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 June 30, 1999
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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
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CNL Income Fund, Ltd.
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(Exact name of registrant as specified in its charter)
Florida 59-2666264
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 East South Street
Orlando, Florida 32801
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 650-1000
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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 _________
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CONTENTS
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Page
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Part I.
Item 1. Financial Statements:
Condensed Balance Sheets
Condensed Statements of Income
Condensed Statements of Partners' Capital
Condensed Statements of Cash Flows
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Part II.
Other Information
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CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
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June 30, December 31,
1999 1998
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ASSETS
Land and buildings on operating leases, less
accumulated depreciation of $2,379,237 and
$2,277,627, respectively $ 7,472,578 $ 7,574,188
Investment in joint ventures 832,194 841,379
Cash and cash equivalents 203,524 252,521
Receivables, less allowance for doubtful accounts
of $30,168 in 1999 10,896 30,959
Prepaid expenses 6,623 5,463
Lease costs, less accumulated amortization of
$25,625 and $24,375, respectively 24,375 25,625
Accrued rental income 31,065 30,791
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$ 8,581,255 $ 8,760,926
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 32,083 $ 736
Escrowed real estate taxes payable 4,100 1,024
Distributions payable 266,982 266,982
Due to related parties 149,805 129,060
Rents paid in advance and deposits 17,930 36,105
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Total liabilities 470,900 433,907
Commitments and Contingencies (Note 2)
Partners' capital 8,110,355 8,327,019
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$ 8,581,255 $ 8,760,926
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</TABLE>
See accompanying notes to condensed financial statements.
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CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
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Quarter Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
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Revenues:
Rental income from operating leases $ 248,493 $ 257,223 $482,159 $ 530,832
Interest and other income 3,605 9,327 5,203 12,456
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252,098 266,550 487,362 543,288
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Expenses:
General operating and administrative 17,404 23,354 39,080 45,502
Professional services 8,937 9,817 11,202 12,602
Real estate taxes -- 1,080 1,091 2,161
State and other taxes -- 43 5,667 4,450
Depreciation and amortization 51,430 52,171 102,860 105,822
Transaction costs 26,454 -- 57,570 --
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104,225 86,465 217,470 170,537
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Income Before Equity in Earnings of Joint
Ventures and Gain on Sale of Land and
Building 147,873 180,085 269,892 372,751
Equity in Earnings of Joint Ventures 23,518 20,584 47,408 41,457
Gain on Sale of Land and Building -- 235,804 -- 235,804
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Net Income $ 171,391 $ 436,473 $317,300 $ 650,012
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Allocation of Net Income:
General partners $ 1,714 $ 3,022 $ 3,173 $ 5,157
Limited partners 169,677 433,451 314,127 644,855
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$ 171,391 $ 436,473 $317,300 $ 650,012
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Net Income Per Limited Partner Unit $ 5.66 $ 14.45 $ 10.47 $ 21.50
=========== =========== =========== ===========
Weighted Average Number of Limited Partner
Units Outstanding 30,000 30,000 30,000 30,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
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CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
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Six Months Ended Year Ended
June 30, December 31,
1999 1998
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General partners:
Beginning balance $ 330,430 $ 321,759
Net income 3,173 8,671
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333,603 330,430
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Limited partners:
Beginning balance 7,996,589 8,707,291
Net income 314,127 992,766
Distributions ($17.80 and $56.78 per
limited partner unit, respectively) (533,964 ) (1,703,468 )
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7,776,752 7,996,589
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Total partners' capital $ 8,110,355 $ 8,327,019
================ =================
</TABLE>
See accompanying notes to condensed financial statements.
