10-Q 1 if17.txt CNL INCOME FUND XVII, LTD. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT of 1934 For the quarterly period ended June 30, 2003 -------------------------------------------------------------------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT of 1934 For the transition period from ____________________ to _____________________ Commission file number 0-22485 --------------------------------------- CNL Income Fund XVII, Ltd. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 59-3295393 ------------------------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 450 South Orange Avenue Orlando, Florida 32801 ------------------------------------- ------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number (including area code) (407) 540-2000 ------------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act): Yes___ No X CONTENTS Part I Page Item 1. Financial Statements: ---- Condensed Balance Sheets 1 Condensed Statements of Income 2 Condensed Statements of Partners' Capital 3 Condensed Statements of Cash Flows 4 Notes to Condensed Financial Statements 5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 Item 4. Controls and Procedures 11 Part II Other Information 12-14 CNL INCOME FUND XVII, LTD. (A Florida Limited Partnership) CONDENSED BALANCE SHEETS June 30, December 31, 2003 2002 ------------------ ------------------- ASSETS Real estate properties with operating leases, net $ 14,733,368 $ 15,022,053 Net investment in direct financing leases 405,064 410,120 Investment in joint ventures 5,694,132 5,749,285 Cash and cash equivalents 717,036 829,739 Receivables, less allowance for doubtful accounts of $35,101 in 2003 6,493 37,006 Accrued rental income 441,399 502,962 Other assets 9,922 12,370 ------------------ ------------------- $ 22,007,414 $ 22,563,535 ================== =================== LIABILITIES AND PARTNERS' CAPITAL Accounts payable and accrued expenses $ 8,700 $ 3,494 Real estate taxes payable 44,056 13,457 Distributions payable 600,000 600,000 Due to related parties 13,538 26,600 Rents paid in advance 31,910 31,910 Deferred rental income 48,234 49,998 ------------------ ------------------- Total liabilities 746,438 725,459 Partners' capital 21,260,976 21,838,076 ------------------ ------------------- $ 22,007,414 $ 22,563,535 ================== ===================

See accompanying notes to condensed financial statements. CNL INCOME FUND XVII, LTD. (A Florida Limited Partnership) CONDENSED STATEMENTS OF INCOME Quarter Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 ------------- -------------- ------------- ------------- Revenues: Rental income from operating leases $ 461,653 $ 414,911 $ 856,587 $ 826,814 Earned income from direct financing leases 10,854 24,424 21,776 48,995 Interest and other income 807 6,073 1,112 22,857 ------------- -------------- ------------- ------------- 473,314 445,408 879,475 898,666 ------------- -------------- ------------- ------------- Expenses: General operating and administrative 41,321 52,543 97,944 116,434 Property related 897 7,866 4,410 13,071 Management fees to related parties 7,994 6,249 11,696 12,305 State and other taxes -- 1,149 25,246 9,258 Depreciation and amortization 80,560 74,963 162,232 147,945 Provision for write-down of assets 213,000 -- 213,000 -- ------------- -------------- ------------- ------------- 343,772 142,770 514,528 299,013 ------------- -------------- ------------- ------------- Income Before Equity in Earnings of Joint Ventures 129,542 302,638 364,947 599,653 Equity in Earnings of Joint Ventures 128,919 163,823 257,953 240,684 ------------- -------------- ------------- ------------- Income from Continuing Operations 258,461 466,461 622,900 840,337 ------------- -------------- ------------- ------------- Discontinued Operations: Income from discontinued operations -- 52,751 -- 105,478 Gain on disposal of discontinued operations -- 285,677 -- 285,677 ------------- -------------- ------------- ------------- -- 338,428 -- 391,155 ------------- -------------- ------------- ------------- Net Income $ 258,461 $ 804,889 $ 622,900 $1,231,492 ============= ============== ============= ============= Income Per Limited Partner Unit Continuing operations $ 0.09 $ 0.16 $ 0.21 $ 0.28 Discontinued operations -- 0.11 -- 0.13 ------------- -------------- ------------- ------------- $ 0.09 $ 0.27 $ 0.21 $ 0.41 ============= ============== ============= ============= Weighted Average Number of Limited Partner Units Outstanding 3,000,000 3,000,000 3,000,000 3,000,000 ============= ============== ============= =============

