CNL INCOME FUND IX LTD - 10-K Annual Report

Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-K

(Mark One)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2001

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 0-20017

CNL INCOME FUND IX, LTD.
(Exact name of registrant as specified in its charter)

Florida 59-3004138
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (407) 540-2000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class: Name of exchange on which registered:
None Not Applicable

Securities registered pursuant to Section 12(g) of the Act:

Units of limited partnership interest ($10 per Unit)
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]

Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 3,500,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.

DOCUMENTS INCORPORATED BY REFERENCE:
None

PART I

Item 1. Business

CNL Income Fund IX, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on April 16, 1990. The general partners of the Partnership are Robert A.
Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida corporation
(the "General Partners"). Beginning on March 20, 1991, the Partnership offered
for sale up to $35,000,000 in limited partnership interests (the "Units")
(3,500,000 Units each at $10 per Unit) pursuant to a registration statement on
Form S-11 under the Securities Act of 1933, as amended. The offering terminated
on September 6, 1991, at which date the maximum offering proceeds of $35,000,000
had been received from investors who were admitted to the Partnership as limited
partners (the "Limited Partners").

The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totaled
$30,800,000, and were used to acquire 41 Properties, including 13 Properties
owned by joint ventures in which the Partnership is a co-venturer, and to
establish a working capital reserve for Partnership purposes.

During the year ended December 31, 1997, the Partnership sold its
Property in Alpharetta, Georgia, and reinvested the net sales proceeds in an
IHOP Property located in Englewood, Colorado, with an affiliate of the General
Partners, as tenants-in-common. During the year ended December 31, 1999, the
Partnership sold its Properties in Rochester, New York and Corpus Christi,
Texas, and used a portion of the net sales proceeds to reinvest in a Property in
Albany, Georgia. In addition, the Partnership reinvested a portion of the net
sales proceeds in a Property in Dublin, California and a Property in Montgomery,
Alabama, each as tenants-in-common, with affiliates of the General Partners.
During the year ended December 31, 2000, the Partnership sold its Properties in
Williamsville, New York and in Bluffton and Alliance, Ohio, and used a portion
of these net sales proceeds to invest in a Property in Libertyville, Colorado,
with an affiliate of the General Partners, as tenants-in-common. During the year
ended December 31, 2001, the Partnership sold its Properties in Bedford,
Indiana, Copley Township, Ohio and the Property in Dublin, California, which was
held with an affiliate of the General Partners as tenants-in-common, and
reinvested the majority of these sales proceeds in a Property in Blaine,
Minnesota and in a Property in Waldorf, Maryland with affiliates of the General
Partners as tenants-in-common. As a result of the above transactions, as of
December 31, 2001, the Partnership owned 38 Properties. The 38 Properties
include 13 Properties owned by joint ventures in which the Partnership is a
co-venturer and four Properties owned with affiliates as tenants-in-common. The
Partnership leases the Properties generally on a triple-net basis with the
lessees responsible for all repairs and maintenance, property taxes, insurance
and utilities.

The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.

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. Under the Agreement and Plan of Merger,
APF was to issue shares of its common stock as consideration for the Merger. On
March 1, 2000, the General Partners and APF announced that they had mutually
agreed to terminate the Agreement and Plan of Merger. The agreement to terminate
the Agreement and Plan of Merger was based, in large part, on the General
Partners' concern that, in light of market conditions relating to publicly
traded real estate investment trusts, the value of the transaction had
diminished. As a result of such diminishment, the General Partners', ability to
unequivocally recommend voting for the transaction, in the exercise of their
fiduciary duties, had become questionable.

Leases

Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership, the
joint ventures in which the Partnership is a co-venturer and the Properties
owned with affiliates of the General Partners as tenants-in-common, generally
provide for initial terms ranging from 14 to 20 years (the average being 16
years), and expire between 2005 and 2021. The leases are generally on a
triple-net basis, with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities. The leases of the Properties provide
for minimum base annual rental payments (payable in monthly installments)
ranging from approximately $62,500 to $246,400. In addition, generally the
leases provide for percentage rent, based on sales in excess of a specified
amount. In addition, a majority of the leases provide that, commencing in
specified lease years (ranging from the third to the sixth lease year), the
annual base rent required under the terms of the lease will increase.

Generally, the leases of the Properties provide for two to four
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 24 of the Partnership's 38 Properties also have been
granted options to purchase Properties at the Property's then fair market value
after a specified portion of the lease term has elapsed. Fair market value will
be determined through an appraisal by an independent appraisal firm. Under the
terms of certain leases, the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.

The leases also generally provide that, in the event the Partnership
wishes to sell the Property subject to that lease, the Partnership first must
offer the lessee the right to purchase the Property on the same terms and
conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.

In July 2001, the Partnership reinvested the majority of the net sales
proceeds from the sale of the Property in Dublin, California, which was held
with an affiliate of the General Partners as tenants-in-common, in a Bennigan's
Property in Waldorf, Maryland, with affiliates of the General Partners as
tenants-in-common, as described below in "Joint Venture and Tenancy in Common
Arrangements". The lease terms for this Property are substantially the same as
the Partnership's other leases, as described above. In addition, in December
2001, the Partnership reinvested the majority of the net sales proceeds from the
sale of the Properties in Bedford, Illinois and Copley Township, Ohio in a
Baker's Square Property in Blaine, Minnesota. The lease terms for this Property
are substantially the same as the Partnership's other leases, as described
above.

In July 2001, the tenant of the Property in Wildwood, Florida vacated
the Property and ceased restaurant operations. The Partnership will not
recognize rental and earned income from the vacant Property until a new tenant
for the Property is located or until the Property is sold and the proceeds from
such sale are reinvested in an additional Property. The lost revenues resulting
from this vacant Property 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. The General Partners are currently seeking either a
new tenant or a purchaser for the vacant Property.

In October 2001, Phoenix Restaurant Group, Inc. and its Subsidiaries
(collectively referred to as "PRG"), a tenant of the Partnership, filed for
Chapter 11 bankruptcy protection and rejected the lease relating to the Property
in Grand Prairie, Texas. The Partnership will not recognize rental and earned
income from the vacant Property until a new tenant for the Property is located
or until the Property is sold and the proceeds from such sale are reinvested in
an additional Property. The lost revenues resulting from this vacant Property
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. The
General Partners are currently seeking either a new tenant or a purchaser for
the vacant Property.

Major Tenants

During 2001, four of the Partnership's lessees (or group of affiliated
lessees), (i) Carrols Corporation, (ii) Flagstar Enterprises, Inc., (iii) Burger
King Corporation and BK Acquisition, Inc. (which are affiliated entities under
common control) (hereinafter referred to as Burger King Corp.) and (iv) Golden
Corral Corporation, each contributed more than ten percent of the Partnership's
total rental, earned and mortgage interest income (including the Partnership's
share of rental and earned income from joint ventures and Properties owned as
tenants-in-common). As of December 31, 2001, Carrols Corporation was the lessee
under leases relating to four restaurants, Flagstar Enterprises, Inc. was the
lessee under leases relating to five restaurants, Burger King Corp. was the
lessee under leases relating to the 13 restaurants and Golden Corral Corporation
was the lessee under leases relating to three restaurants. It is anticipated
that, based on the minimum rental payments required by the leases, these four
lessees or groups of affiliated lessees each will continue to contribute more
than ten percent of the Partnership's total rental income in 2002. In addition,
four Restaurant Chains, Burger King, Hardee's, Shoney's and Golden Corral Family
Steakhouse Restaurants ("Golden Corral"), each accounted for more than ten
percent of the Partnership's total rental, earned income and mortgage interest
during 2001 (including the Partnership's share of the rental income from joint
ventures and Properties owned as tenants-in-common). In 2002, it is anticipated
that these four Restaurant Chains each will continue to account for more than
ten percent of the total rental income to which the Partnership is entitled
under the terms of its leases. Any failure of these lessees or Restaurant Chains
could materially affect the Partnership's income if the Partnership is not able
to re-lease the Properties in a timely manner. No single tenant or group of
affiliated tenants lease Properties with an aggregate carrying value in excess
of 20% of the total assets of the Partnership.