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CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
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Six Months Ended
June 30,
1999 1998
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Increase (Decrease) in Cash and Cash Equivalents:
Net Cash Provided by Operating Activities $ 484,967 $ 557,386
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Cash Flows from Investing Activities:
Proceeds from sale of land and building -- 661,300
Decrease in restricted cash -- 126,009
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Net cash provided by investing activities -- 787,309
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Cash Flows from Financing Activities:
Distributions to limited partners (533,964 ) (632,442 )
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Net cash used in financing activities (533,964 ) (632,442 )
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Net Increase (Decrease) in Cash and Cash Equivalents (48,997 ) 712,253
Cash and Cash Equivalents at Beginning of Period 252,521 184,130
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Cash and Cash Equivalents at End of Period $ 203,524 $ 896,383
============== ===============
Supplemental Schedule of Non-Cash Financing
Activities:
Deferred real estate disposition fee incurred
and unpaid at end of period $ -- $ 20,400
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Distributions declared and unpaid at end of
quarter $ 266,982 $ 853,283
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</TABLE>
See accompanying notes to condensed financial statements.
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CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1999 and 1998
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 ended June 30, 1999 may not be indicative of the results
that may be expected for the year ending December 31, 1999. Amounts as
of December 31, 1998, 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,
1998.
2. Commitments and Contingencies:
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to
which the Partnership would be merged with and into a subsidiary of APF
(the "Merger"). As consideration for the Merger, APF has agreed to
issue 578,880 shares of its common stock, par value $0.01 per share
(the "APF Shares") which, for the purposes of valuing the merger
consideration, have been valued by APF at $20.00 per APF Share, the
price paid by APF investors (after an adjustment for a one for two
reverse stock split effective June 3, 1999) in three previous public
offerings, the most recent of which was completed in December 1998. In
order to assist the general partners in evaluating the proposed merger
consideration, the general partners retained Valuation Associates, a
nationally recognized real estate appraisal firm, to appraise the
Partnership's restaurant property portfolio. Based on Valuation
Associates' appraisal, the Partnership's property portfolio and other
assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $11,384,042 as of December 31, 1998. The APF
Shares are expected to be listed for trading on the New York Stock
Exchange concurrently with the consummation of the Merger, and
therefore, would be freely tradable at the option of the former limited
partners. At a special meeting of the partners that is expected to be
held in the fourth quarter of 1999, limited partners holding in excess
of 50% of the Partnership's outstanding limited partnership interests
must approve the Merger prior to consummation of the transaction. If
the limited partners at the special meeting approve the Merger, APF
<PAGE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1999 and 1998
2. Commitments and Contingencies - Continued:
will own the properties and other assets of the Partnership. The
general partners intend to recommend that the limited partners of the
Partnership approve the Merger. In connection with their
recommendation, the general partners will solicit the consent of the
limited partners at the special meeting. If the limited partners reject
the Merger, the Partnership will bear the portion of the transaction
costs based upon the percentage of "For" votes and the general partners
will bear the portion of such transaction costs based upon the
percentage of "Against" votes and abstentions.
On May 11, 1999, certain limited partners in several of the CNL Income
Funds served a lawsuit against the general partners and APF in
connection with the proposed Merger. On July 8, 1999, the plaintiffs
amended the complaint to add three additional limited partners as
plaintiffs. Additionally, on June 22, 1999, a limited partner in
certain of the CNL Income Funds served a lawsuit against the general
partners, APF and CNL Fund Advisors, Inc. and certain of its affiliates
in connection with the proposed Merger. The general partners and APF
believe that the lawsuits are without merit and intend to defend
vigorously against the claims. See Part II - Item 1. Legal Proceedings.
3. Subsequent Event:
In July 1999, the Partnership entered into a promissory note with the
corporate general partner for a loan in the amount of $21,000 in
connection with the operations of the Partnership. The loan is
uncollateralized, non-interest bearing and due on demand.
<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 June 30, 1999,
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 of the general partners as tenants-in-common.
