FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
-------------------------------------------------------
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 of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 E. South Street
Orlando, Florida 32801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 650-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8-12
Part II
Other Information 13
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ----------------
<S> <C>
ASSETS
Land and buildings on operating leases, less
accumulated depreciation of $2,226,822
and $2,172,913 $7,624,993 $8,185,465
Investment in and due from joint ventures 896,601 919,476
Cash and cash equivalents 285,367 184,130
Restricted cash -- 129,257
Receivables, less allowance for doubtful
accounts of $3,092 in 1997 586 21,331
Prepaid expenses 5,987 4,989
Lease costs, less accumulated amortization
of $23,750 and $21,875 26,250 28,125
Accrued rental income 29,628 27,305
--------------- ----------------
$8,869,412 $9,500,078
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 811 $ 2,595
Accrued and escrowed real estate
taxes payable 7,170 734
Distributions payable 266,982 316,221
Due to related parties 131,112 115,741
Rents paid in advance and deposits 24,673 35,737
--------------- ----------------
Total liabilities 430,748 471,028
Partners' capital 8,438,664 9,029,050
--------------- ----------------
$8,869,412 $9,500,078
=============== ================
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---------- ---------- ------------ ------------
<S> <C>
Revenues:
Rental income from operating
leases $243,612 $253,305 $ 774,444 $ 780,333
Interest and other income 6,597 6,517 19,053 14,314
---------- ---------- ------------ ------------
250,209 259,822 793,497 794,647
---------- ---------- ------------ ------------
Expenses:
General operating and
administrative 20,145 19,477 65,647 63,833
Professional services 2,404 3,227 15,006 9,136
Real estate taxes 1,080 1,101 3,241 3,305
State and other taxes -- -- 4,450 3,538
Depreciation and amortization 51,429 50,958 157,251 156,060
---------- ---------- ------------ ------------
75,058 74,763 245,595 235,872
---------- ---------- ------------ ------------
Income Before Equity in Earnings
of Joint Ventures and Gain on Sale
of Land and Buildings 175,151 185,059 547,902 558,775
Equity in Earnings of Joint Ventures 20,937 172,680 62,394 226,035
Gain on Sale of Land and Buildings -- 233,183 235,804 233,183
---------- ---------- ------------ ------------
Net Income $196,088 $590,922 $ 846,100 $1,017,993
========== ========== ============ ============
Allocation of Net Income:
General partners $ 1,961 $ 4,999 $ 7,118 $ 9,270
Limited partners 194,127 585,923 838,982 1,008,723
---------- ---------- ------------ ------------
$196,088 $590,922 $ 846,100 $1,017,993
========== ========== ============ ============
Net Income Per Limited Partner Unit $ 6.47 $ 19.53 $ 27.97 $ 33.62
========== ========== ============ ============
Weighted Average Number of Limited
Partner Units Outstanding 30,000 30,000 30,000 30,000
========== ========== ============ ============
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
1998 1997
---------------------------- ------------------
<S> <C>
General partners:
Beginning balance $ 321,759 $ 310,182
Net income 7,118 11,577
---------------- ---------------
328,877 321,759
---------------- ---------------
Limited partners:
Beginning balance 8,707,291 8,734,995
Net income 838,982 1,237,180
Distributions ($47.88 and
$42.16 per limited partner
unit, respectively) (1,436,486 ) (1,264,884 )
---------------- ---------------
8,109,787 8,707,291
---------------- ---------------
Total partners' capital $ 8,438,664 $ 9,029,050
================ ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
--------------- ---------------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating Activities $ 799,653 $ 1,009,004
---------------- ---------------
Cash Flows from Investing Activities:
Proceeds from sale of land and building 661,300 793,009
Return of capital from joint venture -- 472,373
Decrease (increase) in restricted cash 126,009 (793,009 )
---------------- ---------------
Net cash provided by investing
activities 787,309 472,373
---------------- ---------------
Cash Flows from Financing Activities:
Proceeds from loan from corporate
general partner -- 81,000
Repayment of loan from corporate
general partner -- (81,000 )
Distributions to limited partners (1,485,725 ) (948,663 )
---------------- ---------------
Net cash used in financing
activities (1,485,725 ) (948,663 )
---------------- ---------------
Net Increase in Cash and Cash Equivalents 101,237 532,714
Cash and Cash Equivalents at Beginning
of Period 184,130 159,379
---------------- ---------------
Cash and Cash Equivalents at End of
Period $ 285,367 $ 692,093
================ ===============
Supplemental Schedule of Non-Cash Financing
Activities
Distributions declared and unpaid at end of
period $ 266,982 $ 316,221
================ ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1998 and 1997
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and nine months ended September 30, 1998, may not be
indicative of the results that may be expected for the year ending
December 31, 1998. Amounts as of December 31, 1997, included in the
financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund, Ltd. (the "Partnership") for the year ended December 31,
1997.