Joint Venture and Tenancy in Common Arrangements

The Partnership has entered into the following separate joint venture
arrangements: CNL Restaurant Investments II with CNL Income Fund VII, Ltd. and
CNL Income Fund VIII, Ltd., to purchase and hold six Properties; CNL Restaurant
Investments III with CNL Income Fund X, Ltd., to purchase and hold six
Properties; and Ashland Joint Venture with CNL Income Fund X, Ltd. and CNL
Income Fund XI, Ltd., to purchase and hold one Property. Each CNL Income Fund is
an affiliate of the General Partners and is a limited partnership organized
pursuant to the laws of the State of Florida.

The joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint ventures in accordance with their respective percentage interests in the
joint ventures. The Partnership has a 45.2% interest in CNL Restaurant
Investments II, a 50% interest in CNL Restaurant Investments III and a 27.33%
interest in Ashland Joint Venture. The Partnership and its joint venture
partners are also jointly and severally liable for all debts, obligations and
other liabilities of the joint ventures.

CNL Restaurant Investments II's and CNL Restaurant Investments III's
joint venture agreements do not provide a fixed term, but continue in existence
until terminated by any of the joint venturers. Ashland Joint Venture has an
initial term of 14 years and, after the expiration of the initial term,
continues in existence from year to year unless terminated at the option of any
of the joint venturers or by an event of dissolution. Events of dissolution
include the bankruptcy, insolvency or termination of any joint venturer, sale of
the Property owned by the joint venture and mutual agreement of the Partnership
and its joint venture partners to dissolve the joint venture.

The joint venture agreements restrict each venturer's ability to sell,
transfer or assign its joint venture interest without first offering it for sale
to its joint venture partners, either upon such terms and conditions as to which
the venturers may agree or, in the event the venturers cannot agree, on the same
terms and conditions as any offer from a third party to purchase such joint
venture interest.

Net cash flow from operations of CNL Restaurant Investments II, CNL
Restaurant Investments III and Ashland Joint Venture is distributed 45.2%, 50%
and 27.33%, respectively, to the Partnership and the balance is distributed to
each of the other joint venture partners in accordance with their respective
percentage interest in the joint venture. Any liquidation proceeds, after paying
joint venture debts and liabilities and funding reserves for contingent
liabilities, will be distributed first to the joint venture partners with
positive capital account balances in proportion to such balances until such
balances equal zero, and thereafter in proportion to each joint venture
partner's percentage interest in the joint venture.

In addition to the above joint venture arrangements, the Partnership
entered into an agreement to hold a Property in Englewood, Colorado, as
tenants-in-common with CNL Income Fund III, Ltd.; a Property in Dublin,
California, as tenants-in-common, with CNL Income Fund VI, Ltd.; a Property in
Montgomery, Alabama, as tenants-in-common, with CNL Income Fund VII, Ltd.; a
Property in Libertyville, Illinois, as tenants-in-common with CNL Income Fund
VIII, Ltd. In June 2001, the Partnership and CNL Income Fund VI, Ltd., as
tenants-in-common, sold the Property in Dublin, California. The Partnership
owned a 25% interest in the profits and losses of this Property. Each CNL Income
Fund is an affiliate of the General Partners and is a limited partnership
organized pursuant to the laws of the state of Florida. The agreements provide
for the Partnership and the affiliates to share in the profits and losses of the
Properties in proportion to each party's percentage interest. The Partnership
owns a 67%, 29% and 34% interest in the Properties in Englewood, Colorado,
Montgomery, Alabama, and Libertyville, Illinois, respectively. The tenancy in
common agreements restrict each co-tenant's ability to sell, transfer, or assign
its interest in the tenancy in common's Properties without first offering it for
sale to the remaining co-tenants.

In addition, in July 2001, the Partnership entered into an agreement to
hold a Bennigan's Property in Waldorf, Maryland, as tenants-in-common, with CNL
Income Fund VI, Ltd. and CNL Income Fund XVII, Ltd., each of which is a Florida
limited partnership and an affiliate of the General Partners. The agreement
provides for the Partnership and the affiliates to share in the profits and
losses of the Property and net cash flow from the Property, in proportion to
each co-venturer's percentage interest. The Partnership owns a 15% interest in
this Property. The tenancy in common agreement restricts each co-tenant's
ability to sell, transfer, or assign its interest in the tenancy in common's
Property without first offering it for sale to the remaining co-tenants.

The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of
the Property if the proceeds are reinvested in an additional Property.

Certain Management Services

CNL APF Partners, LP, an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement. Under this agreement, CNL APF Partners, LP
(the "Advisor") is responsible for collecting rental payments, inspecting the
Properties and the tenants' books and records, assisting the Partnership in
responding to tenant inquiries and notices and providing information to the
Partnership about the status of the leases and the Properties. The Advisor also
assists the General Partners in negotiating the leases. For these services, the
Partnership has agreed to pay the Advisor an annual fee of one percent of the
sum of gross rental revenues from Properties wholly owned by the Partnership
plus the Partnership's allocable share of gross revenues of joint ventures in
which the Partnership is a co-venturer, but not in excess of competitive fees
for comparable services. Under the management agreement, the management fee is
subordinated to receipt by the Limited Partners of an aggregate, ten percent,
cumulative, noncompounded annual return on their adjusted capital contributions
(the "10% Preferred Return"), calculated in accordance with the Partnership's
limited partnership agreement (the "Partnership Agreement").

During 2000, CNL Fund Advisors, Inc. assigned its rights in, and its
obligations under, the management agreement with the Partnership to CNL APF
Partners, LP. All of the terms and conditions of the management agreement,
including the payment of fees, as described above, remain unchanged.

The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.

Competition

The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.

Employees

The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of APF, the parent company of the
Advisor perform certain services for the Partnership. In addition, the General
Partners have available to them the resources and expertise of the officers and
employees of CNL Financial Group, Inc., a diversified real estate company, and
its affiliates, who may also perform certain services for the Partnership.

Item 2. Properties

As of December 31, 2001, the Partnership owned 38 Properties. Of the 38
Properties, 21 are owned by the Partnership in fee simple, 13 are owned through
joint venture arrangements and four are owned through a tenancy in common
arrangement. See Item 1. Business - Joint Venture and Tenancy in Common
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.

Description of Properties

Land. The Partnership's Property sites range from approximately 21,400
to 169,800 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.

The following table lists the Properties owned by the Partnership as of
December 31, 2001 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation for the year ended December 31, 2001.

State Number of Properties

Alabama 4
Colorado 1
Florida 1
Georgia 2
Illinois 2
Indiana 1
Louisiana 3
Maryland 1
Michigan 1
Minnesota 2
Mississippi 1
New Hampshire 3
New York 1
North Carolina 3
Ohio 4
South Carolina 1
Tennessee 2
Texas 5
-----
TOTAL PROPERTIES 38
=====

Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. The buildings
generally are rectangular and are constructed from various combinations of
stucco, steel, wood, brick and tile. Building sizes range from approximately
2,100 to 10,600 square feet. All buildings on Properties are freestanding and
surrounded by paved parking areas. Buildings are suitable for conversion to
various uses, although modifications may be required prior to use for other than
restaurant operations. As of December 31, 2001, the Partnership had no plans for
renovation of the Properties. Depreciation expense is computed for buildings and
improvements using the straight line method using a depreciable life of 40 years
for federal income tax purposes.

As of December 31, 2001, the aggregate cost of the Properties owned by
the Partnership and joint ventures (including Properties owned through tenancy
in common arrangements) for federal income tax purposes was $19,589,253 and
$20,400,246, respectively.

The following table lists the Properties owned by the Partnership as of
December 31, 2001 by Restaurant Chain.

Restaurant Chain Number of Properties(1)

Baker's Square 2
Bennigan's 1
Burger King 18
Captain D's 1
Denny's 2
Golden Corral 3
Hardee's 6
IHOP 2
Johnnies 1
Shoney's 3
-----
TOTAL PROPERTIES 39
=====

(1) One of the Properties owned by the Partnership has a Captain D's and a
Shoney's as one building.