Capital Resources
The Partnership's primary source of capital for the six months ended
June 30, 1999 and 1998, was cash from operations (which includes cash received
from tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). For the six months ended June 30, 1999
and 1998, the Partnership generated cash from operations of $484,967 and
$557,386, respectively. The decrease in cash from operations for the six months
ended June 30, 1999 is primarily a result of changes in income and expenses as
described in "Results of Operations" below and changes in the Partnership's
working capital.
In addition, in July 1999, the Partnership entered into a promissory
note with the corporate general partner for a loan in the amount of $21,000 in
connection with the operations of the Partnership. The loan is uncollateralized,
non-interest bearing and due on demand.
Currently, rental income from the Partnership's Properties and any
amounts borrowed under a promissory note, as described above, are invested in
money market accounts or other short-term, highly liquid investments such as
demand deposit accounts at commercial banks, certificates of deposit, and money
market accounts with less than a 30-day maturity date, pending the Partnership's
use of such funds to pay Partnership expenses or to make distributions to the
limited partners. At June 30, 1999, the Partnership had $203,524 invested in
such short-term investments, as compared to $252,521 at December 31, 1998. The
funds remaining at June 30, 1999 will be used to pay distributions and other
liabilities.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
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.
The Partnership generally distributes cash from operations remaining
after the payment of operating expenses of the Partnership, to the extent that
the general partners determine that such funds are available for distribution.
Based on current and anticipated future cash from operations, for the six months
ended June 30, 1998, proceeds from the sale of a Property, and to a lesser
extent, the loan received from the corporate general partner in July 1999, the
Partnership declared distributions to limited partners of $533,964 and
$1,169,504 for the six months ended June 30, 1999 and 1998, respectively
($266,982 and $853,283 for the quarters ended June 30, 1999 and 1998,
respectively). This represents distributions of $17.80 and $38.98 per unit for
the six months ended June 30, 1999 and 1998, respectively ($8.90 and $28.44 for
the quarters ended June 30, 1999 and 1998, respectively). The distribution for
the six months ended June 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
limited partners' ten percent preferred return and the balance of $369,939 was
treated as a return of capital for purposes of calculating the limited partners'
ten percent 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 ten percent 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. No distributions
were made to the general partners for the quarters and six months ended June 30,
1999 and 1998. No amounts distributed to the limited partners for the six months
ended June 30, 1999 and 1998, 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.
Total liabilities of the Partnership, including distributions payable,
increased to $470,900 at June 30, 1999, from $433,907 at December 31, 1998,
primarily as a result of the Partnership accruing transaction costs relating to
the proposed merger with CNL American Properties Fund, Inc. ("APF"), as
described below. The increase in liabilities at June 30, 1999 was partially
offset by a decrease in rents paid in advance at June 30, 1999, as compared to
December 31, 1998. Liabilities at June 30, 1999, to the extent they exceed cash
and cash equivalents at June 30, 1999, 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.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
<PAGE>
Results of Operations
During the six months ended June 30, 1998, the Partnership owned and
leased 15 wholly owned Properties (which included one Property in Kissimmee,
Florida, which was sold in April 1998), and during the six months ended June 30,
1999, the Partnership owned and leased 14 wholly owned Properties, to operators
of fast-food and family-style restaurant chains. In connection therewith, during
the six months ended June 30, 1999 and 1998, the Partnership earned $482,159 and
$530,832, respectively, in rental income from these Properties, $248,493 and
$257,223 of which was earned during the quarters ended June 30, 1999 and 1998,
respectively. The decrease in rental income during the quarter and six months
ended June 30, 1999, as compared to the quarter and six months ended June 30,
1998, is partially attributable to a decrease in rental income as a result of
the sale of the Property in Kissimmee, Florida, during 1998.
The decrease in rental income during the quarter and six months ended
June 30, 1999, as compared to the quarter and six months ended June 30, 1998, is
also partially a result of the fact that during the quarter and six months ended
June 30, 1999, the Partnership established an allowance for doubtful accounts in
connection with the tenant of the Property in Mesquite, Texas filing for
bankruptcy. While the tenant has not rejected or affirmed this lease, there can
be no assurance that the lease will not be rejected in the future. The possible
rejection of this lease could have an adverse effect on the results of
operations of the Partnership, if the Partnership is not able to re-lease the
Property in a timely manner.