In May 1998, the Financial Accounting Standards Board reached a
consensus in EITF 98-9, entitled "Accounting for Contingent Rent in the
Interim Financial Periods." Adoption of this consensus did not have a
material effect on the Partnership's financial position or results of
operations.
2. Land and Buildings on Operating Leases:
During the nine months ended September 30, 1998, the Partnership sold
its property in Kissimmee, Florida, for $680,000 and received net sales
proceeds of $661,300 resulting in a gain of $235,804 for financial
reporting purposes. This property was originally acquired by the
Partnership in 1987 and had a cost of approximately $475,400, excluding
acquisition fees and miscellaneous acquisition expenses; therefore the
Partnership sold this property for approximately $185,900 in excess of
its original purchase price. In connection with the sale, the
Partnership incurred a deferred, subordinated, real estate disposition
fee of $20,400 (see Note 4).
5
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1998 and 1997
3. 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, noncompounded annual return on their adjusted
capital contributions (the "10% Preferred Return") on a noncumulative
basis.
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 the 10% Preferred Return
on a cumulative basis, plus the return of their adjusted capital
contributions. The general partners will then receive, to the extent
previously subordinated and 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 nine months ended September 30, 1998 and 1997, the
Partnership declared distributions to the limited partners of
$1,436,486 and $948,663, respectively ($266,982 and $316,221 for the
quarters ended September 30, 1998 and 1997, respectively). This
represents distributions of $47.88 and $31.62 per unit for the nine
months ended September 30, 1998 and 1997, respectively ($8.90 and
$10.54 per unit for the quarters ended September 30, 1998 and 1997,
respectively). Distributions for the nine months ended September 30,
1998, included $586,300 as a result of the distribution of net sales
proceeds from the sale of the property in Kissimmee, Florida. Of this
amount, $216,361 was applied toward the limited partners' 10% Preferred
Return and the balance of $369,939 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
6
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1998 and 1997
3. Allocations and Distributions - Continued:
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
distributions have been made to the general partners to date.
4. Related Party Transactions:
An affiliate of the Partnership is 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
affiliate provides a substantial amount of services in connection with
the sale. Payment of the real estate disposition fee is subordinated to
receipt by the limited partners of the 10% Preferred Return on a
cumulative basis, plus their adjusted capital contributions. For the
nine months ended September 30, 1998, the Partnership incurred $20,400
in a deferred, subordinated, real estate disposition fee as a result of
the sale of a property (see Note 2). No deferred, subordinated, real
estate disposition fees were incurred for the nine months ended
September 30, 1997.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund, Ltd. (the "Partnership") is a Florida limited
partnership that 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 restaurants were to
be constructed, which are leased primarily to operators of national and regional
fast-food restaurant chains (collectively, the "Properties"). The leases
generally are triple-net leases, with the lessees responsible for all repairs
and maintenance, property taxes, insurance and utilities. As of September 30,
1998, the Partnership owned 17 Properties, which included interests in two
Properties owned by joint ventures in which the Partnership is a co-venturer and
one Property owned with affiliates as tenants-in-common.
