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, 2003
--------------------------------------
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.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2666264
- ------------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
- ------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
--------------------------
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 ___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): Yes____ No X
CONTENTS
Page
Part I.
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 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
Item 4. Controls and Procedures 10
Part II.
Other Information 11-12
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
2003 2002
------------------ ------------------
ASSETS
Real estate properties with operating leases, net $ 3,557,459 $ 3,637,099
Real estate held for sale 759,285 1,061,365
Investment in joint ventures 428,369 435,495
Cash and cash equivalents 352,230 419,385
Receivables -- 19,656
Due from related parties 11,096 --
Accrued rental income 60,660 54,479
Other assets 5,639 4,172
------------------ ------------------
$ 5,174,738 $ 5,631,651
================== ==================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 5,332 $ 831
Real estate taxes payable 11,324 13,433
Distributions payable 157,040 161,343
Due to related parties 173,589 166,556
Rents paid in advance and deposits 33,414 43,025
------------------ ------------------
Total liabilities 380,699 385,188
Partners' capital 4,794,039 5,246,463
------------------ ------------------
$ 5,174,738 $ 5,631,651
================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------------- ------------- -------------- -------------
Revenues:
Rental income from operating leases $ 116,164 $ 117,119 $ 347,330 $ 358,033
Contingent rental income 13,778 11,004 16,264 28,947
Interest and other income -- 786 226 7,745
------------- ------------- -------------- ---------------
129,942 128,909 363,820 394,725
------------- ------------- -------------- ---------------
Expenses:
General operating and administrative 26,340 30,935 95,908 111,037
Property related 2,055 -- 3,722 3,626
State and other taxes -- -- 7,599 3,652
Depreciation 26,547 26,545 79,641 81,111
------------- ------------- -------------- ---------------
54,942 57,480 186,870 199,426
------------- ------------- -------------- ---------------
Income Before Loss on Dissolution of Joint Venture, Gain on
Sale of Real Estate Properties and Equity in Earnings
of Joint Ventures 75,000 71,429 176,950 195,299
Loss on Dissolution of Joint Venture -- -- -- (30,579 )
Gain on Sale of Real Estate Properties -- -- -- 348,026
Equity in Earnings of Joint Ventures 12,117 12,181 36,299 361,045
------------- ------------- -------------- ---------------
Income from Continuing Operations 87,117 83,610 213,249 873,791
------------- ------------- -------------- ---------------
Discontinued Operations:
Income (Loss) from discontinued operations 19,181 (58,031 ) 56,839 (15,536 )
Loss on disposal of discontinued operations -- -- (1,392 ) --
------------- ------------- -------------- ---------------
19,181 (58,031 ) 55,447 (15,536 )
------------- ------------- -------------- ---------------
Net Income $ 106,298 $ 25,579 $ 268,696 $ 858,255
============= ============= ============== ===============
Income (Loss) Per Limited Partner Unit
Continuing Operations $ 2.90 $ 2.79 $ 7.11 $ 29.13
Discontinued Operations 0.64 (1.94 ) 1.85 (0.52 )
------------- ------------- -------------- ---------------
$ 3.54 $ 0.85 $ 8.96 $ 28.61
============= ============= ============== ===============
Weighted Average Number of Limited Partner
Units Outstanding 30,000 30,000 30,000 30,000
============= ============= ============== ===============
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2003 2002
--------------------- ------------------
General partners:
Beginning balance $ 340,768 $ 340,768
Net income -- --
--------------------- ------------------
340,768 340,768
--------------------- ------------------
Limited partners:
Beginning balance 4,905,695 6,141,384
Net income 268,696 975,172
Distributions ($24.04 and $73.70 per
limited partner unit, respectively) (721,120 ) (2,210,861 )
--------------------- ------------------
4,453,271 4,905,695
--------------------- ------------------
Total partners' capital $ 4,794,039 $ 5,246,463
===================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2003 2002
--------------- ---------------
Net Cash Provided by Operating Activities $ 360,381 $ 476,671
--------------- ---------------
Cash Flows from Investing Activities:
Proceeds from sale of assets 297,887 1,064,259
Liquidating distribution from joint venture -- 613,554
--------------- ---------------
Net cash provided by investing activities 297,887 1,677,813
--------------- ---------------
Cash Flows from Financing Activities:
Distributions to limited partners (725,423 ) (2,095,344 )
--------------- ---------------
Net cash used in financing activities (725,423 ) (2,095,344 )
--------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents (67,155 ) 59,140
Cash and Cash Equivalents at Beginning of Period 419,385 414,999
--------------- ---------------
Cash and Cash Equivalents at End of Period $ 352,230 $ 474,139
=============== ===============
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Deferred real estate disposition fee incurred and
unpaid at end of period $ 9,000 $ 32,215
=============== ===============
Distributions declared and unpaid at end of period $ 157,040 $ 161,342
=============== ===============
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2003 and 2002
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 the general partners, necessary for a fair statement of the
results for the interim periods presented. Operating results for the
quarter and nine months ended September 30, 2003 may not be indicative of
the results that may be expected for the year ending December 31, 2003.