For the six months ended June 30, 1999 and 1998, the Partnership owned
and leased two Properties indirectly through joint venture arrangements and one
Property with affiliates of the general partners as tenants-in-common. In
connection therewith, during the six months ended June 30, 1999 and 1998, the
Partnership earned $47,408 and $41,457, respectively, attributable to net income
earned by these joint ventures, $23,518 and $20,584 of which was earned during
the quarters ended June 30, 1999 and 1998, respectively.
Operating expenses, including depreciation and amortization expense,
were $217,470 and $170,537 for the six months ended June 30, 1999 and 1998,
respectively, of which $104,225 and $86,465 were incurred for the quarters ended
June 30, 1999 and 1998, respectively. The increase in operating expenses during
the quarter and six months ended June 30, 1999, as compared to the quarter and
six months ended June 30, 1998, is primarily attributable to the fact that the
Partnership incurred $26,454 and $57,750, respectively, in transaction costs
related to the general partners retaining financial and legal advisors to assist
them in evaluating and negotiating the proposed Merger with APF, as described
below. If the limited partners reject the Merger, the Partnership will bear
their portion of the transaction costs based upon the percentage of "For" votes
and the general partners will bear the portion of such transaction costs based
upon the percentage of "Against" votes and abstentions.
As a result of the sale of a Property during the six months ended June
30, 1998, the Partnership recognized a gain of $235,804 for financial reporting
purposes. No Properties were sold during the six months ended June 30, 1999.
<PAGE>
Proposed Merger
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF (the "Merger"). As consideration for the Merger, APF
has agreed to issue 578,880 shares of its common stock, par value $0.01 per
share (the "APF Shares") which, for the purposes of valuing the merger
consideration, have been valued by APF at $20.00 per APF Share, the price paid
by APF investors (after an adjustment for a one for two reverse stock split
effective June 3, 1999) in three previous public offerings, the most recent of
which was completed in December 1998. In order to assist the general partners in
evaluating the proposed merger consideration, the general partners retained
Valuation Associates, a nationally recognized real estate appraisal firm, to
appraise the Partnership's restaurant property portfolio. Based on Valuation
Associates' appraisal, the Partnership's property portfolio and other assets
were valued on a going concern basis (meaning the Partnership continues
unchanged) at $11,384,042 as of December 31, 1998. The APF Shares are expected
to be listed for trading on the New York Stock Exchange concurrently with the
consummation of the Merger, and therefore, would be freely tradable at the
option of the former limited partners. At a special meeting of the partners that
is expected to be held in the third quarter of 1999, limited partners holding in
excess of 50% of the Partnership's outstanding limited partnership interest must
approve the Merger prior to consummation of the transaction. If the limited
partners at the special meeting approve the Merger, APF will own the Properties
and other assets of the Partnership. The general partners intend to recommend
that the limited partners of the Partnership approve the Merger. In connection
with their recommendation, the general partners will solicit the consent of the
limited partners at the special meeting. If the limited partners reject the
Merger, the Partnership will bear the portion of the transaction costs based
upon the percentage of "For" votes and the general partners will bear the
portion of such transaction costs based upon the percentage of "Against" votes
and abstentions.
On May 11, 1999, four limited partners in several of the CNL Income
Funds served a lawsuit against the general partners and APF in connection with
the proposed Merger. On July 8, 1999, the plaintiffs amended the complaint to
add three additional limited partners as plaintiffs. Additionally, on June 22,
1999, a limited partner in certain of the CNL Income Funds served a lawsuit
against the general partners, APF and CNL Fund Advisors, Inc. and certain of its
affiliates, in connection with the proposed Merger. The general partners and APF
believe that the lawsuits are without merit and intend to defend vigorously
against the claims. See Part II - Item 1. Legal Proceedings.
