----------
10,199,928 10,199,928
Less accumulated
depreciation (2,108,774) (1,901,068)
----------- -----------
$ 8,091,154 $ 8,298,860
=========== ===========
</TABLE>
During 1994, the Partnership sold its property in Fairfield,
California, for a total of $1,018,490, excluding a deferred, real
estate disposition fee payable to an affiliate of the general partners
of $31,500, resulting in a gain of $182,384 for financial reporting
purposes.
In addition, in June 1996, the Partnership sold a small, undeveloped
portion of the land relating to its property in Mesquite, Texas. In
connection therewith, the Partnership received net sales proceeds, and
recognized a gain for financial reporting purposes, of $19,000.
Certain leases provide for escalating guaranteed minimum rents
throughout the lease terms. Income from these scheduled rent increases
is recognized on a straight-line basis over the terms of the leases.
For the years ended December 31, 1995 and 1994, the Partnership
recognized $2,081 and $1,863, respectively, of such income. For the
year ended December 31, 1996, rental payments received exceeded the
rental income recognized on a straight-line basis by $1,234.
21
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
3. Land and Buildings on Operating Leases - Continued:
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1996:
1997 $ 935,480
1998 938,709
1999 913,400
2000 913,053
2001 889,177
Thereafter 3,758,766
----------
$8,348,585
==========
Since lease renewal periods are exercisable at the option of the
tenant, the above table only presents future minimum lease payments due
during the initial lease terms. In addition, this table does not
include any amounts for future contingent rentals which may be received
on the leases based on a percentage of the tenant's gross sales.
4. Investment in and Due from Joint Ventures:
The Partnership has a 50 percent interest in the profits and losses of
Orange Avenue Joint Venture, Seventh Avenue Joint Venture and Sand Lake
Road Joint Venture. These joint ventures each own and lease one
property to an operator of national fast-food or family-style
restaurants. The following presents the joint ventures' combined,
condensed financial information at December 31:
1996 1995
---------- ----------
Land and buildings on
operating leases,
less accumulated
depreciation $1,750,065 $1,794,290
Cash 11,934 3,372
Receivables 18,456 27,682
Prepaid expenses - 119
Accrued rental income 16,620 14,102
Liabilities 30,232 38,281
Partners' capital 1,766,843 1,801,284
Revenues 277,652 272,155
Net income 232,152 225,948
22
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
4. Investment in and Due from Joint Ventures:
The Partnership recognized income totalling $116,076, $112,974 and
$112,160 for the years ended December 31, 1996, 1995 and 1994,
respectively, from these joint ventures.
The investment in and due from joint ventures includes $27,682 at
December 31, 1996 and 1995, which is due from Seventh Avenue Joint
Venture as a result of an underpayment of distributions to the
Partnership.
5. Receivables:
In March 1996, the Partnership accepted a promissory note from the
tenant of the property in Mesquite, Texas, in the amount of $156,308,
for past due rental and other amounts, and real estate taxes previously
paid by the Partnership on behalf of the tenant. Payments were due in
60 monthly installments of $3,492, including interest at a rate of 11
percent per annum, and collections commenced on June 1, 1996.
Receivables at December 31, 1996, included $150,787 of such amounts,
including accrued interest of $5,657 and late fees of $1,222. As of
January 24, 1997, the Partnership had collected the full amount of the
promissory note. (see Note 10).
6. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited
partners and one percent to the general partners; provided, however,
that the one percent of net cash flow to be distributed to the general
partners is subordinated to receipt by the limited partners of an
aggregate, ten percent, noncumulative, noncompounded annual return on
their adjusted capital contributions (the "10% Preferred Return").
Generally, net sales proceeds from the sale of properties, to the
extent distributed, will be distributed first to the limited partners
in an amount sufficient to provide them with their cumulative 10%
Preferred Return, plus the return of their adjusted capital
contributions. The general partners will then receive, to the extent
previously subordinated and
23
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
6. Allocations and Distributions - Continued:
unpaid, a one percent interest in all prior distributions of net cash
flow and a return of their capital contributions. Any remaining sales
proceeds will be distributed 95 percent to the limited partners and
five percent to the general partners. Any gain from the sale of a
property is, in general, allocated in the same manner as net sales
proceeds are distributable. Any loss from the sale of a property is, in
general, allocated first, on a pro rata basis, to partners with
positive balances in their capital accounts; and thereafter, 95 percent
to the limited partners and five percent to the general partners.