Amounts as of December 31, 2002, 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, 2002.
In January 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest
Entities" to expand upon and strengthen existing accounting guidance that
addresses when a company should include the assets, liabilities and
activities of another entity in its financial statements. To improve
financial reporting by companies involved with variable interest entities
(more commonly referred to as special-purpose entities or off-balance sheet
structures), FIN 46 requires that a variable interest entity be
consolidated by a company if that company is subject to a majority risk of
loss from the variable interest entity's activities or entitled to receive
a majority of the entity's residual returns or both. Prior to FIN 46, a
company generally included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003, and to older entities, in the
first fiscal year or interim period ending after December 15, 2003. The
general partners believe adoption of this standard may result in either
consolidation or additional disclosure requirements of the Partnership's
unconsolidated joint ventures, which are currently accounted for under the
equity method. However, such consolidation is not expected to significantly
impact the Partnership's results of operations.
In May 2003, the FASB issued FASB Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity" ("FAS 150"). FAS 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics
of both liabilities and equity. FAS 150 will require issuers to classify
certain financial instruments as liabilities (or assets in some
circumstances) that previously were classified as equity. One requirement
of FAS 150 is that minority interests for majority owned finite lived
entities be classified as a liability and recorded at fair market value.
FAS 150 initially applied immediately to all financial instruments entered
into or modified after May 31, 2003, and otherwise was effective at the
beginning of the first interim period beginning after June 15, 2003.
Effective October 29, 2003, the FASB deferred implementation of FAS 150 as
it applies to minority interests of finite lived Partnerships. The deferral
of these provisions is expected to remain in effect while these interests
are addressed in either Phase II of the FASB's Liabilities and Equity
project or Phase II of the FASB's Business Combinations project; therefore,
no specific timing for the implementation of these provisions has been
stated. The implementation of the currently effective aspects of FAS 150
did not have an impact on the Partnership's results of operations.
2. Reclassification
Certain items in the prior year's financial statements have been
reclassified to conform to 2003 presentation. These reclassifications had
no effect on total partners' capital or net income.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2003 and 2002
3. Discontinued Operations
During 2002, the Partnership identified for sale one property that was
classified as Discontinued Operations in the accompanying financial
statements. In January 2003, the Partnership sold the property in Angleton,
Texas resulting in a loss on disposal of discontinued operations of
approximately $1,400 during the nine months ended September 30, 2003. The
Partnership had recorded a provision for write-down of assets in a previous
year related to this property. As of September 30, 2003, the Partnership
was negotiating an agreement to sell its property in Camp Hill,
Pennsylvania. As a result, the property was reclassified from real estate
properties with operating leases to real estate held for sale. The
reclassified asset was recorded at the lower of its carrying amount or fair
value, less cost to sell. The financial results for these properties are
reflected as Discontinued Operations in the accompanying financial
statements.
The operating results of the discontinued operations for the above
properties are as follows:
Quarter Ended Nine Months Ended September
September 30, 30,
2003 2002 2003 2002
------------ ------------- ------------ -----------------
Rental revenues $ 22,131 $ 29,785 $ 68,639 $ 89,354
Expenses (2,950 ) (8,571 ) (11,800 ) (25,645 )
Provision for write-down of assets -- (79,245 ) -- (79,245 )
------------ ------------- ------------ -----------------
Income (loss) from discontinued
operations $ 19,181 $ (58,031 ) $ 56,839 $ (15,536 )
============ ============= ============ =================
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.
However, if the net sales proceeds are reinvested in a replacement
property, no such real estate disposition fees will be incurred until such
replacement property is sold and the net sales proceeds are distributed.