Year 2000 Readiness Disclosure
The Year 2000 problem concerns the inability of information and
non-information technology systems to properly recognize and process date
sensitive information beyond January 1, 2000. As of June 30, 1999 the
Partnership did not have any information or non-information technology systems.
The general partners and certain of the affiliates of the general partners
provide all services requiring the use of information and non-information
technology systems pursuant to a management agreement with the Partnership. The
information technology system of the affiliates of the general partners consists
of a network of personal computers and servers built using hardware and software
from mainstream suppliers. The non-information technology systems of the
affiliates of the general partners are primarily facility related and include
building security systems, elevators, fire suppressions, HVAC, electrical
systems and other utilities. The affiliates of the general partners have no
internally generated programmed software coding to correct because substantially
all of the software utilized by the general partners and affiliates is purchased
or licensed from external providers. The maintenance of non-information
technology systems at the Partnership's Properties is the responsibility of the
tenants of the Properties in accordance with the terms of the Partnership's
leases.
In early 1998, the general partners and affiliates formed a Year 2000
team, for the purpose of identifying, understanding and addressing the various
issues associated with the Year 2000 problem. The Y2K Team consists of the
general partners and members from certain of the affiliates of the general
partners, including representatives from senior management, information systems,
telecommunications, legal, office management, accounting and property
management. The Y2K Team's initial step in assessing the Partnership's Year 2000
readiness consists of identifying any systems that are date-sensitive and,
accordingly, could have potential Year 2000 problems. The Y2K Team is in the
process of conducting inspections, interviews and tests to identify which of the
Partnership's systems could have a potential Year 2000 problem.
The information system of the affiliates of the general partners is
comprised of hardware and software applications from mainstream suppliers.
Accordingly, the Y2K Team is in the process of contacting the respective vendors
and manufacturers to verify the Year 2000 compliance of their products. In
addition, the Y2K Team has requested and is evaluating documentation from other
companies with which the Partnership has a material third party relationship,
including the Partnership's tenants, vendors, financial institutions and the
Partnership's 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. The Y2K Team has also
requested and is evaluating documentation from the non-information technology
systems providers of the affiliates of the general partners. Although the
general partners continue to receive positive responses from the companies with
which the Partnership has third party relationships regarding their Year 2000
compliance, the general partners cannot be assured that the tenants, financial
institutions, transfer agent, other vendors and system providers have adequately
considered the impact of the Year 2000. The general partners are not able to
measure the effect on the operations of the Partnership of any third party's
failure to adequately address the impact of the Year 2000.
The general partners and their affiliates have identified and have
implemented upgrades for certain hardware equipment. In addition, the general
partners and their affiliates have identified certain software applications
which will require upgrades to become Year 2000 compliant. The general partners
expect that all of these upgrades, as well as any other necessary remedial
measures on the information technology systems used in the business activities
and operations of the Partnership, to be completed by September 30, 1999,
although, the general partners cannot be assured that the upgrade solutions
provided by the vendors have addressed all possible Year 2000 issues. The
general partners do not expect the aggregate cost of the Year 2000 remedial
measures to be material to the results of operations of the Partnership.
<PAGE>
The general partners and their affiliates have received certification
from the Partnership's transfer agent of its Year 2000 compliance. Due to the
material relationship of the Partnership with its transfer agent, the Y2K Team
is evaluating the Year 2000 compliance of the systems of the transfer agent and
expects to have the evaluation completed by September 30, 1999. Despite the
positive response from the transfer agent and the evaluation of the transfer
agent's system by the Y2K Team, the general partners cannot be assured that the
transfer agent has addressed all possible Year 2000 issues. In the event that
the systems of the transfer agent are not Year 2000 compliant, the general
partners and their affiliates will have to allocate resources to internally
perform the functions of the transfer agent. The general partners do not
anticipate that the additional cost of these resources would have a material
impact on the Partnership.