During the years ended December 31, 1996, 1995 and 1994, the
Partnership declared distributions to the limited partners of
$1,264,884, $1,264,883 and $2,279,123, respectively. Distributions for
the year ended December 31, 1994, included $861,500 as a result of the
distribution of net sales proceeds from the sale of the property in
Fairfield, California, which were treated as a return of capital for
purposes of calculating the limited partners' cumulative 10% Preferred
Return. As a result of the return of capital, the amount of the limited
partners' adjusted capital contributions (which generally is the
limited partners' capital contributions, less distributions from the
sale of a property that are considered to be a return of capital) was
decreased; therefore, the amount of the limited partners' adjusted
capital contributions on which the 10% Preferred Return is calculated
was lowered accordingly. No distributions have been made to the general
partners to date.
24
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
7. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- -------
<S> <C>
Net income for
financial reporting
purposes $1,083,109 $ 962,102 $1,208,576
Depreciation for tax
reporting purposes
in excess of
depreciation for
financial reporting
purposes (108,995) (109,002) (109,002)
Gain on sale of land
and buildings for
financial reporting
purposes in excess
of gain for tax
reporting purposes - - (5,160)
Equity in earnings of
joint ventures for
financial reporting
purposes in excess of
equity in earnings of
joint ventures for
tax reporting purposes (17,987) (14,739) (11,057)
Allowance for (120,724) 22,392 99,273
Doubtful accounts
Accrued rental income 1,234 (2,081) (1,863)
Rents paid in advance (16,487) 5,083 (6,711)
---------- ---------- ----------
Net income for federal
income tax purposes $ 820,150 $ 863,755 $1,174,056
========== ========== ==========
</TABLE>
25
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
8. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of
CNL Investment Company and CNL Fund Advisors, Inc. The other individual
general partner, Robert A. Bourne, is the president of CNL Investment
Company and CNL Fund Advisors, Inc. CNL Income Fund Advisors, Inc. was
a wholly owned subsidiary of CNL Group, Inc. until its merger,
effective January 1, 1996, with CNL Fund Advisors, Inc. During the
years ended December 31, 1996, 1995 and 1994, CNL Investment Company,
CNL Income Fund Advisors, Inc. and CNL Fund Advisors, Inc. (hereinafter
referred to collectively as the "Affiliates") each performed certain
services for the Partnership, as described below.
During the years ended December 31, 1996, 1995 and 1994, certain
Affiliates acted as manager of the Partnership's properties pursuant to
a property management agreement with the Partnership. In connection
therewith, the Partnership agreed to pay the Affiliates an annual,
noncumulative, subordinated property management fee of one-half of one
percent of the Partnership assets under management (valued at cost)
annually. The property management fee is limited to one percent of the
sum of gross operating revenues from properties wholly owned by the
Partnership and the Partnership's allocable share of gross operating
revenues from joint ventures or competitive fees for comparable
services. In addition, these fees will be incurred and will be payable
only after the limited partners receive their aggregate, noncumulative
10% Preferred Return. Due to the fact that these fees are
non-cumulative, if the limited partners do not receive their 10%
Preferred Return in any particular year, no management fees will be due
or payable for such year. As a result of such threshold, no management
fees were incurred during the years ended December 31, 1996, 1995 and
1994.
Certain Affiliates are also entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if the
Affiliates provide a substantial amount of services in connection with
the sale. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are
26
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
8. Related Party Transactions - Continued:
distributed. The payment of the real estate disposition fee is
subordinated to receipt by the limited partners of their aggregate,
cumulative 10% Preferred Return, plus their adjusted capital
contributions. For the year ended December 31, 1994, the Partnership
incurred $31,500 in deferred, subordinated real estate disposition fees
as a result of the Partnership's sale of its property in Fairfield,
California. No deferred, subordinated real estate disposition fees were
incurred for the years ended December 31, 1996 and 1995.
During the years ended December 31, 1996, 1995 and 1994, the Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $67,685, $58,543 and $43,992
for the years ended December 31, 1996, 1995 and 1994, respectively, for
such services.
The due to related parties consisted of the following at December 31:
1996 1995
_____ _____
Due to Affiliates:
Deferred, subordinated real
estate disposition fee $66,750 $66,750
Expenditures incurred on
behalf of the Partnership 9,527 3,106
Accounting and administrative
services 18,735 5,283
------- -------
$95,012 $75,139
======= =======
The deferred, subordinated real estate disposition fees are the result
of the Partnership's sale of a property during the year ended December
31, 1992 and the sale of another property during the year ended
December 31, 1994. These fees will not be paid until after the limited
partners have received their cumulative 10% Preferred Return, plus
their adjusted capital contributions, as described above.
