<PAGE>

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

                                  FORM 10-K/A
                                Amendment No. 1
(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, 1998
                                         ------------------------

                                      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)

                             400 East South Street
                            Orlando, Florida 32801
                   (Address of principal executive offices, including zip code)

      Registrant's telephone number, including area code: (407) 650-1000


          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
<PAGE>

     The Form 10-K of CNL Income Fund X, Ltd. for the year ended December 31,
1998 is being amended to revise the disclosure under Item 1. Business, Item 2.
Properties, Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations and Item 8. Financial Statements and Supplementary
Data.


                                    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, totalled
$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. As a result of the above transactions, as of December 31, 1998, the
Partnership owned 41 Properties. The 41 Properties include 13 Properties owned
by joint ventures in which the Partnership is a co-venturer and one Property
owned with an affiliate as tenants-in-common. In February and March 1999, the
Partnership sold two Properties, one in Corpus Christi, Texas and one in
Rochester, New York, respectively. The Partnership intends to reinvest the net
sales proceeds from these sales in additional Properties. The Partnership leases
the Properties on a triple-net basis with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.

     On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the fourth quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger, APF will own the Properties and other assets of the
Partnership.

     In the event that the Limited Partners vote against the Merger, 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.

                                       2
<PAGE>

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 as tenants-in-common, generally provide for initial terms
ranging from 10 to 20 years (the average being 17 years), and expire between
2005 and 2017. The leases are 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 $51,500 to
$171,400. 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 five five-year
renewal options subject to the same terms and conditions as the initial lease.
Certain lessees 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.

     During 1998, a tenant, Brambury Associates filed for bankruptcy and
rejected the lease relating to one of their two leases and ceased making rental
payments to the Partnership on the rejected lease. The Partnership will not
recognize rental and earned income from this Property until a new tenant 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 the lease
that was rejected could have an adverse effect on the results of operations of
the Partnership if the Partnership is unable to re-lease the Property in a
timely manner. The General Partners are currently seeking either a new tenant or
purchaser for the Property with the rejected lease. The Partnership continued
receiving rental payments on the lease that was not rejected and in March 1999,
the Partnership sold this Property to a third party. The Partnership intends to
reinvest the net sales proceeds in an additional Property.

     During 1998, four of the Partnership's leases, were amended to provide for
rent reductions from August 1998 through the end of the lease term. However, the
General Partners do not anticipate that any decrease in rental income due to
these rent reductions relating to the Properties will have a material effect on
the Partnership's financial position or results of operations.

     During 1994, the leases relating to the Properties in Blufton, Alliance and
North Baltimore, Ohio were amended to provide for the payment of reduced annual
base rent with no scheduled rent increases. However, the lease amendment
provided for lower percentage rent breakpoints, as compared to the original
lease agreement, a change that was designed to result in higher percentage rent
payments at any time that percentage rent became payable. In accordance with a
provision in the amendments, as a result of the former tenant assigning the
leases to a new tenant during 1998, the rents under the assigned lease reverted
back to those that were required under the original lease agreements.

Major Tenants

     During 1998, five of the Partnership's lessees (or group of affiliated
lessees), (i) Carrols Corporation, (ii) TPI Restaurants, Inc., (iii) Flagstar
Enterprises, Inc., (iv) Burger King Corporation and BK Acquisition, Inc. (which
are affiliated entities under common control) (hereinafter referred to as Burger
King Corp.) and (v) Golden Corral Corporation, each contributed more than ten
percent of the Partnership's total rental income (including the Partnership's
share of rental income from 13 Properties owned by joint ventures and one
Property owned as tenants-in-common). As of December 31, 1998, Carrols
Corporation was the lessee under leases relating to four restaurants, TPI
Restaurants,

                                       3
<PAGE>

Inc. was the lessee under leases relating to five 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
owned by joint ventures and Golden Corral Corporation was the lessee under
leases relating to two restaurants. It is anticipated that, based on the minimum
rental payments required by the leases, these five lessees or groups of
affiliated lessees each will continue to contribute more than ten percent of the
Partnership's total rental income in 1999. 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 income during 1998 (including the Partnership's share of the rental
income from 13 Properties owned by joint ventures and one Property owned as
tenants-in-common). In 1999, 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 percent 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., affiliates of the General Partners, to purchase and
hold six Properties; CNL Restaurant Investments III with CNL Income Fund X,
Ltd., an affiliate of the General Partners, to purchase and hold six Properties;
and Ashland Joint Venture with CNL Income Fund X, Ltd. and CNL Income Fund XI,
Ltd., affiliates of the General Partners, to purchase and hold one Property.
Each of the affiliates 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 percent 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 30 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
percent 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, in July 1997, the
Partnership entered into an agreement to hold an IHOP Property as tenants-in-
common, with CNL Income Fund III, Ltd., an affiliate of the General Partners.
The agreement provides for the Partnership and the affiliate to share in the
profits and losses of the Property in proportion to each co-tenant's percentage
interest. The Partnership owns a 67 percent interest in this Property. The
affiliate is a limited partnership organized pursuant to the laws of the State
of Florida. 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-tenant.

                                       4
<PAGE>

     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 Fund Advisors, Inc., 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 Fund Advisors,
Inc. 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. CNL Fund Advisors, Inc. also
assists the General Partners in negotiating the leases. For these services, the
Partnership has agreed to pay CNL Fund Advisors, Inc. 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").

     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.

Employees

     The Partnership has no employees. The officers of CNL Realty Corporation
and the officers and employees of CNL Fund Advisors, Inc. 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 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, 1998, the Partnership owned 41 Properties. Of the 41
Properties, 27 are owned by the Partnership in fee simple, 13 are owned through
joint venture arrangements and one is 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. This schedule was filed with the Partnership's Form 10-K for the year
ended December 31, 1998.