See accompanying notes to condensed financial statements. CNL INCOME FUND XVII, LTD. (A Florida Limited Partnership) CONDENSED STATEMENTS OF PARTNERS' CAPITAL Six Months Ended Year Ended June 30, December 31, 2003 2002 --------------------- ------------------ General partners: Beginning balance $ (4,460 ) $ (4,460 ) Net income -- -- --------------------- ------------------ (4,460 ) (4,460 ) --------------------- ------------------ Limited partners: Beginning balance 21,842,536 22,516,424 Net income 622,900 1,726,112 Distributions ($0.40 and $0.80 per limited partner unit, respectively) (1,200,000 ) (2,400,000 ) --------------------- ------------------ 21,265,436 21,842,536 --------------------- ------------------ Total partners' capital $ 21,260,976 $ 21,838,076 ===================== ==================

See accompanying notes to condensed financial statements. CNL INCOME FUND XVII, LTD. (A Florida Limited Partnership) CONDENSED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2003 2002 --------------- -------------- Increase (Decrease) in Cash and Cash Equivalents Net Cash Provided by Operating Activities $ 1,087,297 $ 1,145,942 --------------- -------------- Cash Flows from Investing Activities: Proceeds from sale of real estate properties -- 3,499,595 Additions to real estate properties with operating leases -- (1,364,194 ) Investment in joint ventures -- (424,807 ) Increase in restricted cash -- (1,381,420 ) --------------- -------------- Net cash provided by investing activities -- 329,174 --------------- -------------- Cash Flows from Financing Activities: Distributions to limited partners (1,200,000 ) (1,200,000 ) --------------- -------------- Net cash used in financing activities (1,200,000 ) (1,200,000 ) --------------- -------------- Net Increase (Decrease) in Cash and Cash Equivalents (112,703 ) 275,116 Cash and Cash Equivalents at Beginning of Period 829,739 673,924 --------------- -------------- Cash and Cash Equivalents at End of Period $ 717,036 $ 949,040 =============== ============== Supplemental Schedule of Non-Cash Financing Activities: Distributions declared and unpaid at end of Period $ 600,000 $ 600,000 =============== ==============

See accompanying notes to condensed financial statements. CNL INCOME FUND XVII, LTD. (A Florida Limited Partnership) NOTES TO CONDENSED FINANCIAL STATEMENTS Quarters and Six Months Ended June 30, 2003 and 2002 1. Basis of Presentation: The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. The financial statements reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of the general partners, necessary for a fair statement of the results for the interim periods presented. Operating results for the quarter and six months ended June 30, 2003, may not be indicative of the results that may be expected for the year ending December 31, 2003. Amounts as of December 31, 2002, included in the financial statements, have been derived from audited financial statements as of that date. These unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in Form 10-K of CNL Income Fund XVII, Ltd. (the "Partnership") for the year ended December 31, 2002. In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities" to expand upon and strengthen existing accounting guidance that addresses when a company should include the assets, liabilities and activities of another entity in its financial statements. To improve financial reporting by companies involved with variable interest entities (more commonly referred to as special-purpose entities or off-balance sheet structures), FIN 46 requires that a variable interest entity be consolidated by a company if that company is subject to a majority risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. Prior to FIN 46, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003, and to older entities, in the first fiscal year or interim period beginning after June 15, 2003. The general partners believe adoption of this standard may result in either consolidation or additional disclosure requirements with respect to the Partnership's unconsolidated joint ventures, which are currently accounted for under the equity method. However, such consolidation is not expected to significantly impact the Partnership's results of operations. 2. Reclassification: Certain items in the prior year's financial statements have been reclassified to conform to 2003 presentation. These reclassifications had no effect on total partners' capital or net income. 3. Real Estate Properties with Operating Leases: During the quarter and six months ended June 30, 2003, the Partnership recorded a provision for write-down of assets of $213,000 relating to the property in Warner Robins, Georgia. The provision represented the difference between the carrying value of the property and its estimated fair value. The tenant of this property experienced financial difficulties, and in July 2003, the tenant surrendered the premises. 