27
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. Concentration of Credit Risk:
The following schedule presents total rental income from individual
lessees, each representing more than ten percent of the Partnership's
total rental income (including the Partnership's share of rental
income from joint ventures), for at least one of the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
<S> <C>
Golden Corral
Corporation $452,653 $452,653 $452,653
Wendy's Inter-
national, Inc. 212,322 206,805 205,185
Restaurant Manage-
ment Services,
Inc. 129,633 124,315 124,315
</TABLE>
In addition, the following schedule presents total rental income from
individual restaurant chains, each representing more than ten percent
of the Partnership's total rental income (including the Partnership's
share of rental income from joint ventures), for at least one of the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
<S> <C>
Wendy's Old
Fashioned
Hamburger
Restaurants $507,642 $582,315 $646,507
Golden Corral
Family Steakhouse
Restaurants 452,653 452,653 452,653
Popeye's Famous
Fried Chicken 129,633 124,315 124,315
</TABLE>
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership. However, the general partners believe that the risk
of such a default is reduced due to the essential or important nature
of these properties for the on-going operations of the lessees.
28
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
10. Subsequent Event:
In January 1997, the Partnership entered into a promissory note with
the corporate general partner for a loan in the amount of $81,000 in
connection with the operations of the Partnership. The loan is
uncollateralized, non-interest bearing and due on demand.
29
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
JAMES M. SENEFF, JR., age 50, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation in
1980. CNL Group, Inc. is the parent company of CNL Securities Corp., CNL
Investment Company, CNL Fund Advisors, Inc., and prior to its merger with CNL
Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors, Inc.
Mr. Seneff is Chief Executive Officer, and has been a director and registered
principal of CNL Securities Corp., which served as the managing dealer in the
Partnership's offering of Units, since its formation in 1979. Mr. Seneff also
has held the position of President and a director of CNL Management Company, a
registered investment advisor, since its formation in 1976, has served as Chief
Executive Officer and Chairman of the Board of CNL Investment Company, and Chief
Executive Officer and Chairman of the Board of Commercial Net Lease Realty, Inc.
since 1992, has served as the Chairman of the Board and the Chief Executive
Officer of CNL Realty Advisors, Inc. since its inception in 1991, served as
Chairman of the Board and Chief Executive Officer of CNL Income Fund Advisors,
Inc. since its inception in 1994 through December 31, 1995, has served as
Chairman of the Board and Chief Executive Officer of CNL Fund Advisors, Inc.
since its inception in 1994, and has held the position of Chief Executive
Officer and a director of CNL Institutional Advisors, Inc., a registered
investment advisor, since its inception in 1990. In addition, Mr. Seneff has
served as Chairman of the Board and Chief Executive Officer of CNL American
Properties Fund, Inc. since 1994, and has served as Chairman of the Board and
Chief Executive Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors, Inc. since January 1997. Mr. Seneff previously served on
the Florida State Commission on Ethics and is a former member and past Chairman
of the State of Florida Investment Advisory Council, which recommends to the
Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of more
than $40 billion of retirement funds. Since 1971, Mr. Seneff has been active in
the acquisition, development and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
joint venturer in over 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these real estate
ventures are approximately 65 privately offered real estate limited partnerships
in which Mr. Seneff, directly or through an affiliated entity, serves or has
served as a general partner. Also included are CNL Income Fund II, Ltd., CNL
Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund V, Ltd., CNL
Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL
Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income Fund XI, Ltd., CNL
Income Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd.,
CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd.
and CNL Income Fund XVIII, Ltd. (the "CNL Income Fund Partnerships"), public
real estate limited partnerships with investment objectives similar to those of
the Partnership, in which Mr. Seneff serves as a general partner. Mr. Seneff
received his degree in Business Administration from Florida State University in
1968.
