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 March 31, 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
0-19144
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CNL Income Fund VI, Ltd.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
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Florida 59-2922954
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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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</TABLE>
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
Page
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
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
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<CAPTION>
March 31, December 31,
1999 1998
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ASSETS
Land and buildings on operating leases, less
accumulated depreciation of $3,699,926 and
$3,586,086 $ 18,446,004 $ 18,559,844
Net investment in direct financing leases 3,913,621 3,929,152
Investment in joint ventures 5,064,213 5,021,121
Cash and cash equivalents 1,158,507 1,170,686
Receivables, less allowance for doubtful accounts
of $322,603 and $323,813 63,010 150,912
Prepaid expenses 8,422 949
Lease costs, less accumulated amortization of
$7,594 and $7,181 10,106 10,519
Accrued rental income, less allowance for doubtful
accounts of $41,869 and $38,944 809,258 785,982
Other assets 26,731 26,731
------------------- -------------------
$ 29,499,872 $ 29,655,896
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 38,776 $ 8,173
Accrued and escrowed real estate taxes payable 5,041 2,500
Due to related party 9,648 19,403
Distributions payable 787,500 857,500
Rents paid in advance and deposits 47,442 28,241
------------------- -------------------
Total liabilities 888,407 915,817
Commitment (Note 3)
Minority interest 147,449 144,949
Partners' capital 28,464,016 28,595,130
------------------- -------------------
$ 29,499,872 $ 29,655,896
=================== ===================
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
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<CAPTION>
Quarter Ended
March 31,
1999 1998
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Revenues:
Rental income from operating leases $ 600,737 $ 632,051
Earned income from direct financing leases 112,080 124,209
Contingent rental income 9,175 32,390
Interest and other income 15,456 36,676
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737,448 825,326
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Expenses:
General operating and administrative 40,783 45,465
Professional services 4,710 5,870
State and other taxes 9,466 9,905
Depreciation and amortization 114,253 115,910
Transaction costs 33,125 --
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202,337 177,150
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Income Before Minority Interest in Income of
Consolidated Joint Venture, Equity in
Earnings of Unconsolidated Joint Ventures and
Gain on Sale of Land and Buildings 535,111 648,176
Minority Interest in Income of Consolidated
Joint Venture (2,500 ) (12,881 )
Equity in Earnings of Unconsolidated Joint Ventures 123,775 56,496
Gain on Sale of Land and Buildings -- 345,122
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Net Income $ 656,386 $1,036,913
============== ===============
Allocation of Net Income:
General partners $ 6,564 $ 8,488
Limited partners 649,822 1,028,425
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$ 656,386 $1,036,913
============== ===============
Net Income Per Limited Partner Unit $ 9.28 $ 14.69
============== ===============
Weighted Average Number of Limited Partner
Units Outstanding 70,000 70,000
============== ===============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
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<CAPTION>
Quarter Ended Year Ended
March 31, December 31,
1999 1998
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General partners:
Beginning balance $ 257,690 $ 229,363
Net income 6,564 28,327
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264,254 257,690
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Limited partners:
Beginning balance 28,337,440 28,564,886
Net income 649,822 2,992,554
Distributions ($11.25 and $46.00 per
limited partner unit, respectively) (787,500 ) (3,220,000 )
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28,199,762 28,337,440
------------------- ------------------
Total partners' capital $ 28,464,016 $ 28,595,130
=================== ==================
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
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<CAPTION>
Quarter Ended
March 31,
1999 1998
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Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 960,251 $ 861,169
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Cash Flows from Investing Activities:
Proceeds from sale of land and buildings -- 1,932,253
Additions to land and buildings on operating
leases -- (125,000 )
Investment in joint ventures (114,930 ) (1,253,755 )
Decrease (Increase) in restricted cash -- (536,967 )
-------------- ---------------
Net cash provided by (used in)
investing activities (114,930 ) 16,531
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Cash Flows from Financing Activities:
Distributions to limited partners (857,500 ) (787,500 )
Distributions to holder of minority interest -- (9,801 )
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Net cash used in financing activities (857,500 ) (797,301 )
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Net Increase (Decrease) in Cash and Cash Equivalents (12,179 ) 80,399
Cash and Cash Equivalents at Beginning of Quarter 1,170,686 1,614,759
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Cash and Cash Equivalents at End of Quarter $1,158,507 $1,695,158
============== ===============
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
quarter $ 787,500 $ 787,500
============== ===============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 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 March 31, 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 VI, Ltd. (the "Partnership") for the year ended December
31, 1998.