Based upon the progress the general partners and their affiliates have
made in addressing the Year 2000 issues and their plan and timeline to complete
the compliance program, the general partners do not foresee significant risks
associated with Year 2000 compliance at this time. The general partners and
their affiliates plan to address their significant Year 2000 issues prior to the
Partnership being affected by them; therefore, we have not developed a
comprehensive contingency plan. However, if the general partners and their
affiliates identify significant risks related to their Year 2000 compliance, or
if their progress deviates from the anticipated timeline, the general partners
and their affiliates will develop contingency plans as deemed necessary at that
time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On May 11, 1999, four limited partners in several CNL Income Funds
served a derivative and purported class action lawsuit filed April
22, 1999 against the general partners and APF in the Circuit Court
of the Ninth Judicial Circuit of Orange County, Florida, alleging
that the general partners breached their fiduciary duties and
violated provisions of certain of the CNL Income Fund partnership
agreements in connection with the proposed Merger. The plaintiffs
are seeking unspecified damages and equitable relief. On July 8,
1999, the plaintiffs filed an amended complaint which, in addition
to naming three additional plaintiffs, includes allegations of
aiding and abetting and conspiring to breach fiduciary duties,
negligence and breach of duty of good faith against certain of the
defendants and seeks additional equitable relief. As amended, the
caption of the case is Jon Hale, Mary J. Hewitt, Charles A.
Hewitt, Gretchen M. Hewitt Bernard J. Schulte, Edward M. and
Margaret Berol Trust, and Vicky Berol v. James M. Seneff, Jr.,
Robert A. Bourne, CNL Realty Corporation, and CNL American
Properties Fund, Inc., Case No. CIO-99-0003561.
On June 22, 1999, a limited partner of several CNL Income Funds
served a purported class action lawsuit filed April 29, 1999
against the general partners and APF, Ira Gaines, individually and
on behalf of a class of persons similarly situated, v. CNL
American Properties Fund, Inc., James M. Seneff, Jr., Robert A.
Bourne, CNL Realty Corporation, CNL Fund Advisors, Inc., CNL
Financial Corporation a/k/a CNL Financial Corp., CNL Financial
Services, Inc. and CNL Group, Inc., Case NO. CIO-99-3796, in the
Circuit Court of the Ninth Judicial Circuit of Orange County,
Florida, alleging that the general partners breached their
fiduciary duties and that APF aided and abetted their breach of
fiduciary duties in connection with the proposed Merger. The
plaintiff is seeking unspecified damages and equitable relief.
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.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
2.1 Agreement and Plan of Merger by and between the
Registrant and CNL American Properties Fund, Inc.
("APF") dated March 11, 1999 and as amended June
4, 1999 (Filed as Appendix B to the Prospectus
Supplement for the Registrant, constituting a
part of Amendment No. 1 to the Registration
Statement of APF on Form S-4, File No. 74329.)
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 March
27, 1998, 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 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 March
27, 1998, 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 March 27,
1998, 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.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1999.
<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 9th day of August, 1999.
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 June 30, 1999, and its statement of income for
the six months then ended and is qualified in its entirety by reference to the
Form 10-Q of CNL Income Fund, Ltd. for the six months ended June 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 203,524
<SECURITIES> 0
<RECEIVABLES> 41,064
<ALLOWANCES> 30,168
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 9,851,815
<DEPRECIATION> 2,379,237
<TOTAL-ASSETS> 8,581,255
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,110,355
<TOTAL-LIABILITY-AND-EQUITY> 8,581,255
<SALES> 0
<TOTAL-REVENUES> 487,362
<CGS> 0
<TOTAL-COSTS> 217,470
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 317,300
<INCOME-TAX> 0
<INCOME-CONTINUING> 317,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 317,300
<EPS-BASIC> 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>