ROBERT A. BOURNE, age 49, is President and Treasurer of CNL Group,
Inc., President, a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, CNL Fund
30
<PAGE>
Advisors, Inc., and prior to its merger with CNL Fund Advisors, Inc., effective
January 1, 1996, CNL Income Fund Advisors, Inc., and President, Chief Investment
Officer and a director of CNL Institutional Advisors, Inc., a registered
investment advisor. Mr. Bourne also has served as a director since 1992, as
President from July 1992 to February 1996, and since February 1996, as Vice
Chairman of the Board of Directors, Secretary and Treasurer of Commercial Net
Lease Realty, Inc. In addition, Mr. Bourne has served as a director since its
inception in 1991, as President from 1991 to February 1996, as Secretary from
February 1996 to July 1996, and since February 1996, as Treasurer and Vice
Chairman of CNL Realty Advisors, Inc. In addition, Mr. Bourne has served as
President and a director of CNL American Properties Fund, Inc. since 1994, and
has served as President and a director of CNL American Realty Fund, Inc. since
1996 and of CNL Real Estate Advisors, Inc since January 1997. Upon graduation
from Florida State University in 1970, where he received a B.A. in Accounting,
with honors, Mr. Bourne worked as a certified public accountant and, from
September 1971 through December 1978, was employed by Coopers & Lybrand,
Certified Public Accountants, where he held the position of tax manager
beginning in 1975. From January 1979 until June 1982, Mr. Bourne was a partner
in the accounting firm of Cross & Bourne and from July 1982 through January
1987, he was a partner in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Mr. Bourne, who joined CNL Securities Corp. in 1979, has
participated as a general partner or joint venturer in over 100 real estate
ventures involved in the financing, acquisition, construction and rental of
office buildings, apartment complexes, restaurants, hotels and other real
estate. Included in these real estate ventures are approximately 64 privately
offered real estate limited partnerships in which Mr. Bourne, directly or
through an affiliated entity, serves or has served as a general partner. Also
included are the CNL Income Fund Partnerships, public real estate limited
partnerships with investment objectives similar to those of the Partnership, in
which Mr. Bourne serves as a general partner.
CNL REALTY CORPORATION is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.
CNL FUND ADVISORS, INC., provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 400 East South Street, Suite 500, Orlando,
Florida 32801. CNL Fund Advisors, Inc. is a wholly owned subsidiary of CNL
Group, Inc., a diversified real estate company, and was organized to perform
property acquisition, property management and other services.
CNL GROUP, INC., which is the parent company of CNL Investment Company
and CNL Fund Advisors, Inc., is a diversified real estate corporation organized
in 1980 under the laws of the State of Florida. Other subsidiaries and
affiliates of CNL Group, Inc. include a property development and management
company, two investment advisory companies, and seven corporations organized as
strategic business units. James M. Seneff, Jr., an individual General Partner of
the Partnership, is the Chairman of the Board, Chief Executive Officer, and a
director of CNL Group, Inc. Mr. Seneff and his wife own all of the outstanding
shares of CNL Group, Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as members
of the Boards of Directors of those entities. The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.
JOHN T. WALKER, age 38, joined CNL Group, Inc. in September 1994, as
Senior Vice President, responsible for Research and Development. He currently
serves as the Chief Operating Officer and Executive Vice President of CNL Fund
Advisors, Inc. and CNL American Properties Fund, Inc. and serves as Executive
Vice President of CNL American Realty Fund, Inc. and CNL Real Estate Advisors,
Inc. From May 1992 to May 1994, he was Executive Vice President for Finance and
Administration and Chief Financial Officer of Z Music, Inc., a cable television
network which was subsequently acquired by Gaylord Entertainment, where he was
responsible for overall financial and administrative management and planning.
From January 1990 through April 1992, Mr. Walker was Chief Financial Officer of
the First Baptist Church in Orlando, Florida. From April 1984 through December
1989, he was a partner in the accounting firm of Chastang, Ferrell & Walker,
P.A., where he was the partner in charge
31
<PAGE>
of audit and consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a Cum Laude graduate
of Wake Forest University with a B.S. in Accountancy and is a certified public
accountant.
LYNN E. ROSE, age 48, a certified public accountant, has served as
Chief Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She
has served as Chief Operating Officer, Vice President and Secretary of CNL
Corporate Services, Inc. since November 1994. Ms. Rose also has served as Chief
Financial Officer and Secretary of CNL Institutional Advisors, Inc. since its
inception in 1990, a director of CNL Realty Advisors, Inc. since its inception
in 1991, Secretary of CNL Realty Advisors, Inc. since its inception in 1991
(excluding February 1996 to July 1996), Treasurer of CNL Realty Advisors, Inc.
from 1991 to February 1996, Secretary and Treasurer of Commercial Net Lease
Realty, Inc. from 1992 to February 1996, Secretary of CNL Income Fund Advisors,
Inc. since its inception in 1994 to December 1995, and a director, Secretary and
Treasurer of CNL Fund Advisors, Inc. since 1994 and has served as a director,
Secretary and Treasurer of CNL Real Estate Advisors, Inc. since January 1997.