Liquidity and Capital Resources
During the nine months ended September 30, 1998 and 1997, the
Partnership generated cash from operations (which includes cash received from
tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses) of $799,653 and $1,009,004, respectively.
The decrease in cash from operations for the nine months ended September 30,
1998, is primarily a result of changes in the Partnership's working capital and
changes in income and expenses as described in "Results of Operations" below.
Other sources and uses of capital included the following during the
nine months ended September 30, 1998.
In April 1998, the Partnership sold its Property in Kissimmee, Florida,
to the tenant for $680,000 and received net sales proceeds of $661,300,
resulting in a gain of $235,804 for financial reporting purposes. This Property
was originally acquired by the Partnership in 1987 and had a cost of
approximately $475,400, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold this Property for approximately
$185,900 in excess of its original purchase price. In connection with the sale,
the Partnership incurred a deferred, real estate disposition fee of $20,400.
Payment of the real estate disposition fee is subordinated to receipt by the
limited partners of an aggregate, ten percent, noncompounded annual return on
their adjusted capital contributions (the 10% Preferred Return) on a cumulative
basis, plus their adjusted capital contributions. The Partnership distributed
$586,300 of the net sales proceeds as a special distribution to the limited
partners and the balance of the funds were retained by the Partnership to meet
the Partnership's working capital and other needs.
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 September 30, 1998, the Partnership had
$285,367 invested in such short-term investments, as compared to $184,130 at
December 31, 1997. The increase in cash and cash equivalents is primarily due to
the Partnership retaining a portion of the net sales proceeds received from the
sale of the Property in Kissimmee, Florida in April 1998. The funds remaining at
September 30, 1998, will be used to pay distributions and other liabilities.
8
<PAGE>
Liquidity and Capital Resources - Continued
Total liabilities of the Partnership, including distributions payable,
decreased to $430,748 at September 30, 1998, from $471,028 at December 31, 1997,
primarily as a result of a decrease in distributions payable to the limited
partners at September 30, 1998, as compared to December 31, 1997. Liabilities at
September 30, 1998, to the extent they exceed cash and cash equivalents at
September 30, 1998, will be paid from future cash from operations and, in the
event the general partners elect to make additional capital contributions or
loans to the Partnership, from future general partner capital contributions or
loans.
Based on current and anticipated future cash from operations, and for
the nine months ended September 30, 1998, a portion of the proceeds received
from the sale of the Property described above, the Partnership declared
distributions to limited partners of $1,436,486 and $948,663 for the nine months
ended September 30, 1998 and 1997, respectively ($266,982 and $316,221 for the
quarters ended September 30, 1998 and 1997, respectively). This represents
distributions of $47.88 and $31.62 per unit for the nine months ended September
30, 1998 and 1997, respectively ($8.90 and $10.54 for the quarters ended
September 30, 1998 and 1997, respectively). The distribution for the nine months
ended September 30, 1998, included $586,300 of net sales proceeds from the sale
of the Property in Kissimmee, Florida. This special distribution was effectively
a return of a portion of the limited partners' investment, although, in
accordance with the Partnership agreement, $216,361 was applied towards the 10%
Preferred Return, on a cumulative basis, and the balance of $369,939 was treated
as a return of capital for purposes of calculating the 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. As a result of the sale of the
Property, the Partnership's total revenue was reduced, while the majority of the
Partnership's operating expenses remained fixed. Therefore, distributions of net
cash flow were adjusted commencing in the quarter ended June 30, 1998. No
distributions were made to the general partners for the quarters and nine months
ended September 30, 1998 and 1997. No amounts distributed to the limited
partners for the nine months ended September 30, 1998 and 1997, except for
$369,939 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 have been informed by CNL American Properties
Fund, Inc. ("APF"), an affiliate of the general partners, that it intends to
significantly increase its asset base by proposing to acquire affiliates of the
general partners which have similar restaurant property portfolios, including
the Partnership. APF is a real estate investment trust whose primary business is
the ownership of restaurant properties leased on a long-term, "triple-net" basis
to operators of national and regional restaurant chains. Accordingly, the
general partners anticipate that APF will make an offer to acquire the
Partnership in exchange for securities of APF. The general partners have
recently retained financial and legal advisors to assist them in evaluating and
negotiating any
9
<PAGE>
Liquidity and Capital Resources - Continued
offer that may be proposed by APF. However, at this time, APF has made no such
offer. In the event that an offer is made, the general partners will evaluate it
and if the general partners believe that the offer is worth pursuing, the
general partners will promptly inform the limited partners. Any agreement to
sell the Partnership would be subject to the approval of the limited partners in
accordance with the terms of the partnership agreement.