The payment of the real estate disposition fee is subordinated to receipt
by the limited partners of their aggregate 10% preferred return, plus their
adjusted capital contributions. During the nine months ended September 30,
2003 and 2002, the Partnership incurred deferred, subordinated real estate
disposition fees of $9,000 and $32,215, respectively, as a result of the
sale of one property during each period.
5. Subsequent Event
In October 2003, Chevy's, Inc., the tenant of the property in Vancouver,
Washington which the Partnership owns as tenants-in-common with affiliates
of the general partners, filed for Chapter 11 bankruptcy protection. The
Partnership owns a 12.17% interest in this property. As of November 7,
2003, Chevy's, Inc. had neither rejected nor affirmed the lease related to
this property.
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 and tenancy in common 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, 2002, the Partnership owned ten Properties
directly and one Property indirectly through a joint venture arrangement and one
Property indirectly through a tenancy in common arrangement. As of September 30,
2003, the Partnership owned nine Properties directly and one Property indirectly
through a joint venture arrangement and one Property indirectly through a
tenancy in common arrangement.
Capital Resources
Cash from operating activities was $360,381 and $476,671 for the nine
months ended September 30, 2003 and 2002, respectively. The decrease in cash
from operating activities during the nine months ended September 30, 2003, as
compared to the same period of 2002, was the result of changes in the
Partnership's working capital and changes in income and expenses.
Other sources and uses of cash included the following during the nine
months ended September 30, 2003.
During the nine months ended September 30, 2003, the Partnership sold
its Property in Angleton, Texas to a third party and received net sales proceeds
of approximately $297,900 resulting in a loss of approximately $1,400. In
connection with the sale, the Partnership incurred a deferred, subordinated
disposition fee of $9,000. Payment of the real estate disposition fee is
subordinated to the receipt by the limited partners of their aggregate,
cumulative 10% Preferred Return, plus their adjusted capital contributions. The
Partnership distributed the net sales proceeds as a special distribution to the
limited partners, as described below.
At September 30, 2003, the Partnership had $352,230 in cash and cash
equivalents, as compared to $419,385 at December 31, 2002. At September 30,
2003, these funds were held in demand deposit accounts at commercial banks. The
funds remaining at September 30, 2003, will be used to pay distributions and
other liabilities of the Partnership.
In October 2003, Chevy's, Inc., the tenant of the Property in Vancouver,
Washington which the Partnership owns as tenants-in-common with affiliates of
the general partners, filed for Chapter 11 bankruptcy protection. The
Partnership owns a 12.17% interest in this Property. As of November 7, 2003,
Chevy's, Inc. had neither rejected nor affirmed the lease related to this
Property. The lost revenues that would result if the lease were rejected, will
have an adverse effect on the equity in earnings of joint ventures of the
Partnership if the tenancy in common is not able to re-lease or sell the
Property in a timely manner.
Short-Term Liquidity
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 Partnership's short-term liquidity requirements consist primarily of
the operating expenses of the Partnership.
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 the
general partners determine that funds are available for distribution. Based on
current and anticipated future cash from operations and net proceeds from the
sales of Properties, the Partnership declared distributions to limited partners
of $721,120 and $2,049,519 for the nine months ended September 30, 2003 and
2002, respectively, ($157,040 and $161,342 for the quarters ended September 30,
2003 and 2002, respectively). This represents distributions of $24.04 and $68.31
per unit for the nine months ended September 30, 2003 and 2002, respectively,
($5.23 and $5.38 per unit for each applicable quarter). The distribution for the
nine months ended September 30, 2003 included $250,000 of net sales proceeds
from the 2003 sale of the Property in Angleton, Texas and the distribution for
the nine months ended September 30, 2002 included $1,550,000 of net sales
proceeds from the 2002 sale of the Properties in Mesquite, Texas and Orlando,
Florida. The special distribution in 2003 was effectively a return of a portion
of the limited partners' investment, although in accordance with the Partnership
agreement, it was applied to the limited partners' unpaid cumulative 10%
Preferred Return. The special distribution during 2002 was effectively a return
of a portion of the limited partners investment, although, in accordance with
the Partnership agreement, $468,077 was applied towards the 10% Preferred
Return, on a cumulative basis, and the balance of $1,081,923 was treated as a
return of capital for purposes of calculating the 10% Preferred Return. As a
result of the 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) 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 sales of
Properties in previous years and the current year, the Partnership's total
revenues have declined and are expected to remain reduced in subsequent periods,
while the majority of the Partnership's operating expenses remained and are
expected to remain fixed. Due to the above mentioned sales of Properties and to
current and anticipated future cash from operations, distributions of net cash
flow were adjusted commencing during the quarters ended March 31, 2003 and 2002.