Ms. Rose also has served as Secretary and Treasurer of CNL American Properties
Fund, Inc. since 1994, and has served as Secretary and Treasurer of CNL American
Realty Fund, Inc. since 1996. Ms. Rose also currently serves as Secretary for
approximately 50 additional corporations. Ms. Rose oversees the management
information services, administration, legal compliance, accounting, tenant
compliance, and reporting for over 250 corporations, partnerships, and joint
ventures. Prior to joining CNL, Ms. Rose was a partner with Robert A. Bourne in
the accounting firm of Bourne & Rose, P.A., Certified Public Accountants. Ms.
Rose holds a B.A. in Sociology from the University of Central Florida and is a
registered financial and operations principal of CNL Securities Corp. She was
licensed as a certified public accountant in 1979.
JEANNE A. WALL, age 38, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and
previously served as Executive Vice President of CNL Investment Company since
January 1991. In 1984, Ms. Wall joined CNL Securities Corp. as its Partnership
Administrator. In 1985, Ms. Wall became Vice President of CNL Securities Corp.
and, in 1987, she became a Senior Vice President of CNL Securities Corp. In
this capacity, Ms. Wall serves as national marketing and sales director and
oversees the national marketing plan for the CNL investment programs. In
addition, Ms. Wall oversees the partnership administration and investor services
for programs offered through participating brokers. Ms. Wall also has served as
Senior Vice President of CNL Institutional Advisors, Inc., a registered
investment advisor, from 1990 to 1993, as Vice President of CNL Realty Advisors,
Inc. since its inception in 1991, as Vice President of Commercial Net Lease
Realty, Inc. since 1992, as Executive Vice President of CNL Income Fund
Advisors, Inc. from its inception in 1994 to December 1995, as Executive Vice
President of CNL Fund Advisors, Inc. since 1994, and as Executive Vice President
of CNL American Properties Fund, Inc. since 1994. In addition, Ms. Wall has
served as Executive Vice President of CNL Real Estate Advisors, Inc. since
January 1997 and as Executive Vice President of CNL American Realty Fund, Inc.
since 1996. Ms. Wall holds a B.A. in Business Administration from Linfield
College and is a registered principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program Association
and on the Direct Participation Program committee for the National Association
of Securities Dealers (NASD).
STEVEN D. SHACKELFORD, age 33, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996. Mr. Shackelford joined CNL Group,
Inc. in September 1996. He also currently serves as the Chief Financial Officer
of CNL American Properties Fund, Inc. From March 1995 to July 1996, he was a
senior manager in the national office of Price Waterhouse where he was
responsible for advising foreign clients seeking to raise capital and a public
listing in the United States. From August 1992 to March 1995, he served as a
manager in the Price Waterhouse, Paris, France office serving several
multinational clients. Mr. Shackelford was an audit staff and senior from 1986
to 1992 in the Orlando, Florida office of Price Waterhouse. Mr Shackelford
received a B.A. in Accounting, with honors, and a Masters of Business
Administration from Florida State University and is a certified public
accountant.
32
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 28, 1997, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of February 28, 1997, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
<S> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
====
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. There are no arrangements
which at a subsequent date may result in a change in control of the Registrant.
33
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 1996, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation Method of For the Year
and Recipient Computation Ended December 31, 1996
-------------------- ------------- -----------------------
<S> <C>
Reimbursement to Operating expenses Operating expenses
affiliates for are reimbursed at incurred on
operating expenses the lower of cost behalf of the
or 90 percent of Partnership:
the prevailing $40,510
rate at which
comparable Accounting and
services could administrative
have been obtained services: $67,685
in the same
geographic area.
If the General
Partners or their
affiliates loan
funds to the
Partnership, the
General Partners
or their
affiliates will be
reimbursed for the
interest and fees
charged to them by
unaffiliated
lenders for such
loans. Affiliates
of the General
Partners from time
to time incur
certain operating
expenses on behalf
of the Partnership
for which the
Partnership
reimburses the
affiliates without
interest.
Annual, One-half of one $ - 0 -
subordinated percent per year
property of Partnership
management fee to assets under
affiliates management (valued
at cost),
subordinated to
certain minimum
returns to the
Limited Partners.