The Partnership's investment strategy of acquiring Properties for cash
and 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.
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.
Results of Operations
During the nine months ended September 30, 1997, the Partnership owned
and leased 15 wholly owned Properties (including one Property in Casa Grande,
Arizona, which was sold in August 1997), and during the nine months ended
September 30, 1998, the Partnership owned and leased 15 wholly owned Properties
(including one Property in Kissimmee, Florida which was sold in April 1998), to
operators of fast-food and family-style restaurant chains. In connection
therewith, during the nine months ended September 30, 1998 and 1997, the
Partnership earned $774,444 and $780,333, respectively, in rental income from
these Properties, $243,612 and $253,305 of which was earned during the quarters
ended September 30, 1998 and 1997, respectively. The decrease in rental income
during the quarter and nine months ended September 30, 1998, as compared to the
quarter and nine months ended September 30, 1997, is primarily attributable to a
decrease in rental income as a result of Property sales during 1998 and 1997.
The decrease in rental income during the quarter and nine months ended September
30, 1998, as compared to the quarter and nine months ended September 30, 1997,
was partially offset by an increase in rental income due to the fact that the
Partnership reinvested the majority of the net sales proceeds from the sale of a
Property in August 1997, in a Property in Camp Hill, Pennsylvania in October
1997.
In addition, for the nine months ended September 30, 1997, the
Partnership owned and leased three Properties indirectly through joint venture
arrangements (including one Property sold in August 1997) and for the nine
months ended September 30, 1998, the Partnership owned and leased two Properties
indirectly through joint venture arrangements and one Property with affiliates
as tenants-in-common. In connection therewith, during the nine months ended
September 30, 1998 and 1997, the Partnership earned $62,394 and $226,035,
respectively, attributable to net income earned by these joint ventures, $20,937
and $172,680 of which was earned during the quarters ended September 30, 1998
and 1997, respectively. The decrease in net income earned by joint ventures is
primarily attributable to the fact that in August 1997, Seventh Avenue Joint
Venture, in which the Partnership owned a 50 percent interest, sold its Property
resulting in a gain to the joint venture of approximately $295,100 for financial
reporting
10
<PAGE>
Results of Operations - Continued
purposes. The decrease is partially offset by the fact that in December 1997,
the Partnership reinvested a portion of its pro rata share of the net sales
proceeds in a Property located in Vancouver, Washington as tenants-in-common
with affiliates of the general partners.
Operating expenses, including depreciation and amortization expense,
were $245,595 and $235,872 for the nine months ended September 30, 1998 and
1997, respectively, of which $75,058 and $74,763 were incurred for the quarters
ended September 30, 1998 and 1997, respectively.
As a result of the sale of the Property in Kissimmee, Florida, as
described above in "Liquidity and Capital Resources," the Partnership recognized
a gain of $235,804 for financial reporting purposes for the nine months ended
September 30, 1998. During the quarter and nine months ended September 30, 1997,
the Partnership sold the Property in Casa Grande, Arizona and recognized a gain
of $233,183 for financial reporting purposes.
In May 1998, the Financial Accounting Standards Board reached a
consensus in EITF 98-9, entitled "Accounting for Contingent Rent in the Interim
Financial Periods." Adoption of this consensus did not have a material effect on
the Partnership's financial position or results of operations.
The Year 2000 problem is the result of information technology systems
and embedded systems (products which are made with microprocessor (computer)
chips such as HVAC systems, physical security systems and elevators) using a
two-digit format, as opposed to four digits, to indicate the year. Such
information technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.