No distributions were made to the general partners for the nine months ended
September 30, 2003 and 2002. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
Total liabilities, including distributions payable, were $380,699 at
September 30, 2003, as compared to $385,188 at December 31, 2002. Liabilities at
September 30, 2003, to the extent they exceed cash and cash equivalents, will be
paid from anticipated future cash from operations, or in the event the general
partners elect to make additional capital contributions or loans, from the
future general partners' contributions or loans.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $347,330 during the nine months ended
September 30, 2003, as compared to $358,033 during the same period of 2002,
$116,164 and $117,119 of which were earned during the third quarters of 2003 and
2002, respectively. The decrease in rental revenues during the nine months ended
September 30, 2003 was due to the sale of the Property in Mesquite, Texas in
February 2002. Rental revenues are expected to remain at reduced amounts because
the Partnership used the net sales proceeds to pay liabilities of the
Partnership and to make distributions to the limited partners.
The Partnership also earned $16,264 in contingent rental income for the
nine months ended September 30, 2003, as compared to $28,947 for the same period
of 2002, $13,778 and $11,004 of which were earned during the quarters ended
September 30, 2003 and 2002, respectively. The decrease in contingent rental
income during the nine months ended September 30, 2003 was attributable to the
sale of the Property in Mesquite, Texas, the lease of which required the payment
of contingent rent. The decrease in contingent rental income was partially
offset by an increase in gross sales of certain restaurant Properties, the
leases of which require the payment of contingent rental income.
The Partnership also earned $36,299 attributable to net income earned by
joint ventures during the nine months ended September 30, 2003, as compared to
$361,045 during the same period of 2002, $12,117 and $12,181 of which were
earned during the quarters ended September 30, 2003 and 2002, respectively. The
decrease in net income earned by joint ventures during the nine months ended
September 30, 2003, as compared to the same period of 2002, was the result of
Sand Lake Road Joint Venture, in which the Partnership owned a 50% interest,
selling its Property to the tenant in June 2002 at a gain of approximately
$604,000. The Partnership dissolved the joint venture in accordance with the
joint venture agreement.
Operating expenses, including depreciation expense, were $186,870 during
the nine months ended September 30, 2003, as compared to $199,426 during the
same period of 2002, $54,942 and $57,480 of which were incurred during the
quarters ended September 30, 2003 and 2002, respectively. The decrease in
operating expenses during 2003 was primarily due to a decrease in the costs
incurred for administrative expenses for servicing the Partnership and its
Properties. The decrease in operating expenses was partially offset by higher
state tax expense relating to several states in which the Partnership conducts
business.
During the nine months ended September 30, 2002, Sand Lake Road Joint
Venture, in which the Partnership owned a 50% interest, sold its Property to the
tenant in accordance with the purchase option under the lease agreement. The
Partnership and the outside joint venture partner dissolved the joint venture in
accordance with the joint venture agreement and recorded a loss of $30,579 on
the dissolution.
As a result of the sale of the Property in Mesquite, Texas, the
Partnership recognized a gain of $348,026 during the nine months ended September
30, 2002. This Property was identified for sale as of December 31, 2001. Because
this Property was identified for sale prior to the January 2002 implementation
of Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets", the results of operations relating
to this Property were included as Income from Continuing Operations in the
accompanying financial statements.
During the year ended December 31, 2002, the Partnership identified for
sale one Property that was classified as Discontinued Operations in the
accompanying financial statements. In addition, in September 2003, the
Partnership identified for sale its Property in Camp Hill, Pennsylvania. As a
result, the Partnership reclassified the asset from real estate properties with
operating leases to real estate held for sale. The reclassified asset was
recorded at the lower of its carrying amount or fair value, less cost to sell.
As of November 7, 2003, the sale had not occurred.
The Partnership recognized net rental losses (rental revenues less
Property related expenses and provision for write-down of assets) of $58,031 and
$15,536 during the quarter and nine months ended September 30, 2002,
respectively, relating to these two Properties. The net rental loss during the
quarter and nine months ended September 30, 2002, was a result of the
Partnership recording a provision for write-down of assets of approximately
$79,200 relating to the Property in Angleton, Texas. The provision represented
the difference between the carrying value of the Property and its estimated fair
value. In January 2003, the Partnership sold the Property in Angleton, Texas and
recorded a loss on disposal of discontinued operations of approximately $1,400.