The property
management fee
will not exceed
the lesser of one
percent of gross
operating revenues
or competitive
fees for
comparable
services. Due to
the fact that
these fees are
non-cumulative, if
the Limited
Partners do not
receive their 10%
Preferred Return
in any particular
year, no property
management fees
will be due or
payable for such
year.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation Method of For the Year
and Recipient Computation Ended December 31, 1996
-------------------- --------------- -----------------------
<S> <C>
Deferred, A deferred, $ - 0 -
subordinated real subordinated real
estate disposition estate disposition
fee payable to fee, payable upon
affiliates sale of one or
more Properties,
in an amount equal
to the lesser of
(i) one-half of a
competitive real
estate commission,
or (ii) three
percent of the
sales price of
such Property or
Properties.
Payment of such
fee shall be made
only if affiliates
of the General
Partners provide a
substantial amount
of services in
connection with
the sale of a
Property or
Properties and
shall be
subordinated to
certain minimum
returns to the
Limited Partners.
However, if the
net sales proceeds
are reinvested in
a replacement
property, no such
real estate
disposition fee
will be incurred
until such
replacement
property is sold
and the net sales
proceeds are
distributed.
General Partners' A deferred, $ - 0 -
deferred, sub- subordinated share
ordinated share of equal to one
Partnership net percent of
cash flow Partnership
distributions of
net cash flow,
subordinated to
certain minimum
returns to the
Limited Partners.
General Partners' A deferred, $ - 0 -
deferred, sub- subordinated share
ordinated share of equal to five
Partnership net percent of
sales proceeds Partnership
from a sale or distributions of
sales such net sales
proceeds,
subordinated to
certain minimum
returns to the
Limited Partners.
</TABLE>
35
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Accountants
Balance Sheets at December 31, 1996 and 1995
Statements of Income for the years ended December 31, 1996,
1995 and 1994
Statements of Partners' Capital for the years ended December
31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
years ended December 31, 1996, 1995 and 1994
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1996
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1996
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 Certificate of Limited Partnership of CNL Income Fund, Ltd.,
as amended. (Included as Exhibit 3.1 to Amendment No. 1 to
Registration Statement No. 33-2850 on Form S-11 and
incorporated herein by reference.)
3.2 Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund, Ltd. (Included as Exhibit 3.2
to Form 10-K filed with the Securities and Exchange Commission
on April 7, 1992, and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund, Ltd.,
as amended. (Included as Exhibit 4.1 to Amendment No. 1 to
Registration Statement No. 33-2850 on Form S-11 and
incorporated herein by reference.)
4.2 Form of Amended and Restated Certificate and Agreement of
Limited Partnership of CNL Income Fund, Ltd. (Included as
Exhibit 3.2 to Form 10-K filed with the Securities and
Exchange Commission on April 7, 1992, and incorporated herein
by reference.)
10.1 Property Management Agreement. (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange Commission on
April 7, 1992, and incorporated herein by reference.)
36
<PAGE>
10.2 Assignment of Property Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc. (Included
as Exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated herein
by reference.)
10.3 Assignment of Property Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on March 29, 1996, and incorporated herein
by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period from
October 1, 1996 through December 31, 1996.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 25th day of
March, 1997.
CNL INCOME FUND, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
______________________________
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
______________________________
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
______________________________
JAMES M. SENEFF, JR.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert A. Bourne President, Treasurer March 25, 1997
------------------------ and Director
Robert A. Bourne (Principal Financial
and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive March 25, 1997
------------------------ Officer and Director
James M. Seneff, Jr. (Principal Executive
Officer)
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Additions Deductions
------------------------------------- -------------------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ---- ----------- ---------- ---------- ---------- ---------- --------- --------
<S> <C>
1994 Allowance for
doubtful
accounts (a) $ 471 $ 4,260 $95,484(b) $ 471(c) $ - $ 99,744
======== ======= ======= ======= ======= ========
1995 Allowance for
doubtful
accounts (a) $ 99,744 $ - $22,392(b) $ - $ - $122,136
======== ======= ======= ======= ======= ========
1996 Allowance for
doubtful
accounts (a) $122,136 $ - $ 1,413(b) $32,166(c) $89,970 $ 1,413
======== ======= ======= ======= ======= ========
</TABLE>
(a) Deducted from receivables on the balance sheet.
(b) Reduction of rental and other income.
(c) Amounts written off as uncollectible.