The Partnership accounts for its approximate 66 percent interest in the
accounts of Caro Joint Venture using the consolidation method. Minority
interest represents the minority joint venture partner's proportionate
share of the equity in the Partnership's consolidated joint venture.
All significant intercompany accounts and transactions have been
eliminated.
2. Merger Transaction:
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 3,730,388 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 $10.00 per APF Share, the
price paid by APF investors 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 $36,721,726 as of December 31, 1998. Legg Mason Wood
Walker, Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a
financial point of view. 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
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1999 and 1998
2. Merger Transaction - Continued:
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 interests 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 5, 1999, four limited partners in several of the CNL Income
Funds filed a lawsuit against the general partners and APF in
connection with the proposed Merger (see Part II - Item 1. Legal
Proceedings). The general partners and APF believe that the lawsuit is
without merit and intend to defend vigorously against the claims.
Because the lawsuit was so recently filed, it is premature to further
comment on the lawsuit at this time.
3. Commitments:
During the quarter ended March 31, 1999, one of the Partnership's
tenants decided to exercise the option under its four lease agreements
to purchase four of the Partnership's Burger King properties. The
general partners believe that the anticipated sales price for each
property exceeds the Partnership's net carrying value attributable to
each of the respective properties. As of May 13, 1999, the sales had
not occurred.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CNL Income Fund VI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 17, 1988 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 selected national and
regional fast-food and family-style restaurant chains (collectively, the
"Properties"). The leases are triple-net leases, with the lessees generally
responsible for all repairs and maintenance, property taxes, insurance, and
utilities. As of March 31, 1999, the Partnership owned 42 Properties, which
included interests in six Properties owned by joint ventures in which the
Partnership is a co-venturer and five Properties owned with affiliates as
tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the quarters ended
March 31, 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). Cash from operations was $960,251 and
$861,169 for the quarters ended March 31, 1999 and 1998, respectively. The
increase in cash from operations for the quarter ended March 31, 1999, is
primarily a result of changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
quarter ended March 31, 1999.
In April 1998, the Partnership entered into a joint venture
arrangement, Melbourne Joint Venture, with CNL Income Fund XIV, Ltd., an
affiliate of the general partners, to construct and hold one restaurant
Property. During the quarter ended March 31, 1999, the Partnership made
additional capital contributions of approximately $114,900 to this joint venture
to pay construction costs of the joint venture Property accrued at December 31,
1998. As of March 31, 1999 the Partnership owned a 50 percent interest in the
profits and losses of the joint venture.
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 March 31, 1999, the Partnership had $1,158,507
invested in such short-term investments as compared to $1,170,686 at December
31, 1998. The funds remaining at March 31, 1999, after payment of distributions
and other liabilities, will be used to meet the Partnership's working capital
and other needs.
<PAGE>
Liquidity and Capital Resources - Continued
Total liabilities of the Partnership, including distributions payable,
decreased to $888,407 at March 31, 1999, from $915,817 at December 31, 1998,
primarily as the result of the Partnership accruing a special distribution of
accumulated, excess operating reserves to the limited partners of $70,000 at
December 31, 1998, which was paid in January 1999. The decrease in liabilities
at March 31, 1999 is partially offset due to the Partnership accruing
transaction costs relating to the proposed Merger with CNL American Properties
Fund, Inc. ("APF"), as described below. The general partners believe the
Partnership has sufficient cash on hand to meet the Partnership's current
working capital needs.
During the quarter ended March 31, 1999, one of the Partnership's
tenants decided to exercise the option under it four lease agreements to
purchase four of the Partnership's Burger King Properties. The general partners
believe that the anticipated sales price for each Property exceeds the
Partnership's net carrying value attributable to each of the respective
Properties. As of May 13, 1999, the sales had not occurred.
Based on cash from operations, the Partnership declared distributions
to the limited partners of $787,500 for each of the quarters ended March 31,
1999 and 1998. This represents distributions for each applicable quarter of
$11.25 per unit. No distributions were made to the general partners for the
quarters ended March 31, 1999 and 1998. No amounts distributed to the limited
partners for the quarters ended March 31, 1999 and 1998, 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 to the limited partners on a quarterly basis.
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.
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").