The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.

The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.

Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish buildings, premises,
signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures are required to be
paid by the lessee during the term of the lease. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.

As of December 31, 2001, 2000, 1999, 1998, and 1997, the Properties
were 95%, 100%, 98%, 98%, and 100%, occupied, respectively. The following is a
schedule of the average rent per Property for the years ended December 31:

2001 2000 1999 1998 1997
------------- ------------- --------------- -------------- --------------

Rental Revenues (1)(2) $ 2,805,847 $ 3,104,235 $ 3,168,448 $ 3,473,845 $3,350,655
Properties (2) 37 40 42 41 40
Average Rent per
Property $ 75,834 $ 77,606 $ 75,439 $ 84,728 $ 83,766

(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements and the
Properties owned through tenancy in common arrangements. Rental
revenues have been adjusted, as applicable, for any amounts for which
the Partnership has established an allowance for doubtful accounts.

(2) Excludes Properties that were vacant at December 31, and that did not
generate rental revenues during the year ended December 31.

The following is a schedule of lease expirations for leases in place as
of December 31, 2001 for the next ten years and thereafter.

Percentage of
Expiration Year Number Annual Rental Gross Annual
of Leases Revenues(1) Rental Income
----------------- ---------------- --------------------- --------------------------

2002 -- $ -- --
2003 -- -- --
2004 -- -- --
2005 8 599,850 20.57%
2006 11 742,948 25.47%
2007 -- -- --
2008 -- -- --
2009 -- -- --
2010 -- -- --
2011 12 969,913 33.26%
Thereafter 6 603,757 20.70%
---------- ------------- -------------
Total 37 $ 2,916,468 100.00%
========== ============= =============

(1) Excludes one Property which was vacant as of December 31, 2001.

Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2001 (see Item 1. Business -
Major Tenants) are substantially the same as those described in Item 1. Business
- - Leases.

Carrols Corporation leases four Burger King restaurants. The initial
term of each lease ranges from 14 to 20 years (expiring in 2011) and the average
minimum base annual rent is approximately $85,600 (ranging from approximately
$82,400 to $92,500).

Flagstar Enterprises, Inc. leases five Hardee's restaurants. The
initial term of each lease is 20 years (expiring in 2011) and the average
minimum base annual rent is approximately $75,900 (ranging from approximately
$52,800 to $96,000).

Burger King Corp. leases 13 Burger King restaurants with an initial
term of 14 years (expiring between 2005 and 2006) and the average minimum base
annual rent is approximately $103,700 (ranging from approximately $73,800 to
$134,100).

Golden Corral Corporation leases three Golden Corral restaurants with
an initial term of 15 years (expiring in 2005 and 2014) and the average minimum
base annual rent is approximately $168,500 (ranging from approximately $157,500
to $176,400).

Item 3. Legal Proceedings

Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective Properties, is party to, or
subject to, any material pending legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

(a) As of March 15, 2001 there were 3,408 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. During 2001,
Limited Partners who wished to sell their Units may have offered the Units for
sale pursuant to the Partnership's distribution reinvestment plan (the "Plan"),
and Limited Partners who wished to have their distributions used to acquire
additional Units (to the extent Units were available for purchase), may have
done so pursuant to such Plan. The General Partners have the right to prohibit
transfers of Units. From inception through December 31, 2001, the price for any
Unit transferred pursuant to the Plan was $9.50 per Unit. The price paid for any
Unit transferred other than pursuant to the Plan was subject to negotiation by
the purchaser and the selling Limited Partner. The Partnership will not redeem
or repurchase Units.

The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 2001 and 2000 other than
pursuant to the Plan, net of commissions.

2001 (1) 2000 (1)
----------------------------------- ------------------------------------
High Low Average High Low Average
--------- -------- ---------- -------- --------- ----------

First Quarter $ 8.06 $ 6.36 $ 7.22 (2) (2) (2)
Second Quarter 7.23 6.62 6.86 $ 8.80 $ 7.00 $ 7.19
Third Quarter 7.29 6.00 6.70 9.50 6.90 7.98
Fourth Quarter 6.14 6.14 6.14 7.40 5.80 7.11

(1) A total of 12,230 and 19,820 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2001 and 2000,
respectively.

(2) No transfer of Units took place during the quarter other than pursuant
to the plan.

The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.

For each of the years ended December 31, 2001 and 2000, the Partnership
declared cash distributions in the aggregate amounts of $3,150,004 to the
Limited Partners. Distributions of $787,501 were declared at the close of each
of the Partnership's calendar quarters during 2001 and 2000 to the Limited
Partners. No amounts distributed to the Limited Partners for the years ended
December 31, 2001 and 2000, are required to be or have been treated by the
Partnership as a return of capital for purposes of calculating the Limited
Partners' return on their adjusted capital contributions. No distributions have
been made to the General Partners to date. These amounts include monthly
distributions made in arrears for the Limited Partners electing to receive such
distributions on this basis.

The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.

(b) Not applicable.

Item 6. Selected Financial Data

2001 2000 1999 1998 1997
-------------- --------------- -------------- --------------- ---------------

Year ended December 31:
Revenues (1) $2,915,398 $3,174,257 $3,082,697 $3,368,285 $3,230,343
Net Income (2) 1,991,906 1,850,780 2,385,067 2,286,698 2,937,632
Cash distributions
declared (3) 3,150,004 3,150,004 3,150,004 3,220,004 3,150,004
Net income per Unit (2) 0.57 0.53 0.68 0.65 0.83
Cash distributions
declared per Unit (3) 0.90 0.90 0.90 0.92 0.90

At December 31:
Total assets $26,859,177 $28,132,613 $29,443,276 $30,099,078 $31,096,421
Partners' capital 25,991,659 27,149,757 28,448,981 29,213,918 30,147,224

(1) Revenues include equity in earnings of joint ventures.

(2) Net income for the years ended December 31, 2001 and 1998, includes
$462,925 and $582,375 from provision for write-down of assets,
respectively. Net income for the years ended December 31, 2001, 1999
and 1997, includes $298,795, $75,997 and $199,643, respectively, from
gains on sales of assets. Net income for the year ended December 31,
2000 includes $730,668 from a loss on sale of assets.

(3) Distributions for the year ended December 31, 1998 includes a special
distribution to the Limited Partners of $70,000, which represented
cumulative excess operating reserves.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The Partnership was organized on April 16, 1990, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurant
Properties were to be constructed, to be leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are generally triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of December
31, 2001, the Partnership owned 38 Properties, either directly or indirectly
through joint venture or tenancy in common arrangements.

Capital Resources

The Partnership's primary source of capital for the years ended
December 31, 2001, 2000, and 1999, was cash from operations (which includes cash
received from tenants, distributions from joint ventures and interest received,
less cash paid for expenses). Cash from operations was $2,835,733, $2,844,067,
and $2,868,096, for the years ended December 31, 2001, 2000, and 1999,
respectively. The decrease in cash from operations during 2001 and 2000, each as
compared to the previous year, was primarily a result of changes in income and
expenses as described in "Results of Operations" below and changes in the
Partnership's working capital.

Other sources and uses of capital included the following during the
years ended December 31, 2001, 2000, and 1999:

In February 1999, the Partnership sold its Property in Corpus Christi,
Texas, and received net sales proceeds of $1,350,000, resulting in a gain of
$56,369. In March 1999, the Partnership reinvested the net sales proceeds in a
Property in Albany, Georgia, at an approximate cost of $1,641,200. The
transaction, relating to the sale of the Property in Corpus Christi, Texas, and
the reinvestment of the net sales proceeds in the Property in Albany, Georgia,
qualified as a like-kind exchange transaction for federal income tax purposes.