F-1
<PAGE>
CNL INCOME FUND, LTD.
( A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Initial Cost Subsequent
To Partnership To Acquisition
-------------------------- ---------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------ ----------- ------------ -------- --------
<S> <C>
Properties the Partnership has
Invested in:
Golden Corral Family
Steakhouse Restaurants:
Virginia Beach, Virginia - $ 340,125 $ 580,432 $ - $ -
Kent Island, Maryland - 140,703 637,826 - -
Salisbury, Maryland - 263,217 532,213 - -
Jasper, Alabama (d) - 220,665 473,818 - -
Eunice, Louisiana - 186,009 477,947 - -
Pizza Hut Restaurant:
Bowie, Texas - 26,958 106,042 13,622 -
Popeyes Famous Fried
Chicken Restaurants:
Kissimmee, Florida - 239,934 266,628 - -
Merritt Island, Florida - 248,564 303,406 - -
Wendy's Old Fashioned
Hamburger Restaurants:
Mesa, Arizona - 440,339 328,579 - -
Oklahoma City, Oklahoma - 278,878 393,423 20,000 -
Stockbridge, Georgia - 282,482 363,008 - -
Mesquite, Texas - 443,956 456,983 - -
Casa Grande, Arizona - 305,869 391,563 7,255 -
Payson, Arizona - 391,076 427,218 - -
Other:
Angleton, Texas - 162,107 447,511 1,572 -
---------- ---------- -------- -------
3,970,882 $6,186,597 $ 42,449 $ -
========== ========== ======== =======
<PAGE>
</TABLE>
<TABLE>
<CAPTION> Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
---------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
------- ------------ ----- ------------ ----------- --------- -------------
<S> <C>
Properties the Partnership has
Invested in:
Golden Corral Family
Steakhouse Restaurants:
Virginia Beach, Virginia $ 340,125 $ 580,432 $ 920,557 $ 198,314 1986 10/86 (b)
Kent Island, Maryland 140,703 637,826 778,529 214,380 1986 12/86 (b)
Salisbury, Maryland 263,217 532,213 795,430 180,361 1986 12/86 (b)
Jasper, Alabama (d) 220,665 473,818 694,483 159,256 1986 12/86 (b)
Eunice, Louisiana 186,009 477,947 663,956 159,316 1987 01/87 (b)
Pizza Hut Restaurant:
Bowie, Texas 29,683 116,939 146,622 35,226 1976 12/87 (b)
Popeyes Famous Fried
Chicken Restaurants:
Kissimmee, Florida 239,934 266,628 506,562 89,617 1981 12/86 (b)
Merritt Island, Florida 248,564 303,406 551,970 101,978 1983 12/86 (b)
Wendy's Old Fashioned
Hamburger Restaurants:
Mesa, Arizona 440,339 328,579 768,918 114,090 1986 08/86 (b)
Oklahoma City, Oklahoma 278,878 413,423 692,301 140,598 1986 08/86 (b)
Stockbridge, Georgia 282,482 363,008 645,490 126,044 1986 08/86 (b)
Mesquite, Texas 443,956 456,983 900,939 157,405 1986 09/86 (b)
Casa Grande, Arizona 305,869 398,818 704,687 133,785 1986 12/86 (b)
Payson, Arizona 391,076 427,218 818,294 143,593 1986 12/86 (b)
Other:
Angleton, Texas 162,107 449,083 611,190 154,811 1986 09/86 (b)
---------- ---------- ----------- ----------
$3,973,607 $6,226,321 $10,199,928 $2,108,774
========== ========== =========== ==========
</TABLE>
F-2
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Initial Cost Subsequent
To Partnership To Acquisition
--------------------------- ----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ---------- ------------- --------- ---------
<S> <C>
Properties of Joint Ventures
in Which the Partnership
has a 50% Interest:
Burger King Restaurant:
Orlando, Florida - $ 291,159 $ 695,033 $ - $ -
Pizza Hut Restaurant:
Orlando, Florida - 206,575 234,064 - -
Wendy's Old Fashioned
Hamburger Restaurant:
Miami, Florida - 392,407 397,633 - -
---------- ---------- -------- -------
$ 890,141 $1,326,730 $ - $ -
========== ========== ======== =======
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
---------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- ------------
<S> <C>
Properties of Joint Ventures
in Which the Partnership
has a 50% Interest:
Burger King Restaurant:
Orlando, Florida $ 291,159 $ 695,033 $ 986,192 $ 239,539 1986 11/86 (b)
Pizza Hut Restaurant:
Orlando, Florida 206,575 234,064 440,639 82,573 1986 06/86 (b)
Wendy's Old Fashioned
Hamburger Restaurant:
Miami, Florida 392,407 397,633 790,040 144,694 1987 06/86 (b)
---------- ---------- ----------- ----------
$ 890,141 $1,326,730 $ 2,216,871 $ 466,806
========== ========== =========== ==========
</TABLE>
F-3
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(a) Transactions in real estate and accumulated depreciation during 1996,
1995 and 1994, are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------ ------------