4. Investment in Joint Ventures: In May 2003, Ocean Shores Joint Venture, in which the Partnership owns a 30.94% interest, entered into an agreement, with a third party, to sell its property in Ocean Shores, Washington. As a result, the joint venture reclassified the asset from real estate property with an operating lease to real estate held for sale. The reclassified asset was recorded at the lower of its carrying amount or fair value, less cost to sell. In addition, the joint venture stopped recording depreciation once the property was identified for sale. The joint venture had recorded a provision for write-down of assets in a previous year relating to this property. CNL INCOME FUND XVII, LTD. (A Florida Limited Partnership) NOTES TO CONDENSED FINANCIAL STATEMENTS Quarters and Six Months Ended June 30, 2003 and 2002 4. Investment in Joint Ventures - Continued: The financial results relating to the property in Ocean Shores, Washington and a property sold in August 2002 by Mansfield Joint Venture, in which the Partnership owns a 21% interest, are classified as Discontinued Operations in the combined condensed financial information presented below. As of June 30, 2003, CNL Mansfield Joint Venture, CNL Kingston Joint Venture, Ocean Shores Joint Venture, CNL VII & XVII Lincoln Joint Venture, Katy Joint Venture and the Partnership and affiliates, as tenants-in-common in six separate tenancy-in-common arrangements, each own and lease one property to an operator of national fast-food or family-style restaurants. The following presents the combined, condensed financial information for the joint ventures and the properties held as tenants-in-common with affiliates at: June 30, December 31, 2003 2002 ----------------- ---------------- Real estate properties with operating leases, net $ 11,526,529 $ 11,649,517 Real estate held for sale 374,035 377,303 Cash 43,380 37,123 Receivables, less allowance for doubtful accounts 518 6,735 Accrued rental income 279,865 237,749 Liabilities 29,022 20,858 Partners' capital 12,195,305 12,287,569 Quarter Ended June 30, Six Months Ended June 30, 2003 2002 2003 2002 ------------- ------------- ------------- -------------- Rental revenues $ 356,590 $ 552,886 $ 709,641 $ 798,135 Expenses (60,456 ) (52,306 ) (124,021 ) (103,495 ) ------------- ------------- ------------- -------------- Income from continuing operations 296,134 500,580 585,620 694,640 ------------- ------------- ------------- -------------- Discontinued operations: Income (loss) from discontinued operations (9,067 ) 15,286 (11,718 ) 21,425 ------------- ------------- ------------- -------------- Net income $ 287,067 $ 515,866 $ 573,902 $ 716,065 ============= ============= ============= ==============

The Partnership recognized income of $257,953 and $240,684 during the six months ended June 30, 2003 and 2002, respectively, of which $128,919 and $163,823 were earned during the quarters ended June 30, 2003 and 2002, respectively, from these joint ventures and tenants-in-common arrangements. CNL INCOME FUND XVII, LTD. (A Florida Limited Partnership) NOTES TO CONDENSED FINANCIAL STATEMENTS Quarters and Six Months Ended June 30, 2003 and 2002 5. Concentration of Credit Risk: The following schedule presents total rental revenues from individual lessees, each representing more than ten percent of rental revenues (including the Partnership's share of rental revenues from the joint ventures and the properties held as tenants-in-common with affiliates of the general partners), for each of the six months ended June 30: 2003 2002 --------------- --------------- Golden Corral Corporation $ 299,401 $ 299,192 Carrols Corporation and Texas Taco Cabana, LP 166,852 N/A National Restaurant Enterprises, Inc. 152,473 212,348 RTM Indianapolis and RTM Southwest Texas, Inc. 131,901 132,007

In addition, the following schedule presents total rental revenues from individual restaurant chains, each representing more than ten percent of rental revenues (including the Partnership's share of rental revenues from the joint ventures and the properties held as tenants-in-common with affiliates of the general partners), for each of the six months ended June 30: 2003 2002 --------------- -------------- Golden Corral Family Steakhouse Restaurants $ 299,401 $ 299,192 Burger King 169,713 230,871 Taco Cabana 149,612 N/A Arby's 140,931 140,861

The information denoted by N/A indicates that for each period presented, the tenant or group of affiliated tenants, and the chain did not represent more than ten percent of the Partnership's total rental revenues. Although the Partnership's properties have some geographical diversity in the United States and the Partnership's lessees operate a variety of restaurant concepts, default by any of these lessees or restaurant chains will significantly impact the results of operations of the Partnership if the Partnership is not able to re-lease the properties in a timely manner. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CNL Income Fund XVII, Ltd. (the "Partnership") is a Florida limited partnership that was organized on February 10, 1995, to acquire for cash, either directly or through joint venture arrangements, both newly constructed and existing restaurant properties, as well as land upon which restaurants were to be constructed, to be leased primarily to operators of national and regional fast-food, family-style and casual dining restaurant chains (collectively, the "Properties"). The leases generally are triple-net leases, with the lessee responsible for all repairs and maintenance, property taxes, insurance and utilities. The Partnership owned 16 Properties directly as of June 30, 2003 and 2002. The Partnership owned eleven and ten Properties indirectly through joint venture or tenancy in common arrangements as of June 30, 2003 and 2002, respectively. Capital Resources Cash from operating activities was $1,087,297 and $1,145,942 for the six months ended June 30, 2003 and 2002, respectively. Cash and cash equivalents of the Partnership were $717,036 at June 30, 2003, as compared to $829,739 at December 31, 2002. At June 30, 2003, these funds were held in demand deposit accounts at commercial banks. The funds remaining at June 30, 2003, will be used to pay distributions and other liabilities of the Partnership. Short-Term Liquidity The Partnership's investment strategy of acquiring Properties for cash and leasing them under triple-net leases to operators who meet specified financial standards minimizes the Partnership's operating expenses. The general partners believe that the leases will generate net cash flow in excess of operating expenses. The Partnership's short-term liquidity requirements consist primarily of the operating expenses of the Partnership. The general partners have the right, but not the obligation, to make additional capital contributions if they deem it appropriate in connection with the Partnership's operations. The Partnership generally distributes cash from operations remaining after the payment of operating expenses of the Partnership, to the extent that the general partners determine that such funds are available for distribution. Based on current and anticipated future cash from operations, the Partnership declared distributions to limited partners of $1,200,000 for each of the six months ended June 30, 2003 and 2002 ($600,000 for each of the quarters ended June 30, 2003 and 2002). This represents distributions for each applicable six months of $0.40 per unit ($0.20 per unit for each applicable quarter). No distributions were made to the general partners for the quarters and six months ended June 30, 2003 and 2002. No amounts distributed to the limited partners for the six months ended June 30, 2003 and 2002, are required to be or have been treated by the Partnership as a return of capital for purposes of calculating the limited partners' return on their adjusted capital contributions. The Partnership intends to continue to make distributions of cash available for distribution to the limited partners on a quarterly basis. Total liabilities of the Partnership, including distributions payable, were $746,438 at June 30, 2003, as compared to $725,459 at December 31, 2002. Total liabilities at June 30, 2003, to the extent they exceed cash and cash equivalents, will be paid from anticipated future cash from operations, or in the event the general partners elect to make additional capital contributions or loans, from the future general partners' contributions or loans. Long Term Liquidity The Partnership has no long-term debt or other long-term liquidity requirements. Results of Operations Total rental revenues were $878,363 for the six months ended June 30, 2003 as compared to $875,809 in the same period in 2002, of which $472,507 and $439,335 were earned during the second quarter of 2003 and 2002, respectively. The increase in rental revenues during the six months ended June 30, 2003, as compared to the same period in 2002, was primarily due to the acquisition of a Property in Houston, Texas in June 2002 with the majority of the net sales proceeds received from the 2002 sales of the Properties in Mesquite, Nevada and Knoxville, Tennessee. The increase in rental revenues during the six months ended June 30, 2003, as compared to the same period in 2002, was partially offset due to the fact that AmeriKing Corporation, the parent company to National Restaurant Enterprises, Inc., which is the tenant of the Properties in Harvey, Lyons and Chicago Ridge, Illinois, experienced financial difficulties and filed for bankruptcy protection in December 2002. The tenant has continued paying rent for each of these Properties; however, during the six months ended June 30, 2003, the Partnership granted a rent reduction of approximately $24,800 to the tenant of these Properties, and a second temporary rent reduction of approximately $49,600 for the period September through December 2003. While the tenant has neither rejected nor affirmed the leases, there can be no assurance that they will not be rejected in the future. The lost revenues that would result if the tenant rejects these leases will have an adverse effect on the results of operations of the Partnership if the Partnership is unable to lease the Properties in a timely manner. In July 2003, Pasta Concepts, LLC surrendered the