In addition, in March 1999, the Partnership sold its Property in
Rochester, New York, and received net sales proceeds of $1,050,000, resulting in
a gain of $19,628. In March 1999, the Partnership reinvested a portion of the
net sales proceeds in a Property in Albany, Georgia, as described above. In
addition, in November 1999, the Partnership reinvested the remaining net sales
proceeds in a Property in Montgomery, Alabama, and a Property in Dublin,
California, each as tenants-in-common with affiliates of the General Partners.
In connection therewith, the Partnership and the affiliates entered into
agreements whereby each party will share in the profits and losses of each
Property in proportion to each party's percentage interest. As of December 31,
2001, the Partnership owned a 29% interest in the Property in Montgomery,
Alabama, as tenants-in-common with CNL Income Fund VIII, Ltd., a Florida limited
partnership and an affiliate of the General Partners. In June 2001, the
Partnership and CNL Income Fund VI, Ltd., an affiliate of the General Partners
and a Florida limited partnership, as tenants-in-common, sold the property in
Dublin, California, in which the Partnership owned a 25% interest, for a sales
price of approximately $1,743,300 and received net sales proceeds of
approximately $1,699,600, resulting in a gain, to the tenancy-in-common, of
approximately $158,100. The Partnership received approximately $424,600 as a
liquidating distribution for its pro-rata share of the net sales proceeds. In
July 2001, the Partnership reinvested these proceeds in a Property in Waldorf,
Louisiana, as tenants-in-common, with CNL Income Fund VI, Ltd., and CNL Income
Fund XVII, Ltd., each of which is an affiliate of the General Partners and a
Florida limited partnership. The Partnership contributed approximately $342,000
for a 15% interest in the profits and losses of the Property. The transaction,
relating to the sale of the Property in Dublin, California and the reinvestment
of the net sales proceeds in the Property in Waldorf, Maryland qualified as a
like-kind exchange transaction for federal income tax purposes.

In May 2000, the Partnership sold its Property in Williamsville, New
York, to a third party for $715,000 and received net sales proceeds of $693,350,
resulting in a loss of $27,391. In August 2000, the Partnership reinvested a
portion of the net sales proceeds in a Property in Libertyville, Illinois, with
CNL Income Fund VIII, Ltd., a Florida limited partnership and an affiliate of
the General Partners, as tenants-in-common. In connection therewith, the
Partnership and the affiliate entered into an agreement whereby each co-venturer
will share in the profits and losses of the Property in proportion to its
applicable percentage interest. The Property was acquired from an affiliate of
the General Partners. The affiliate had purchased and temporarily held title to
the Property in order to facilitate the acquisition of the Property by the
Partnership. The purchase price paid by the Partnership represented the costs
incurred by the affiliate to acquire the Property, including closing costs. As
of December 31, 2000, the Partnership owned a 34% interest in the Property.

In addition, in November 2000, the Partnership sold its Properties in
Bluffton and Alliance, Ohio, for a total of $500,000, resulting in a loss of
$703,277. In connection therewith, the Partnership accepted two promissory notes
in the aggregate amount of $500,000, collateralized by a mortgage on the
respective Property. The promissory notes bear an interest rate of nine percent
per annum and are being collected in 96 monthly installments of principal and
interest, with balloon payments of $184,652 and $123,102, respectively, due in
December 2008. The mortgage note receivable balance relating to these Properties
at December 31, 2001 and 2000 was $482,406 and $503,838, respectively, including
accrued interest of $3,711 and $3,838, respectively.

In addition, in July 2001, the Partnership sold its Property in
Bedford, Indiana to an unrelated third party for approximately $904,800 and
received net sales proceeds of approximately $900,100 resulting in a gain of
approximately $12,100. In December the Partnership reinvested these net sales
proceeds in a Property in Blaine, Minnesota at an approximate cost of
$1,357,600. The Property was acquired from an affiliate of the General Partners.
The affiliate had purchased and temporarily held title to the Property in order
to facilitate the acquisition of the Property by the Partnership. The purchase
price paid by the partnership represented the costs incurred by the affiliate to
acquire the Property, including closing costs. The transaction, relating to the
sale of the Property in Bedford, Indiana and the reinvestment of the net sales
proceeds in the Property in Blaine, Minnesota qualified as a like-kind exchange
transaction for federal income tax purposes.

In addition, in November 2001, the Partnership sold its Property in
Copley Township, Ohio to an unrelated third party for approximately $1,250,000
and received net sales proceeds of approximately $1,086,100, resulting in a gain
of approximately $286,700. In December 2001, the Partnership reinvested a
portion of these net sales proceeds in a Property in Blaine, Minnesota, as
described above. The Partnership distributed amounts sufficient to enable the
Limited Partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the General Partners), resulting from the sale.

None of the Properties owned by the Partnership, or the joint ventures
or tenancy in common arrangements in which the Partnership owns an interest, is
or may be encumbered. Under its partnership agreement, the Partnership is
prohibited from borrowing for any purpose; provided, however, that the General
Partners or their affiliates are entitled to reimbursement, at cost, for actual
expenses incurred by the General Partners or their affiliates on behalf of the
Partnership. Affiliates of the General Partners from time to time incur certain
operating expenses on behalf of the Partnership for which the Partnership
reimburses the affiliates without interest.

In October 2001, the Partnership entered into an agreement with an
unrelated third party to sell the Hardee's Property in Greenville, South
Carolina. As of March 15, 2002 the sale had not occurred. In addition, in
November 2001, the Partnership entered into an agreement with an unrelated third
party to sell the Shoney's Property in Huntsville, Alabama. As of March 15, 2002
the sale had not occurred.

Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term highly liquid investments such as
demand deposit accounts at commercial banks, money market accounts and
certificates of deposit with less than a 90-day maturity date, pending the
Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At December 31, 2001, the Partnership had
$1,247,551 invested in such short-term investments as compared to $829,338 at
December 31, 2000. The increase in cash and cash equivalents at December 31,
2001, as compared to December 31, 2000, was primarily due to the fact that as of
December 31, 2001, the Partnership had not reinvested all of the sales proceeds
it received from the sale of the Property in Copley Township, Ohio, as described
above. As of December 31, 2001, the average interest rate earned on the rental
income deposited in demand deposit accounts at commercial banks was
approximately 2.9% annually. The funds remaining at December 31, 2001 after the
payment of distributions and other liabilities will be used to meet the
Partnership's working capital needs.

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.

Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all leases of the Partnership's Properties are
on a triple-net basis, it is not anticipated that a permanent reserve for
maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purpose, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.

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 the operating expenses, to the extent that the General
Partners determine that such funds are available for distribution. Based on
current and anticipated future cash from operations, the Partnership declared
distributions to the Limited Partners of $3,150,004, for each of the years ended
December 31, 2001, 2000, and 1999, respectively. This represents a distribution
of $0.90 per Unit for each of the years ended December 31, 2001, 2000, and 1999,
respectively. No distributions were made to the General Partners during the
years ended December 31, 2001, 2000, and 1999. No amounts distributed to the
Limited Partners for the years ended December 31, 2001, 2000, or 1999, 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.

During 2000, the general partners waived their right to receive future
distributions from the Partnership, including both distributions of operating
cash flow and distributions of liquidation proceeds, to the extent that the

cumulative amount of such distributions would exceed the balance in the general
partners' capital account as of December 31, 1999. Accordingly, the general
partners were not allocated any net income and did not receive any distributions
during the years ended December 31, 2001 and 2000.

As of December 31, 2001 and 2000, the Partnership owed $5,878 and
$100,846, respectively, to affiliates for operating expenses and accounting and
administrative services. As of March 15, 2002, the Partnership had reimbursed
the affiliates all such amounts. Other liabilities, including distributions
payable, decreased to $861,640 at December 31, 2001, as compared to $882,010 at
December 31, 2000. The General Partners believe the Partnership has sufficient
cash on hand to meet current working capital needs.

Long-Term Liquidity

The Partnership has no long-term debt or other long-term liquidity
requirements.