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. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. APF has agreed to issue 3,730,388 APF Shares which, for the purposes
of valuing the merger consideration, have been valued by APF at $10.00 per APF
Share, the price paid by APF investors 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
<PAGE>
Liquidity and Capital Resources - Continued
on a going concern basis (meaning the Partnership continues unchanged) at
$36,721,726 as of December 31, 1998. Legg Mason Wood Walker, Incorporated has
rendered a fairness opinion that the APF Share consideration, payable by APF, is
fair to the Partnership from a financial point of view. 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
interests 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 5, 1999, four limited partners in several of the CNL Income
Funds filed a lawsuit against the general partners and APF in connection with
the proposed Merger (see Part II - Item 1. Legal Proceedings). The general
partners and APF believe that the lawsuit is without merit and intend to defend
vigorously against the claims. Because the lawsuit was so recently filed, it is
premature to further comment on the lawsuit at this time.
Results of Operations
During the quarter ended March 31, 1998, the Partnership and its
consolidated joint venture, Caro Joint Venture, owned and leased 35 wholly owned
Properties (which included three Properties, which were sold during 1998) to
operators of fast-food and family-style restaurant chains. During the quarter
ended March 31, 1999, the Partnership and Caro Joint Venture, owned and leased
32 wholly owned Properties. In connection therewith, the Partnership and Caro
Joint Venture earned $712,817 and $756,260 during the quarters ended March 31,
1999 and 1998, respectively, in rental income from operating leases and earned
income from direct financing leases from these Properties. Rental and earned
income decreased during the quarter ended March 31, 1999, as compared to the
quarter ended March 31, 1998, primarily as a result of the sales during 1998 of
the Properties in Deland and Melbourne, Florida and Bellevue, Nebraska. Rental
and earned income are expected to remain at reduced amounts while equity in
earnings of joint ventures is expected to increase due to the fact that the
Partnership reinvested these net sales proceeds in joint ventures or in
Properties with affiliates of the general partners, as tenants-in-common.
<PAGE>
Results of Operations - Continued
The decrease in rental and earned income during the quarter ended March
31, 1999 is also attributable to the fact that Caro Joint Venture established an
allowance for doubtful accounts for past due rental amounts during the quarter
ended March 31, 1999. Caro Joint Venture will continue to pursue collection of
these past due rental amounts and any amounts collected will be recorded as
income. In addition, rental and earned income were higher during the quarter
ended March 31, 1998, due to the fact that Caro Joint Venture collected and
recognized as income past due rental amounts for which it had previously
established an allowance for doubtful accounts.
For the quarters ended March 31, 1999 and 1998, the Partnership also
earned $9,175 and $32,390, respectively, in contingent rental income. The
decrease in contingent rental income during the quarter ended March 31, 1999, is
primarily attributable to a decrease in gross sales of certain restaurant
properties, the leases of which require the payment of contingent rental income.
For the quarter ended March 31, 1998, the Partnership owned and leased
three Properties indirectly through joint venture arrangements and four
Properties as tenants-in-common with affiliates of the general partners. For the
quarter ended March 31, 1999, the Partnership owned and leased five Properties
indirectly through joint venture arrangements and five Properties as
tenants-in-common with affiliates of the general partners. In connection
therewith, during the quarters ended March 31, 1999 and 1998, the Partnership
earned $123,775 and $56,496, respectively, attributable to net income earned by
these joint ventures. The increase in net income earned by joint ventures during
the quarter ended March 31, 1999, as compared to the quarter ended March 31,
1998, is primarily due to the fact that in 1998, the Partnership reinvested the
net sales proceeds it received from the 1998 sales of three Properties in
Melbourne Joint Venture and Warren Joint Venture and in a Property in Fort
Myers, Florida, with an affiliate of the general partners as tenants-in-common.
During the quarters ended March 31, 1999 and 1998, the Partnership
earned $15,456 and $36,676, respectively, in interest and other income. Interest
and other income was higher during the quarter ended March 31, 1998, partially
due to the fact that during the quarter ended March 31, 1998, the Partnership
earned interest on the net sales proceeds relating to the sale of the Properties
in Deland and Melbourne, Florida, and Liverpool, New York, pending the
reinvestment of the net sales proceeds in additional Properties. The Partnership
reinvested the net sales proceeds subsequent to March 31, 1998. Interest and
other income was also higher during the quarter ended March 31, 1998, due to the
fact that Caro Joint Venture recognized approximately $13,300 in other income
during the quarter ended March 31, 1998, due to the fact that the tenant of the
Property in Caro, Michigan, paid past due real estate taxes relating to the
Property and the joint venture reversed such amounts during 1998 that it had
previously accrued as payable during 1997.