The Partnership recognized net rental income of $56,839 during the nine months
ended September 30, 2003, relating to the Properties in Angleton, Texas and Camp
Hill, Pennsylvania and net rental income of $19,181 during the quarter ended
September 30, 2003 relating to the Property in Camp Hill, Pennsylvania.
In January 2003, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
Interest Entities" to expand upon and strengthen existing accounting guidance
that addresses when a company should include the assets, liabilities and
activities of another entity in its financial statements. To improve financial
reporting by companies involved with variable interest entities (more commonly
referred to as special-purpose entities or off-balance sheet structures), FIN 46
requires that a variable interest entity be consolidated by a company if that
company is subject to a majority risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's residual
returns or both. Prior to FIN 46, a company generally included another entity in
its consolidated financial statements only if it controlled the entity through
voting interests. The consolidation requirements of FIN 46 apply immediately to
variable interest entities created after January 31, 2003, and to older
entities, in the first fiscal year or interim period ending after December 15,
2003. The general partners believe adoption of this standard may result in
either consolidation or additional disclosure requirements of the Partnership's
unconsolidated joint ventures, which are currently accounted for under the
equity method. However, such consolidation is not expected to significantly
impact the Partnership's results of operations.
In May 2003, the FASB issued FASB Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity" ("FAS 150"). FAS 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both
liabilities and equity. FAS 150 will require issuers to classify certain
financial instruments as liabilities (or assets in some circumstances) that
previously were classified as equity. One requirement of FAS 150 is that
minority interests for majority owned finite lived entities be classified as a
liability and recorded at fair market value. FAS 150 initially applied
immediately to all financial instruments entered into or modified after May 31,
2003, and otherwise was effective at the beginning of the first interim period
beginning after June 15, 2003. Effective October 29, 2003, the FASB deferred
implementation of FAS 150 as it applies to minority interests of finite lived
Partnerships. The deferral of these provisions is expected to remain in effect
while these interests are addressed in either Phase II of the FASB's Liabilities
and Equity project or Phase II of the FASB's Business Combinations project;
therefore, no specific timing for the implementation of these provisions has
been stated. The implementation of the currently effective aspects of FAS 150
did not have an impact on the Partnership's results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The general partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in the
Partnership's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The principal executive
and financial officers of the corporate general partner have evaluated the
Partnership's disclosure controls and procedures as of the end of the period
covered by this Quarterly Report on Form 10-Q and have determined that such
disclosure controls and procedures are effective.
There was no significant change in internal control over financial
reporting that occurred during the most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, internal
control over financial reporting.
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
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.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities and
Exchange Commission on August 11, 2001, and
incorporated herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.5 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2002, and
incorporated herein by reference.)
31.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
31.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
32.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
32.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 2003.
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 12th day of November, 2003.
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)
EXHIBIT INDEX
Exhibit Number
(c) Exhibits
3.1 Certificate of Limited Partnership of CNL Income
Fund, Ltd., as amended. (Included as Exhibit 3.1
to Amendment No. 1 to Registration Statement No.
33-2850 on Form S-11 and incorporated herein by
reference.)
3.2 Amended and Restated Certificate and Agreement of
Limited Partnership of CNL Income Fund, Ltd.
(Included as Exhibit 3.2 to Form 10-K filed with
the Securities and Exchange Commission on 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.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included
as Exhibit 10.4 to Form 10-Q filed with the
Securities and Exchange Commission on August 11,
2001, and incorporated herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc.
(Included as Exhibit 10.5 to Form 10-Q filed with
the Securities and Exchange Commission on August
13, 2002, and incorporated herein reference.)
31.1 Certification of Chief Executive Officer of
Corporate General Partner Pursuant to Rule 13a-14
as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. (Filed herewith.)
31.2 Certification of Chief Financial Officer of
Corporate General Partner Pursuant to Rule 13a-14
as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. (Filed herewith.)
32.1 Certification of Chief Executive Officer of
Corporate General Partner Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (Filed herewith.)
32.2 Certification of Chief Financial Officer of
Corporate General Partner Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (Filed herewith.)
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2