premises relating to the Property in Warner Robins, Georgia because the tenant had been experienced financial difficulties, and therefore, the Partnership stopped recording rental revenues. The lost revenues resulting from the vacant Property will have an adverse effect on the results of operations of the Partnership if the Partnership is unable to lease the Property in a timely manner. The Partnership is seeking a replacement tenant. During the six months ended June 30, 2003 and 2002, the Partnership earned $257,953 and $240,684, respectively, attributable to net income earned by joint ventures, of which $128,919 and $163,823 were earned during the second quarter of 2003 and 2002, respectively. The increase in net income earned by joint ventures during the six months ended June 30, 2003, as compared to the same period in 2002, was primarily due to the Partnership investing during 2002 the majority of the net proceeds from the sales of the Properties in Mesquite, Nevada and Wilmette, Illinois in Katy Joint Venture and a tenancy in common arrangement for a Property in Kenosha, Wisconsin, with affiliates of the general partners and Florida limited partnerships. During the quarter and six months ended June 30, 2002, net income earned by joint ventures was favorably impacted by the collection of $309,700 in past due rents. Phoenix Restaurant Group, Inc., the former tenant of the Property in Corpus Christi in which the Partnership owns an approximate 27% interest, ceased paying rent and filed for bankruptcy in 2001. During April 2002, the bankruptcy court assigned the lease to a new tenant, an affiliate of the general partners, and as a result, the tenancy in common collected the past due rents from the new tenant. All other lease terms remained unchanged and are substantially the same as the Partnership's other leases. Ocean Shores Joint Venture, in which the Partnership owns an approximate 31% interest, has not recorded rental revenues since 2001 due to the fact that the tenant of the Property owned by this joint venture experienced financial difficulties and vacated the Property in April 2001. In March 2003, the joint venture executed a termination of the tenant's lease rights, and the tenant surrendered the premises. In May 2003, the joint venture entered into an agreement with a third party to sell the Property. Based on the sales agreement, no impairment has been deemed necessary because the Partnership had written-down the Property to its estimated fair value in a previous year. As of August 7, 2003, the sale had not occurred. The lost revenues resulting from the vacant Property will continue to have an adverse effect on the equity in earnings of joint ventures until the joint venture sells this Property and reinvests the proceeds in another Property. During the six months ended June 30, 2003, four lessees of the Partnership, Golden Corral Corporation, Carrols Corporation and Texas Taco Cabana, LP (which are affiliated entities under common control) (hereinafter referred as "Carrols Corporation."), National Restaurant Enterprises, Inc. and RTM Indianapolis, Inc. and RTM Southwest Texas, Inc. (which are affiliated entities under common control) (hereinafter referred as "RTM, Inc."), each contributed more than ten percent of the Partnership's total rental revenues (including rental revenues from the Partnership's share of rental income from Properties owned by joint ventures and Properties owned with separate affiliates of the general partners as tenants-in-common). It is anticipated that based on the minimum rental payments required by the leases, these four lessees each will continue to contribute more than ten percent of the Partnership's total rental revenues. In addition, four restaurant chains, Golden Corral, Burger King, Taco Cabana, and Arby's, each accounted for more than ten percent of the Partnership's total rental revenues during the six months ended June 30, 2003 (including rental revenues from the Partnership's share of rental income from Properties owned by joint ventures and Properties owned with separate affiliates of the general partners as tenants-in-common). It is anticipated that each of these four restaurant chains will continue to contribute more than ten percent of the Partnership's rental revenues to which the Partnership is entitled under the terms of the leases. Any failure of these lessees or restaurant chains will have a material adverse affect on the Partnership's results of operations if the Partnership is not able to re-lease or sell the Properties in a timely manner. During the six months ended June 30, 2003 and 2002, the Partnership also earned $1,112 and $22,857, respectively, in interest and other income, of which $807 and $6,073 were earned during the second quarter of 2003 and 2002, respectively. During the six months ended June 30, 2002, interest and other income were higher as compared to the same period in 2003 due to the Partnership recognizing as other