Critical Accounting Policies

The Partnership's leases are accounted for under the provisions of
Statement of Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and
have been accounted for using either the direct financing or the operating
method. FAS 13 requires management to estimate the economic life of the leased
property, the residual value of the leased property and the present value of
minimum lease payments to be received from the tenant. In addition, management
assumes that all payments to be received under its leases are collectible.
Changes in management's estimates or assumption regarding collectibility of
lease payments could result in a change in accounting for the lease at the
inception of the lease.

The Partnership accounts for its unconsolidated joint ventures using
the equity method of accounting. Under generally accepted accounting principles,
the equity method of accounting is appropriate for entities that are partially
owned by the Partnership, but for which operations of the investee are shared
with other partners. The Partnership's joint venture agreements require the
consent of all partners on all key decisions affecting the operations of the
underlying Property.

Management reviews its Properties and investments in unconsolidated
entities periodically (no less than once per year) for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through operations. Management determines whether
impairment in value has occurred by comparing the estimated future undiscounted
cash flows, including the residual value of the Property, with the carrying cost
of the individual Property. If an impairment is indicated, the assets are
adjusted to their fair value.

Results of Operations

During the year ended December 31, 1999, the Partnership owned and
leased 28 wholly owned Properties (including two Properties that were sold
during 1999). During 2000, the Partnership owned and leased 26 wholly owned
Properties (including three Properties that were sold during 2000). During 2001,
the Partnership owned and leased 23 wholly owned Properties (including two
Properties that were sold during 2001). In addition, during 2001, 2000, and
1999, the Partnership was a co-venturer in two separate joint ventures that each
owned and leased six properties and one joint venture that owned and leased one
Property. The Partnership also owned and leased three Properties with affiliates
as tenants-in-common in 1999, four Properties with affiliates as
tenants-in-common in 2000 and five Properties with affiliates as
tenants-in-common in 2001 (including one Property that was sold during 2001). As
of December 31, 2001, the Partnership owned, either directly or through joint
venture and tenancy in common arrangements, 38 Properties, which are generally
subject to long-term, triple-net leases. The leases of the Properties provide
for minimum base annual rental amounts (payable in monthly installments) ranging
from approximately $62,500 to $246,400. Generally, the leases provide for
percentage rent based on sales in excess of a specified amount. In addition, a
majority of the leases provide that, commencing in specified lease years
(ranging from the third to the sixth lease year), the annual base rent required
under the terms of the lease will increase. For further description of the
Partnership's leases and Properties, see Item 1. Business - Leases and Item 2.
Properties, respectively.

During the years ended December 31, 2001, 2000, and 1999, the
Partnership earned $1,990,529, $2,366,345, and $2,335,381, respectively, in
rental income from operating leases and earned income from direct financing
leases related to its wholly owned Properties. Rental and earned income
decreased during the year ended December 31, 2001, as compared to the year ended
December 31, 2000, partially as a result of the fact that in April 2001, the
tenant of the Property in Wildwood, Florida, vacated the Property and ceased
making rental payments on this Property. In July 2001, the Partnership and the
tenant terminated the lease relating to this Property. As a result, the
Partnership stopped recording rental revenue. The Partnership will not recognize
any rental and earned income from this Property until the Property is re-leased
or the Property is sold and the proceeds are reinvested in an additional
Property. The General Partners are currently seeking a replacement tenant or
purchaser for this Property. The lost revenues resulting from the vacant
Property could have an adverse effect on the results of operations of the
Partnership, if the Partnership is not able to re-lease or sell the Property in
a timely manner.

In addition, the decrease in rental and earned income during 2001 was
partially due to the fact that in July and November 2001, the Partnership sold
its Properties in Bedford, Indiana and Copley Township, Ohio, respectively, as
described above in "Capital Resources." The decrease in rental and earned income
during 2001 was partially offset by the fact that in December 2001, the
Partnership reinvested a portion of these net sales proceeds in a Property in
Blaine, Minnesota, as described above in "Capital Resources."

In addition, rental and earned income decreased during 2001 due to the
fact that PRG, the tenant of the Property in Grand Prairie, Texas, experienced
financial difficulties. In October 2001, PRG filed for bankruptcy and rejected
the lease relating to this Property. As a result, the Partnership stopped
recording rental revenue relating to this Property. The Partnership will not
recognize any rental and earned income from this Property until the Property is
re-leased or the Property is sold and the proceeds are reinvested in an
additional Property. The General Partners are currently seeking a replacement
tenant or purchaser for this Property. The lost revenues resulting from the
vacant Property could have an adverse effect on the results of operations of the
Partnership, if the Partnership is not able to re-lease or sell the Property in
a timely manner. The increase in rental and earned income during 2000, as
compared to 1999, was partially offset by the fact that during 2000 and 1999,
the Partnership established an allowance for doubtful accounts of approximately
$54,200 and $19,500, respectively, relating to past due rental amounts for this
Property.

Rental and earned income increased during 2000, partially due to the
fact that during 2000, the Partnership collected and recognized, as income, past
due rental and other amounts relating to the two Properties in Bluffton and
Alliance, Ohio for which the Partnership had previously established an allowance
for doubtful accounts. The increase during 2000 was partially offset by, and the
decrease during 2001 was partially due to the fact that in November 2000, the
Partnership sold these two Properties, as described in "Capital Resources." In
1999 and 2000, the Partnership sold its Properties in Williamsville and
Rochester, New York and Corpus Christi, Texas, each to a third party, which
partially offset the increase in rental and earned income in 2000, as compared
to 1999. The increase in rental and earned income during 2000 was partially due
to the fact that in March 1999, the Partnership reinvested a portion of these
net sales proceeds in a Property in Albany, Georgia. In November 1999 and August
2000, the Partnership invested the remaining net sales proceeds in two
Properties and one Property, respectively, each with affiliates of the General
Partners, as tenants-in-common, as described in "Capital Resources." 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 a joint venture and a Property with an
affiliate of the General Partners, as tenants-in-common.

During the years ended December 31, 2001, 2000, and 1999, the
Partnership earned $19,780, $75,992, and $59,287, respectively, in contingent
rental income. The decrease in contingent rental income during 2001, as compared
to 2000, and the increase during 2000, as compared to 1999, was primarily
attributable to fluctuations in gross sales of certain restaurant Properties
whose leases require the payment of contingent rental income.

During the years ended December 31, 2001, 2000, and 1999, the
Partnership also earned $753,457, $674,930, and $606,337, respectively, in
income attributable to net income earned by joint ventures in which the
Partnership is a co-venturer. The increase in net income earned by joint
ventures during 2001 and 2000, each as compared to the previous year, was
partially due to the fact that in August 2000, the Partnership acquired an
interest in a Property in Libertyville, Illinois, as tenants-in-common with
affiliates of the General Partners, as described above in "Capital Resources."
In addition, the increase in net income earned by joint ventures during 2001, as
compared to 2000, was partially due to the fact that in June 2001, the
Partnership and CNL Income Fund VI, Ltd., as tenants-in-common, sold the
Property in Dublin, California, in which the Partnership owned a 25% interest.
The tenancy in common recognized a gain of approximately $158,100 during 2001,
as described above in "Capital Resources". The increase in net income earned by
joint ventures during 2000, as compared to 1999, was primarily due to the fact
that in November 1999, the Partnership reinvested a portion of the net sales
proceeds it received from the sale of the Property in Rochester, New York, in
one Property in each of Dublin, California, and Montgomery, Alabama, each as
tenants-in-common with affiliates of the General Partners.