The Partnership does not have any information technology systems.
Affiliates of the general partners provide all services requiring the use of
information technology systems pursuant to a management agreement with the
Partnership. The maintenance of embedded systems, if any, at the Partnership's
properties is the responsibility of the tenants of the properties in accordance
with the terms of the Partnership's leases. The general partners and affiliates
have established a team dedicated to reviewing the internal information
technology systems used in the operation of the Partnership, and the information
technology and embedded systems and the Year 2000 compliance plans of the
Partnership's tenants, significant suppliers, financial institutions and
transfer agent.
The information technology infrastructure of the affiliates of the
general partners consists of a network of personal computers and servers that
were obtained from major suppliers. The affiliates utilize various
administrative and financial software applications on that infrastructure to
perform the business functions of the Partnership. The inability of the general
partners and affiliates to identify and timely correct material Year 2000
deficiencies in the software and/or infrastructure could result in an
interruption in, or failure of, certain of the Partnership's business activities
or operations. Accordingly, the general partners and affiliates have requested
and are evaluating documentation from the suppliers of the affiliates regarding
the Year 2000 compliance
11
<PAGE>
Results of Operations - Continued
of their products that are used in the business activities or operations of the
Partnership. The costs expected to be incurred by the general partners and
affiliates to become Year 2000 compliant will be incurred by the general
partners and affiliates; therefore, these costs will have no impact on the
Partnership's financial position or results of operations.
The Partnership has material third party relationships with its
tenants, financial institutions and transfer agent. The Partnership depends on
its tenants for rents and cash flows, its financial institutions for
availability of cash and its transfer agent to maintain and track investor
information. If any of these third parties are unable to meet their obligations
to the Partnership because of the Year 2000 deficiencies, such a failure may
have a material impact on the Partnership. Accordingly, the general partners
have requested and are evaluating documentation from the Partnership's tenants,
financial institutions, and transfer agent relating to their Year 2000
compliance plans. At this time, the general partners have not yet received
sufficient certifications to be assured that the tenants, financial
institutions, and transfer agent have fully considered and mitigated any
potential material impact of the Year 2000 deficiencies. Therefore, the general
partners do not, at this time, know of the potential costs to the Partnership of
any adverse impact or effect of any Year 2000 deficiencies by these third
parties.
The general partners currently expect that all year 2000 compliance
testing and any necessary remedial measures on the information technology
systems used in the business activities and operations of the Partnership will
be completed prior to June 30, 1999. Based on the progress the general partners
and affiliates have made in identifying and addressing the Partnership's Year
2000 issues and the plan and timeline to complete the compliance program, the
general partners do not foresee significant risks associated with the
Partnership's Year 2000 compliance at this time. Because the general partners
and affiliates are still evaluating the status of the systems used in business
activities and operations of the Partnership and the systems of the third
parties with which the Partnership conducts its business, the general partners
have not yet developed a comprehensive contingency plan and are unable to
identify "the most reasonably likely worst case scenario" at this time. As the
general partners identify significant risks related to the Partnership's Year
2000 compliance or if the Partnership's Year 2000 compliance program's progress
deviates substantially from the anticipated timeline, the general partners will
develop appropriate contingency plans.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1998.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 10th day of November, 1998.
CNL INCOME FUND, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund, Ltd. at September 30, 1998, and its statement of
income for the nine months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund, Ltd. for the nine months ended
September 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 285,367
<SECURITIES> 0
<RECEIVABLES> 586
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 9,851,815
<DEPRECIATION> 2,226,822
<TOTAL-ASSETS> 8,869,412
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,438,664
<TOTAL-LIABILITY-AND-EQUITY> 8,869,412
<SALES> 0
<TOTAL-REVENUES> 793,497
<CGS> 0
<TOTAL-COSTS> 245,595
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 846,100
<INCOME-TAX> 0
<INCOME-CONTINUING> 846,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 846,100
<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.
</FN>
</TABLE>