Operating expenses, including depreciation and amortization expense,
were $202,337 and $177,150 for the quarters ended March 31, 1999 and 1998,
respectively. The increase in operating expenses for the quarter ended March 31,
1999, is primarily due to the fact that the
<PAGE>
Results of Operations - Continued
Partnership incurred $33,125 in transaction costs during the quarter ended March
31, 1999 related to the general partners retaining financial and legal advisors
to assist them in evaluating and negotiating the proposed Merger with APF, as
described in "Liquidity and Capital Resources." 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.
As a result of the sale of the Property in Deland, Florida, the
Partnership recognized a gain of $345,122 during the quarter ended March 31,
1998, for financial reporting purposes. No Properties were sold during the
quarter ended March 31, 1999.
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. The Partnership does not have any
information or non-information technology systems. The general partners and
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
committee (the "Y2K 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 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.
<PAGE>
Year 2000 Readiness Disclosure - Continued
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 also 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 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.
The general partners and 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 would 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.
<PAGE>
Year 2000 Readiness Disclosure - Continued
Based upon the progress the general partners and 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, they 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 5, 1999, four limited partners in several of the CNL Income
Funds filed a lawsuit, Jon Hale, Mary J. Hewitt, Charles A.
Hewitt, and Gretchen M. Hewitt v. James M. Seneff, Jr., Robert A.
Bourne, CNL Realty Corporation, and CNL American Properties Fund,
Inc., Case No. CIO-99-0003561, in the Circuit Court of the Ninth
Judicial Circuit of Orange County, Florida, alleging that the
Messrs. Seneff and Bourne and CNL Realty Corporation, as general
partners of the CNL Income Funds, breached their fiduciary duties
and violated the provisions of certain of the CNL Income Fund
partnership agreements in connection with the proposed acquisition
of the CNL Income Funds by APF. The plaintiffs are seeking
unspecified damages and equitable relief. The general partners and
APF believe that the lawsuit is without merit and intend to defend
vigorously against such claims. Because the lawsuit was so
recently filed, it is premature to further comment on the lawsuit
at this time.
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
2.1 Agreement and Plan of Merger by and between the
Registrant and CNL American Properties Fund,
Inc. ("APF") dated March 11, 1999 (filed as
Appendix B to the Prospectus Supplement for the
Registrant, constituting a part of the
Registration Statement of APF on Form S-4, File
No. 74329)
3.1 Certificate of Limited Partnership of CNL Income
Fund VI, Ltd. (Included as Exhibit 3.3 to
Registration Statement No. 33-23892 on Form S-11
and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income
Fund VI, Ltd. (Included as Exhibit 4.2 to
Registration Statement No. 33-23892 on Form S-11
and incorporated herein by reference.)
<PAGE>
4.2 Agreement and Certificate of Limited Partnership
of CNL Income Fund VI, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and
incorporated herein by reference.)
10.1 Management Agreement (Included as Exhibit 10.1
to Form 10-K filed with the Securities and
Exchange Commission on March 31, 1994, and
incorporated herein by reference.)
10.2 Assignment of 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 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 April 1, 1996, and incorporated
herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) Reports on Form 8-K
Current Report on Form 8-K dated March 11, 1999 and filed
March 12, 1999, describing the proposed merger of the
Partnership with and into a subsidiary of CNL American
Properties Fund, Inc.
<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 14th day of May, 1999.
CNL INCOME FUND VI, 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 VI, Ltd. at March 31, 1999, and its statement of income
for the three months then ended and is qualified in its entirety by reference to
the Form 10Q of CNL Income Fund VI, Ltd. for the three months ended March 31,
1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,158,507
<SECURITIES> 0
<RECEIVABLES> 385,613
<ALLOWANCES> 322,603
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 22,145,930
<DEPRECIATION> 3,699,926
<TOTAL-ASSETS> 29,499,872
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,464,016
<TOTAL-LIABILITY-AND-EQUITY> 29,499,872
<SALES> 0
<TOTAL-REVENUES> 737,448
<CGS> 0
<TOTAL-COSTS> 202,337
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 656,386
<INCOME-TAX> 0
<INCOME-CONTINUING> 656,386
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 656,386
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund VI, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>