During 2001, four of the Partnership's lessees (or group of affiliated
lessees), (i) Carrols Corporation, (ii) Flagstar Enterprises, Inc., (iii) Burger
King Corporation and BK Acquisition, Inc. (which are affiliated entities under
common control) (hereinafter referred to as Burger King Corp.) and (iv) Golden
Corral Corporation, each contributed more than ten percent of the Partnership's
total rental, earned and mortgage interest income (including the Partnership's
share of rental and earned income from joint ventures and Properties owned as
tenants-in-common). As of December 31, 2001, Carrols Corporation was the lessee
under leases relating to four restaurants, Flagstar Enterprises, Inc. was the
lessee under leases relating to five restaurants, Burger King Corp. was the
lessee under leases relating to the 13 restaurants and Golden Corral Corporation
was the lessee under leases relating to three restaurants. It is anticipated
that, based on the minimum rental payments required by the leases, these four
lessees or groups of affiliated lessees each will continue to contribute more
than ten percent of the Partnership's total rental income in 2002. In addition,
four Restaurant Chains, Burger King, Hardee's, Shoney's and Golden Corral Family
Steakhouse Restaurants ("Golden Corral"), each accounted for more than ten
percent of the Partnership's total rental, earned income and mortgage interest
during 2001 (including the Partnership's share of the rental income from joint
ventures and Properties owned as tenants-in-common). In 2002, it is anticipated
that these four Restaurant Chains each will continue to account for more than
ten percent of the total rental income to which the Partnership is entitled
under the terms of its leases. Any failure of these lessees or Restaurant Chains
could materially affect the Partnership's income if the Partnership is not able
to re-lease the Properties in a timely manner.

During the years ended December 31, 2001, 2000 and 1999, the
Partnership earned $151,632, $56,990, and $81,692, respectively, in interest and
other income. The increase in interest and other income during 2001, as compared
to 2000, was partially due to the fact that during 2001, the Partnership
collected and recognized as income approximately $63,500 from the tenant of two
Properties that were sold during 2000 in consideration for the Partnership
releasing the tenant from its obligations under the terms of its lease. In
addition, the increase in interest and other income during 2001 was partially
due to the fact that the Partnership earned interest from to the two mortgage
note receivables relating to the 2000 sales of the Properties in Bluffton and
Alliance, Ohio, as described above in "Capital Resources." The decrease in
interest and other income during 2000 as compared to 1999, was primarily
attributable to the increase in interest income related to the amount of funds
invested in cash and cash equivalents due to the disposition of Properties
pending reinvestment in an additional Property and tenancy in common
arrangements.

Operating expenses, including depreciation and amortization expense and
provision for write-down of assets, were $1,222,287, $592,809, and $773,627, for
the years ended December 31, 2001, 2000 and 1999, respectively. The increase in
operating expenses during 2001, as compared to 2000, was primarily due to the
fact that during 2001, the Partnership recorded a provision for write-down of
assets in the amount of $400,800 relating to the Property in Wildwood, Florida.
The tenant vacated this Property and ceased payment of rents under the terms of
its lease agreement. In addition, the Partnership recorded a provision for
write-down of assets in the amount of $62,125 relating to the Property in Grand
Prairie, Texas due to the fact that PRG, the tenant, filed for bankruptcy and
rejected the lease, as described above. Both provisions represented the
difference between the carrying value of the Property at December 31, 2001 and
the General Partners' estimated net realizable value for the Properties. In
addition, during 2001 and 2000 the Partnership incurred certain expenses such as
real estate taxes, insurance, repairs and maintenance and legal fees relating to
the Properties. The General Partners are currently seeking a replacement tenant
or purchaser for these Properties. The Partnership will continue to incur such
expenses relating to these Properties until new tenants or purchasers are
located.

The increase in operating expenses during 2001 was also partially due
to the fact that the Partnership incurred additional state taxes due to changes
in the tax laws of a state in which the Partnership conducts business. In
addition, the increase in operating expenses during 2001 was partially
attributable to an increase in the costs incurred for administrative expenses
for servicing the Partnership and its Properties, as permitted by the
Partnership agreement.

The increase in operating expenses during 2001 was partially offset by,
and the decrease during 2000 was partially due to the amount of transaction
costs the Partnership incurred related to the General Partners retaining
financial and legal advisors to assist them in evaluating and negotiating the
proposed and terminated merger with APF, as described below in "Termination of
Merger."

The decrease in operating expenses during 2000, as compared to 1999,
was also partially due to the fact that in 1999, the Partnership incurred
certain expenses, such as legal fees, insurance and real estate tax expense in
connection with the tenant of the Properties in Williamsville and Rochester, New
York filing for bankruptcy, rejecting the lease, and ceasing rental payments.
Between March 1999 and May 2000, the Partnership sold these two Properties;
therefore, the Partnership did not incur such expenses related to these
Properties in 2000.

As a result of the sales of the Properties in Bedford, Indiana and
Copley Township, Ohio during 2001, and the sales of the Properties in Bluffton
and Alliance, Ohio and Williamsville, New York, during 2000, and the sales of
the Properties in Rochester, New York and Corpus Christi, Texas, during 1999, as
described above in "Capital Resources," the Partnership recognized a gain of
$298,795, a loss of $730,668, and a gain of $75,997 during the years ended
December 31, 2001, 2000, and 1999, respectively.

The restaurant industry, as a whole, has been one of the many
industries affected by the general slowdown in the economy. While the
Partnership has experienced some losses due to the financial difficulties of a
limited number of restaurant operators, the General Partners remain confident in
the overall performance of the fast-food and family style restaurants, the
concepts that comprise the Partnership's portfolio. Industry data shows that
these restaurant concepts continue to outperform and remain more stable than
higher-end restaurants, which have been more adversely affected by the slowing
economy.

The Partnership's leases as of December 31, 2001, in general, are
triple-net leases and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Inflation, overall, has had a minimal effect on
the results of operations of the Partnership. Continued inflation may cause
capital appreciation of the Partnership's Properties. Inflation and changing
prices, however, also may have an adverse impact on the sales of the restaurants
and on potential capital appreciation of the Properties.

In December 1999, the Securities and Exchange Commission released SAB
101, which provides the staff's view in applying generally accepted accounting
principles to selected revenue recognition issues. SAB 101 requires the
Partnership to defer recognition of certain percentage rental income until
certain defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material impact on the
Partnership's results of operations.

In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141 "Business Combinations" (FAS 141) and
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" (FAS 142). The Partnership has reviewed both statements and
has determined that both FAS 141 and FAS 142 do not apply to the Partnership as
of December 31, 2001.

In October 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (FAS 144). This statement requires
that a long-lived asset be tested for recoverability whenever events or changes
in circumstances indicate that its carrying amount may not be recoverable. The
carrying amount of a long-lived asset is not recoverable if it exceeds the sum
of the undiscounted cash flows expected to result from the use and eventual
disposition of the asset. The assessment is based on the carrying amount of the
asset at the date it is tested for recoverability. An impairment loss is
recognized when the carrying amount of a long-lived asset exceeds its fair
value. If an impairment is recognized, the adjusted carrying amount of a
long-lived asset is its new cost basis. The adoption of FAS 144 did not have any
effect on the partnership's recording of impairment losses as this Statement
retained the fundamental provisions of FAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."

Termination of 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. Under the Agreement and Plan of Merger, APF was to
issue shares of its common stock as consideration for the Merger. On March 1,
2000, the General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger. The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General Partners'
concern that, in light of market conditions relating to publicly traded real
estate investment trusts, the value of the transaction had diminished. As a
result of such diminishment, the General Partners' ability to unequivocally
recommend voting for the transaction, in the exercise of their fiduciary duties,
had become questionable.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Partnership accepted two promissory notes in conjunction with the
sale of two Properties. The General Partners believe that the estimated fair
value of the mortgage notes at December 31, 2001, approximated the outstanding
principal amount. The Partnership is exposed to equity loss in the event of
changes in interest rates. The following table presents the expected cash flows
of principal that are sensitive to these changes.

Mortgage Note
Fixed Rate
------------------

2002 $ 17,915
2003 19,620
2004 21,370
2005 23,521
2006 25,759
Thereafter 370,510
----------------

$ 478,695
================

Item 8. Financial Statements and Supplementary Data

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

CONTENTS

Page

Report of Independent Certified Public Accountants 18

Financial Statements:

Balance Sheets 19

Statements of Income 20

Statements of Partners' Capital 21

Statements of Cash Flows 22-23

Notes to Financial Statements 24-40

Report of Independent Certified Public Accountants

To the Partners
CNL Income Fund IX, Ltd.