income the collection of unreimbursed property expenses of approximately $11,200, which were written-off in previous years. Operating expenses, including depreciation and amortization expense and provision for write-down of assets, were $514,528 and $299,013 for the six months ended June 30, 2003 and 2002, respectively, of which $343,772 and $142,770 were incurred during the second quarter of 2003 and 2002, respectively. The increase in operating expenses during the quarter and six months ended June 30, 2003 was primarily due to the fact that during the quarter and six months ended June 30, 2003, the Partnership recorded a provision for write-down of assets of $213,000 relating to the Property in Warner Robins, Georgia. The provision represented the difference between the carrying value of the Property and its estimated fair value. The tenant of this Property experienced financial difficulties, and in July 2003, the tenant surrendered the premises. The increase in operating expenses during the six months ended June 30, 2003 was also partially due to an increase in depreciation expense as a result of a Property acquisition in 2002, and the reclassification of the lease relating to the Property in Muncie, Indiana from direct financing leases to operating leases due to an amendment to the lease. The increase in operating expenses was also partially due to an increase in state tax expense relating to several states in which the Partnership conducts business. The increase in operating expenses during the quarter and six months ended June 30, 2003 was partially offset by a decrease in the costs incurred for administrative expenses for servicing the Partnership and its Properties during 2003. During the year ended December 31, 2002, the Partnership identified and sold three Properties that were classified as Discontinued Operations in the accompanying financial statements. The Partnership recognized net rental income (rental revenues less property expenses) of $52,751 and $105,478 during the quarter and six months ended June 30, 2002, respectively, relating to these Properties. The Partnership sold the Property in Mesquite, Nevada in March 2002. Because the Partnership recorded provisions for write-down of assets for this Property in previous years, no gain or loss was recognized in March 2002 relating to this sale. In May and June 2002, the Partnership sold its Properties in Knoxville, Tennessee and Wilmette, Illinois resulting in a total gain of approximately $285,700. During the quarter ended June 30, 2003, Ocean Shores Joint Venture, in which the Partnership owns an approximate 31% interest, entered into an agreement to sell its Property in Ocean Shores, Washington, as described above. The financial results relating to the Property in Ocean Shores, Washington and a Property sold in August 2002 by Mansfield Joint Venture, in which the Partnership owns a 21% interest, were classified as Discontinued Operations in the combined, condensed financial information reported in the footnotes to the accompanying financial statements for the joint ventures and the tenancies in common with affiliates. The Partnership's pro-rata share of these amounts is included in equity in earnings of joint ventures in the accompanying financial statements. In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities" to expand upon and strengthen existing accounting guidance that addresses when a company should include the assets, liabilities and activities of another entity in its financial statements. To improve financial reporting by companies involved with variable interest entities (more commonly referred to as special-purpose entities or off-balance sheet structures), FIN 46 requires that a variable interest entity be consolidated by a company if that company is subject to a majority risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. Prior to FIN 46, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003, and to older entities, in the first fiscal year or interim period beginning after June 15, 2003. The general partners believe adoption of this standard may result in either consolidation or additional disclosure requirements with respect to the Partnership's unconsolidated joint ventures, which are currently accounted for under the equity method. However, such consolidation is not expected to significantly impact the Partnership's results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 4. CONTROLS AND PROCEDURES The general partners maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in the Partnership's filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. The principal executive and financial officers of the corporate general partner have evaluated the Partnership's disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q and have determined that such disclosure controls and procedures are effective. There was no change in internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings. Inapplicable. Item 2. Changes in Securities. Inapplicable. Item 3. Default upon Senior Securities. Inapplicable. Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable. Item 5. Other Information. Inapplicable. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits **3.1 Affidavit and Certificate of Limited Partnership of CNL Income Fund XVII, Ltd. (Filed as Exhibit 3.1 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **3.2 Amended and Restated Agreement of Limited Partnership of CNL Income Fund XVII, Ltd. (Included as Exhibit 4.2 to Form 10-K filed with the Securities and Exchange Commission on March 21, 1996, and incorporated herein by reference.) **4.1 Affidavit and Certificate of Limited Partnership of CNL Income Fund XVII, Ltd. (Filed as Exhibit 3.1 to Registration Statement No. 33-90998 on Form S-11 and incorporated herein by reference.) **4.2 Amended and Restated Agreement of Limited Partnership of CNL Income Fund XVII, Ltd. (Included as Exhibit 4.2 to Form 10-K filed with the Securities and Exchange Commission on March 21, 1996, and incorporated herein by reference.) **4.3 Form of Agreement between CNL Income Fund XVII, Ltd. and MMS Escrow and Transfer Agency, Inc. and between CNL Income Fund XVIII, Ltd. and MMS Escrow and Transfer Agency, Inc. relating to the Distribution Reinvestment Plans (Filed as Exhibit 4.4 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **8.3 Opinion of Baker & Hostetler regarding certain material issues relating to the Distribution Reinvestment Plan of CNL Income Fund XVII, Ltd. (Filed as Exhibit 8.3 to Amendment No. Three to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.1 Management Agreement between CNL Income Fund XVII, Ltd. and CNL Fund Advisors, Inc. (Included as Exhibit 10.1 to Form 10-K filed with the Securities and Exchange Commission on March 21, 1996, and incorporated herein by reference.) **10.2 Assignment of Management Agreement from CNL Fund Advisors, Inc. to CNL APF Partners, LP. (Included as Exhibit 10.2 to Form 10-Q filed with the Securities and Exchange Commission on August 13, 2001, and incorporated herein by reference.) **10.3 Form of Joint Venture Agreement for Joint Ventures with Unaffiliated Entities (Filed as Exhibit 10.2 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.4 Form of Joint Venture Agreement for Joint Ventures with Affiliated Programs (Filed as Exhibit 10.3 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.5 Form of Development Agreement (Filed as Exhibit 10.5 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.6 Form of Indemnification and Put Agreement (Filed as Exhibit 10.6 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.7 Form of Unconditional Guarantee of Payment and Performance (Filed as Exhibit 10.7 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.8 Form of Lease Agreement for Existing Restaurant (Filed as Exhibit 10.8 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.9 Form of Lease Agreement for Restaurant to be Constructed (Filed as Exhibit 10.9 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.10 Form of Premises Lease for Golden Corral Restaurant (Filed as Exhibit 10.10 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.11 Form of Agreement between CNL Income Fund XVII, Ltd. and MMS Escrow and Transfer Agency, Inc. and between CNL Income Fund XVIII, Ltd. and MMS Escrow and Transfer Agency, Inc. relating to the Distribution Reinvestment Plans (Filed as Exhibit 4.4 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.12 Form of Cotenancy Agreement with Unaffiliated Entity (Filed as Exhibit 10.12 to Amendment No. One to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.13 Form of Cotenancy Agreement with Affiliated Entity (Filed as Exhibit 10.13 to Amendment No. One to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.14 Form of Registered Investor Advisor Agreement (Filed as Exhibit 10.14 to Amendment No. One to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.15 Assignment of Management Agreement from CNL APF Partners, LP to CNL Restaurants XVIII, Inc. (Included as Exhibit 10.5 to Form 10-Q filed with the Securities and Exchange Commission on August 14, 2002, and incorporated herein by reference.) 31.1 Certification of Chief Executive Officer of Corporate General Partner Pursuant to Rule 13a-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) 31.2 Certification of Chief Financial Officer of Corporate General Partner Pursuant to Rule 13a-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) 32.1 Certification of Chief Executive Officer of Corporate General Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) 32.2 Certification of Chief Financial Officer of Corporate General Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) ** previously filed. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended June 30, 2003. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATED this 11th day of August, 2003. CNL INCOME FUND XVII, LTD. By: CNL REALTY CORPORATION General Partner By: /s/ James M. Seneff, Jr. ------------------------------ JAMES M. SENEFF, JR. Chief Executive Officer (Principal Executive Officer) By: /s/ Robert A. Bourne ------------------------------ ROBERT A. BOURNE President and Treasurer (Principal Financial and Accounting Officer) EXHIBIT INDEX Exhibit Number (c) Exhibits **3.1 Affidavit and Certificate of Limited Partnership of CNL Income Fund XVII, Ltd. (Filed as Exhibit 3.1 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **3.2 Amended and Restated Agreement of Limited Partnership of CNL Income Fund XVII, Ltd. (Included as Exhibit 4.2 to Form 10-K filed with the Securities and Exchange Commission on March 21, 1996, and incorporated herein by reference.) **4.1 Affidavit and Certificate of Limited Partnership of CNL Income Fund XVII, Ltd. (Filed as Exhibit 3.1 to Registration Statement No. 33-90998 on Form S-11 and incorporated herein by reference.) **4.2 Amended and Restated Agreement of Limited Partnership of CNL Income Fund XVII, Ltd. (Included as Exhibit 4.2 to Form 10-K filed with the Securities and Exchange Commission on March 21, 1996, and incorporated herein by reference.) **4.3 Form of Agreement between CNL Income Fund XVII, Ltd. and MMS Escrow and Transfer Agency, Inc. and between CNL Income Fund XVIII, Ltd. and MMS Escrow and Transfer Agency, Inc. relating to the Distribution Reinvestment Plans (Filed as Exhibit 4.4 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **8.3 Opinion of Baker & Hostetler regarding certain material issues relating to the Distribution Reinvestment Plan of CNL Income Fund XVII, Ltd. (Filed as Exhibit 8.3 to Amendment No. Three to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.1 Management Agreement between CNL Income Fund XVII, Ltd. and CNL Fund Advisors, Inc. (Included as Exhibit 10.1 to Form 10-K filed with the Securities and Exchange Commission on March 21, 1996, and incorporated herein by reference.) **10.2 Assignment of Management Agreement from CNL Fund Advisors, Inc. to CNL APF Partners, LP. (Included as Exhibit 10.2 to Form 10-Q filed with the Securities and Exchange Commission on August 13, 2001, and incorporated herein by reference.) **10.3 Form of Joint Venture Agreement for Joint Ventures with Unaffiliated Entities (Filed as Exhibit 10.2 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.4 Form of Joint Venture Agreement for Joint Ventures with Affiliated Programs (Filed as Exhibit 10.3 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.5 Form of Development Agreement (Filed as Exhibit 10.5 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.6 Form of Indemnification and Put Agreement (Filed as Exhibit 10.6 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.7 Form of Unconditional Guarantee of Payment and Performance (Filed as Exhibit 10.7 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.8 Form of Lease Agreement for Existing Restaurant (Filed as Exhibit 10.8 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.9 Form of Lease Agreement for Restaurant to be Constructed (Filed as Exhibit 10.9 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.10 Form of Premises Lease for Golden Corral Restaurant (Filed as Exhibit 10.10 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.11 Form of Agreement between CNL Income Fund XVII, Ltd. and MMS Escrow and Transfer Agency, Inc. and between CNL Income Fund XVIII, Ltd. and MMS Escrow and Transfer Agency, Inc. relating to the Distribution Reinvestment Plans (Filed as Exhibit 4.4 to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.12 Form of Cotenancy Agreement with Unaffiliated Entity (Filed as Exhibit 10.12 to Amendment No. One to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.13 Form of Cotenancy Agreement with Affiliated Entity (Filed as Exhibit 10.13 to Amendment No. One to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.14 Form of Registered Investor Advisor Agreement (Filed as Exhibit 10.14 to Amendment No. One to the Registrant's Registration Statement on Form S-11, No. 33-90998, incorporated herein by reference.) **10.15 Assignment of Management Agreement from CNL APF Partners, LP to CNL Restaurants XVIII, Inc. (Included as Exhibit 10.5 to Form 10-Q filed with the Securities and Exchange Commission on August 14, 2002, and incorporated herein by reference.) 31.1 Certification of Chief Executive Officer of Corporate General Partner Pursuant to Rule 13a-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) 31.2 Certification of Chief Financial Officer of Corporate General Partner Pursuant to Rule 13a-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) 32.1 Certification of Chief Executive Officer of Corporate General Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) 32.2 Certification of Chief Financial Officer of Corporate General Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) ** previously filed. EXHIBIT 31.1 EXHIBIT 31.2 EXHIBIT 32.1 EXHIBIT 32.2

CNL INCOME FUND XVII LTD 10-Q