<S> <C>
Properties the Partnership
has Invested in:
Balance, December 31, 1993 $11,111,618 $ 1,581,628
Dispositions (911,690) (107,084)
Depreciation expense - 218,827
----------- -----------
Balance, December 31, 1994 $10,199,928 $ 1,693,371
Depreciation expense - 207,697
----------- -----------
Balance, December 31, 1995 10,199,928 1,901,068
Depreciation expense - 207,706
----------- -----------
Balance, December 31, 1996 $10,199,928 $ 2,108,774
=========== ===========
Properties of Joint Ventures
in Which the Partnership has a
50% Interest:
Balance, December 31, 1993 $ 2,216,871 $ 334,133
Depreciation expense - 44,224
----------- -----------
Balance, December 31, 1994 2,216,871 378,357
Depreciation expense - 44,224
----------- -----------
Balance, December 31, 1995 2,216,871 422,581
Depreciation expense - 44,225
----------- -----------
Balance, December 31, 1996 $ 2,216,871 $ 466,806
=========== ===========
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1996, the aggregate cost of the Properties owned
by the Partnership and joint ventures for federal income tax purposes
was $10,197,888 and $2,216,871, respectively. All of the leases are
treated as operating leases for federal income tax purposes.
(d) The tenant of this property, Golden Corral Corporation, has subleased
this property to a local, independent restaurant. Golden Corral
Corporation continues to be responsible for complying with all the
terms of the lease agreement and is continuing to pay rent on this
property to the Partnership.
F-4
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Page
-------------- ----
<S> <C>
3.1 Certificate of Limited Partnership of CNL Income Fund, Ltd., as
amended. (Included as Exhibit 3.1 to Amendment No. 1 to Registration
Statement No. 33-2850 on Form S-11 and incorporated herein by
reference.)
3.2 Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund, Ltd. (Included as Exhibit
3.2 to Form 10-K filed with the Securities and Exchange
Commission on April 7, 1992, and incorporated herein by
reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund, Ltd., as
amended. (Included as Exhibit 4.1 to Amendment No. 1 to Registration
Statement No. 33-2850 on Form S-11 and incorporated herein by
reference.)
4.2 Form of Amended and Restated Certificate and Agreement of
Limited Partnership of CNL Income Fund, Ltd. (Included as
Exhibit 3.2 to Form 10-K filed with the Securities and
Exchange Commission on April 7, 1992, and incorporated
herein by reference.)
10.1 Property Management Agreement. (Included as Exhibit 10.1 to Form
10-K filed with the Securities and Exchange Commission on April 7,
1992, and incorporated herein by reference.)
10.2 Assignment of Property Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with the
Securities and Exchange Commission on March 30, 1995, and
incorporated herein by reference.)
10.3 Assignment of Property Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
10.3 to Form 10-K filed with the Securities and Exchange Commission
on March 29, 1996, and incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet of CNL Income Fund Ltd at December 31, 1996, and its
statement of income for the year then ended and is qualified in its
entirety by reference to the Form 10-K of CNL Income Fund Ltd. for the
year ended December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 159,379
<SECURITIES> 0
<RECEIVABLES> 181,661
<ALLOWANCES> 1,413
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,199,928
<DEPRECIATION> 2,108,774
<TOTAL-ASSETS> 9,479,777
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,045,177
<TOTAL-LIABILITY-AND-EQUITY> 9,479,777
<SALES> 0
<TOTAL-REVENUES> 1,273,232
<CGS> 0
<TOTAL-COSTS> 325,199
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,083,109
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,083,109
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,083,109
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund, Ltd. has an unclassified
balance sheet; therefore, no values are shown above for current assets
and current liabilities.
<F2>Due to the nature of its industry, CNL Income Fund, Ltd. has an unclassified
balance sheet; therefore, no values are shown above for current assets
and current liabilities.
</FN>
</TABLE>