In our opinion, the accompanying balance sheets and the related statements of
income, of partners' capital and of cash flows present fairly, in all material
respects, the financial position of CNL Income Fund IX, Ltd. (a Florida limited
partnership) at December 31, 2001 and 2000, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under item 14(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Orlando, Florida
February 8, 2002

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

BALANCE SHEETS

December 31,
2001 2000
--------------------- --------------------

ASSETS

Land and buildings on operating leases, net $ 14,060,856 $ 13,663,075
Net investment in direct financing leases 2,807,303 4,047,190
Investment in joint ventures 7,324,599 7,525,414
Mortgage notes receivable 482,406 503,838
Cash and cash equivalents 1,247,551 829,338
Receivables, less allowance for doubtful accounts of
$15,296 and $82,596, respectively
32,171 311,662
Due from related parties 4,872 8,835
Accrued rental income 888,899 1,210,844
Other assets 10,520 32,417
--------------------- --------------------

$ 26,859,177 $ 28,132,613
===================== ====================

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable $ 7,190 $ 33,029
Accrued and escrowed real estate taxes payable 7,853 7,868
Distributions payable 787,501 787,501
Due to related parties 5,878 100,846
Rents paid in advance and deposits 59,096 53,612
--------------------- ------------------------
Total liabilities 867,518 982,856

Commitments (Note 12)

Partners' capital 25,991,659 27,149,757
--------------------- ------------------------

$ 26,859,177 $ 28,132,613
===================== ========================
See accomapnying notes to financial statements.

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

STATEMENTS OF INCOME

Year ended December 31,
2001 2000 1999
--------------- ---------------- ---------------

Revenues:
Rental income from operating leases $ 1,600,005 $ 1,859,266 $ 1,615,198
Earned income from direct financing leases 390,524 507,079 720,183
Contingent rental income 19,780 75,992 59,287
Interest and other income 151,632 56,990 81,692
--------------- ---------------- ---------------
2,161,941 2,499,327 2,476,360
--------------- ---------------- ---------------
Expenses:
General operating and administrative 288,031 166,250 166,844
Professional services 82,391 35,938 51,336
Real estate taxes 38,449 23,160 29,069
State and other taxes 35,739 22,725 27,021
Depreciation and amortization 314,752 312,196 318,248
Provision for write-down of loss of assets 462,925 -- --
Transaction costs -- 32,540 181,109
--------------- ---------------- ---------------
1,222,287 592,809 773,627
--------------- ---------------- ---------------

Income Before Gain (Loss) on Sale of Assets and Equity in
Earnings of Joint Ventures 939,654 1,906,518 1,702,733

Gain (Loss) on Sale of Assets 298,795 (730,668 ) 75,997

Equity in Earnings of Joint Ventures 753,457 674,930 606,337
--------------- ---------------- ---------------

Net Income $ 1,991,906 $ 1,850,780 $ 2,385,067
=============== ================ ===============

Allocation of Net Income:
General partners $ -- $ -- $ 23,654
Limited partners 1,991,906 1,850,780 2,361,413
--------------- ---------------- ---------------

$ 1,991,906 $ 1,850,780 $ 2,385,067
=============== ================ ===============

Net Income Per Limited Partner Unit $ 0.57 $ 0.53 $ 0.68
=============== ================ ===============

Weighted Average Number of Limited Partner Units
Outstanding 3,500,000 3,500,000 3,500,000
=============== ================ ===============

See accompanying notes to financial statements.

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

STATEMENTS OF PARTNERS' CAPITAL

Years Ended December 31, 2001, 2000 and 1999

General Partners Limited Partners
---------------------------------- ----------------------------------------------------------
Accumulated Accumulated
Contributions Earnings Contributions Distributions Earnings
---------------- --------------- ---------------- ---------------- ----------------

Balance, December 31, 1998 $ 1,000 $ 213,763 $ 35,000,000 $ (23,060,591 ) $ 21,249,746

Distributions to limited
partners ($0.90 per limited
partner unit) -- -- -- (3,150,004 ) --
Net income -- 23,654 -- -- 2,361,413
---------------- --------------- ---------------- ---------------- ----------------

Balance, December 31, 1999 1,000 237,417 35,000,000 (26,210,595 ) 23,611,159

Distributions to limited
partners ($0.90 per limited
partner unit) -- -- -- (3,150,004 ) --
Net income -- -- -- -- 1,850,780
---------------- --------------- ---------------- ---------------- ----------------

Balance, December 31, 2000 1,000 237,417 35,000,000 (29,360,599 ) 25,461,939

Distributions to limited
partners ($0.90 per limited
partner unit) -- -- -- (3,150,004 ) --
Net income -- -- -- -- 1,991,906
---------------- --------------- ---------------- ---------------- ----------------

Balance, December 31, 2001 $ 1,000 $ 237,417 $ 35,000,000 $ (32,510,603 ) $ 27,453,845
================ =============== ================ ================ ================

See accompanying notes to financial statements.

- --------------
Syndication
Costs Total
- -------------- --------------

$ (4,190,000 ) $ 29,213,918

-- (3,150,004 )
-- 2,385,067
- -------------- --------------

(4,190,000 ) 28,448,981

-- (3,150,004 )
-- 1,850,780
- -------------- --------------

(4,190,000 ) 27,149,757

-- (3,150,004 )
-- 1,991,906
- -------------- --------------

$ (4,190,000 ) $ 25,991,659
============== ==============

See accompanying notes to financial statements.

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

STATEMENTS OF CASH FLOWS

Year Ended December 31,
2001 2000 1999
--------------- --------------- --------------

Increase (Decrease) in Cash and Cash Equivalents:

Cash Flows from Operating Activities:
Cash received from tenants $ 2,428,747 $ 2,323,462 $ 2,388,494
Distributions from joint ventures 880,582 804,363 738,371
Cash paid for expenses (553,726 ) (319,486 ) (325,027 )
Interest received 80,130 35,728 66,258
--------------- --------------- --------------
Net cash provided by operating activities 2,835,733 2,844,067 2,868,096
--------------- --------------- --------------

Cash Flows from Investing Activities:
Proceeds from sale of assets 1,986,253 693,350 2,400,000
Additions to land and buildings (1,357,599 ) -- (1,641,211 )
Collections on mortgage notes receivable 21,305 -- --
Investment in joint ventures (342,075 ) (494,581 ) (827,754 )
Liquidating distribution from joint venture 424,600 -- --
--------------- --------------- --------------
Net cash provided by (used in) investing
activities 732,484 198,769 (68,965 )
--------------- --------------- --------------

Cash Flows from Financing Activities:
Distributions to limited partners (3,150,004 ) (3,150,004 ) (3,150,004 )
--------------- --------------- --------------
Net cash used in financing activities (3,150,004 ) (3,150,004 ) (3,150,004 )
--------------- --------------- --------------

Net Increase (Decrease) in Cash and Cash Equivalents 418,213 (107,168 ) (350,873 )

Cash and Cash Equivalents at Beginning of Year 829,338 936,506 1,287,379
--------------- --------------- --------------

Cash and Cash Equivalents at End of Year $ 1,247,551 $ 829,338 $ 936,506
=============== =============== ==============

See accompanying notes to financial statements.

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

STATEMENTS OF CASH FLOWS - CONTINUED

Year Ended December 31:
2001 2000 1999
------------ ------------- ------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:

Net income $ 1,991,906 $ 1,850,780 $ 2,385,067
------------ ------------- ------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 313,377 310,696 316,748
Amortization 1,375 1,500 1,500
Equity in earnings of joint ventures, net of
distributions 118,290 138,268 132,034
Loss (gain) on sale of assets (298,795 ) 730,668 (75,997 )
Provision for write-down of assets 462,925 -- --
Increase in interest receivable 127 (3,838 ) --
Decrease (increase) in due from related parties 3,963 (8,835 ) --
Increase in receivables 279,491 (205,220 ) (14,669 )
Decrease in net investment in direct financing
leases 71,154 69,297 61,066
Decrease (increase) in accrued rental income (4,216 ) (27,263 ) (28,526 )
Decrease (increase) in other assets 11,474 (547 ) (18,262 )
Increase (decrease) in accounts payable and
accrued and escrowed real estate taxes payable (25,854 ) (74,358 ) 105,130
Increase in due to related parties (94,968 ) 38,780 37,879
Increase (decrease) in rents paid in advance and
deposits 5,484 24,139 (33,874 )
------------ ------------- ------------
Total adjustments 843,827 993,287 483,029
------------ ------------- ------------

Net Cash Provided by Operating Activities $ 2,835,733 $ 2,844,067 $ 2,868,096
============ ============= ============

Supplemental Schedule of Non-Cash Investing and
Financing Activities:

Mortgage notes accepted in exchange for sale of assets $ -- $ 500,000 $ --
============ ============= ============

Distributions declared and unpaid at December 31 $ 787,501 $ 787,501 $ 787,501
============ ============= ============

See accompanying notes to financial statements.

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2001, 2000, and 1999

1. Significant Accounting Policies:
-------------------------------

Organization and Nature of Business - CNL Income Fund IX, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.

The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50% shareholders of the
Corporate General Partner. The general partners have responsibility for
managing the day-to-day operations of the Partnership.

Real Estate and Lease generally - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
generally on a triple-net basis, whereby the tenant is responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:

Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (see Note 4). Unearned income is deferred
and amortized to income over the lease terms so as to produce
a constant periodic rate of return on the Partnership's
investment in the leases.

Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2001, 2000, and 1999

1. Significant Accounting Policies - Continued:
-------------------------------------------

Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. Whenever a tenant defaults
under the terms of its lease, or events or changes in
circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership
either reserves or reverses the cumulative accrued rental
income balance.

When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to the fair value. Although the general partners have made
their best estimate of these factors based on current conditions, it is
reasonably possible that changes could occur in the near term which
could adversely affect the general partners' estimate of net cash flows
expected to be generated from its properties and the need for asset
impairment write-downs.

When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
although the Partnership continued to pursue collection of such
amounts. If amounts are subsequently determined to be uncollectible,
the corresponding receivable and allowance for doubtful accounts are
decreased accordingly.

Investment in Joint Ventures - The Partnership's investments in three
joint ventures and properties in Englewood, Colorado; Waldorf,
Maryland; Montgomery, Alabama and Libertyville, Illinois for which the
properties are held as tenants-in-common with affiliates, are accounted
for using the equity method since each joint venture agreement requires
the consent of all partners on all key decisions affecting the
operations of the underlying property.

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2001, 2000, and 1999

1. Significant Accounting Policies - Continued:
-------------------------------------------

Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value. Cash accounts
maintained on behalf of the Partnership in demand deposits at
commercial banks and money market funds may exceed federally insured
levels; however, the Partnership has not experienced any losses in such
accounts.

Lease Costs - Other assets include lease costs associated with
negotiating a new lease which are amortized over the term of the new
lease using the straight-line method.

Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.

Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment. See "Income Taxes"
footnote for a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes.

Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.

Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 2001 presentation.
These reclassifications had no effect on total partners' capital or net
income.

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2001, 2000, and 1999

1. Significant Accounting Policies - Continued:
-------------------------------------------

Staff Accounting Bulletin No. 101 ("SAB 101") - In December 1999, the
Securities and Exchange Commission released SAB 101, which provides the
staff's view in applying generally accepted accounting principles to
selected revenue recognition issues. SAB 101 requires the Partnership
to defer recognition of certain percentage rental income until certain
defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material
impact on the Partnership results of operations.

Statement of Financial Accounting Standards No. 141 ("FAS 141") and
Statement of Financial Accounting Standards No. 142 ("FAS 142") - In
July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 "Business Combinations" (FAS
141) and Statement of Financial Accounting Standards No. 142 "Goodwill
and Other Intangible Assets" (FAS 142). The Partnership has reviewed
both statements and has determined that both FAS 141 and FAS 142 do not
apply to the Partnership as of December 31, 2001.

Statement of Financial Accounting Standards No. 144 ("FAS 144") - In
October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement requires
that a long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The adoption of FAS 144 did not have any
effect on the partnership's recording of impairment losses as this
Statement retained the fundamental provisions of FAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of".

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2001, 2000, and 1999

2. Leases:
------

The Partnership leases its land and buildings to operators of national
and regional fast-food and family-style restaurants. The leases are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 13, "Accounting for Leases." Some of the leases have been
classified as operating leases and some of the leases have been
classified as direct financing leases. For the leases classified as
direct financing leases, the building portions of the property leases
are accounted for as direct financing leases while a majority of the
land portion of these leases are operating leases. Substantially all
leases are for 14 to 20 years and provide for minimum and contingent
rentals. In addition, the tenant generally pays all property taxes and
assessments, fully maintains the interior and exterior of the building
and carries insurance coverage for public liability, property damage,
fire and extended coverage. The lease options generally allow tenants
to renew the leases for two to four successive five-year periods
subject to the same terms and conditions as the initial lease. Most
leases also allow the tenant to purchase the property at fair market
value after a specified portion of the lease has elapsed.

3. Land and Buildings on Operating Leases:
--------------------------------------

Land and buildings on operating leases consisted of the following at
December 31:

2001 2000
------------------- --------------------

Land $ 7,060,134 $ 7,116,309
Buildings 9,356,631 8,729,293
------------------- --------------------
16,416,765 15,845,602
Less accumulated depreciation (2,355,909) (2,182,527)
------------------- --------------------

$ 14,060,856 $ 13,663,075
=================== ====================

In May 2000, the Partnership sold its Property in Williamsville, New
York, to a third party for $715,000 and received net sales proceeds of
$693,350, resulting in a loss of $27,391. In August 2000, the
Partnership reinvested approximately $494,600 of the net sales proceeds
it received from this sale in a property in Libertyville, Illinois,
with CNL Income Fund VIII, Ltd., a Florida limited partnership and
affiliate of the general partners, as tenants-in-common for a 34%
interest in the property (see Note 5).

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2001, 2000, and 1999

3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------

In July 2001, the Partnership sold its property in Bedford, Indiana,
for which the building was classified as a direct financing lease (see
Note 4) to the tenant, in accordance with the purchase option under the
lease agreement, for approximately $904,800 and received net sales
proceeds of approximately $900,100, resulting in a gain of
approximately $12,100. In December 2001, the Partnership reinvested
these net sales proceeds in a property in Blaine, Minnesota. This
property was acquired from CNL Funding 2001-A, LP, an affiliate of the
general partners (see Note 9).

In November 2001, the Partnership sold its property in Copley Township,
Ohio to an unrelated third party for approximately $1,250,000 and
received net sales proceeds of approximately $1,086,100, resulting in a
gain of approximately $286,700. In December 2001, the Partnership
reinvested a portion of these net sales proceeds in a property in
Blaine, Minnesota. This property was acquired from CNL Funding 2001-A,
LP, an affiliate of the general partners (see Note 9).

On October 31, 2001, Phoenix Restaurant Group, Inc. and its
Subsidiaries (collectively referred to as "PRG"), the tenant of the
Grand Prairie, Texas property, filed for Chapter 11 bankruptcy
protection. PRG rejected the lease relating to this property. During
the year ended December 31, 2001, the Partnership recorded a provision
for write-down of assets in the amount of $62,125 relating to this
property. The provision represented the difference between the carrying
value of the property at December 31, 2001 and the general partners'
estimated net realizable value for the property.

CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2001, 2000, and 1999

3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------

In addition, during the year ended December 31, 2001, the Partnership
recorded a provision for write-down of assets of $149,948 related to
previously accrued rental income relating to the property located in
Wildwood, Florida. The accrued rental income was the accumulated amount
of non-cash accounting adjustments previously recorded in order to
recognize future scheduled rent increases as income evenly over the
term of the lease. The tenant of this property vacated the property and
ceased restaurant operations. The provision represented the difference
between the carrying value of the property, including the accumulated
accrued rental income balance, and the general partners' estimated net
realizable value of the property.

The following is a schedule of the future