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.

                                       5
<PAGE>

     The following table lists the Properties owned by the Partnership as of
December 31, 1998 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation filed with the Partnership's Form 10-K for the year ended December
31, 1998.

<TABLE>
<CAPTION>
          State                              Number of Properties
          -----                              --------------------
          <S>                                <C>
          Alabama                                     4
          Colorado                                    1
          Florida                                     1
          Georgia                                     1
          Illinois                                    1
          Indiana                                     2
          Louisiana                                   3
          Michigan                                    1
          Minnesota                                   1
          Mississippi                                 1
          North Carolina                              3
          New Hampshire                               3
          New York                                    3
          Ohio                                        7
          South Carolina                              1
          Tennessee                                   2
          Texas                                       6
                                                 -------
          TOTAL PROPERTIES:                          41
                                                 =======
</TABLE>

     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, 1998, 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, 1998, 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 $23,476,756 and $15,548,555, respectively.

     The following table lists the Properties owned by the Partnership as of
December 31, 1998 by Restaurant Chain.

<TABLE>
<CAPTION>
          Properties                         Number of Properties
          ----------                         --------------------
          <S>                                <C>
          Burger King                                  18
          Captain D's                                   1
          Denny's                                       4
          Golden Corral                                 2
          Hardee's                                      6
          IHOP                                          1
          Perkins                                       2
          Shells Seafood Restaurant                     1
          Shoney's                                      6
                                                   -------
          TOTAL PROPERTIES:                            41
                                                   =======
</TABLE>

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

                                       6
<PAGE>

     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, 1998, 1997, 1996, 1995 and 1994, the Properties were
98%, 100%, 100%, 100% and 100% occupied, respectively. The following is a
schedule of the average annual rent for each of the five years ended December
31:

                               For the Year Ended December 31:
<TABLE>
<CAPTION>
                                 1998                 1997                 1996                 1995                 1994
                           ---------------      ---------------      ---------------      ---------------      ---------------
 <S>                       <C>                  <C>                  <C>                  <C>                  <C>
 Rental Income (1)              $3,473,845           $3,350,655           $3,516,267           $3,534,838           $3,482,391
 Properties (2)                         41                   40                   40                   40                   40
 Average per Unit               $   84,728           $   83,766           $   87,907           $   88,371           $   87,060
</TABLE>

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

     The following is a schedule of lease expirations for leases in place as of
December 31, 1998 for each of the ten years beginning with 1999 and thereafter.

<TABLE>
<CAPTION>
                                                                                       Percentage of
                                     Number                 Annual Rental               Gross Annual
   Expiration Year                 of Leases                   Revenues                Rental Income
--------------------          ------------------         ------------------          ------------------
<S>                           <C>                        <C>                         <C>
          1999                           --                          --                        --
          2000                           --                          --                        --
          2001                           --                          --                        --
          2002                           --                          --                        --
          2003                           --                          --                        --
          2004                           --                          --                        --
          2005                            8                     625,126                     18.65%
          2006                           11                     910,294                     27.16%
          2007                            1                      89,214                      2.66%
          2008                           --                          --                        --
       Thereafter                        20                   1,727,066                     51.53%
                                    -------                   ---------                    ------
       Totals (1)                        40                   3,351,700                    100.00%
                                    =======                   =========                    ======
</TABLE>

(1)  Excludes one Property which was vacant at December 31, 1998.

     Leases with Major Tenants.  The terms of each of the leases with the
Partnership's major tenants as of December 31, 1998 (see Item 1.  Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.

                                       7
<PAGE>

     Carrols Corporation leases four Burger King restaurants.  The initial term
of each lease is 20 years (expiring in 2011) and the average minimum base annual
rent is approximately $104,800 (ranging from approximately $98,200 to $121,200).

     TPI Restaurants, Inc. leases four Shoney's restaurants and one Captain D's
restaurant.  The initial term of each lease is 15 years (expiring in 2006) and
the average minimum base annual rent is approximately $97,500 (ranging from
approximately $56,200 to $140,800).

     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 $65,900 (ranging from approximately $46,000 to
$83,600).

     Burger King Corporation 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 two Golden Corral restaurants with an
initial term of 15 years (expiring in 2005) and the average minimum base annual
rent is approximately $164,500 (ranging from approximately $157,500 to
$171,400).

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.


                                    PART II


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, 1998, the Partnership owned 41 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, 1998, 1997, and 1996, 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 $3,253,390, $3,157,964, and
$3,356,240 for the years ended December 31, 1998, 1997, and 1996, respectively.
The increase in cash from operations during 1998, as compared to 1997, and the
decrease during 1997, as compared to 1996, is primarily a result of changes in
income and expenses as discussed 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, 1998, 1997, and 1996.

                                       8
<PAGE>

     In December 1996, the tenant of the Property in Woodmere, Ohio, exercised
its option under the terms of its lease agreement, to substitute the existing
Property for a replacement Property. In conjunction therewith, the Partnership
exchanged the Burger King Property in Woodmere, Ohio, with a Burger King
Property in Carrboro, North Carolina. The lease for the Property in Woodmere,
Ohio, was amended to allow the Property in Carrboro, North Carolina, to continue
under the terms of the original lease. All closing costs were paid by the
tenant. The Partnership accounted for this as a non-monetary exchange of similar
assets and recorded the acquisition of the Property in Carrboro, North Carolina,
at the net book value of the Property in Woodmere, Ohio. No gain or loss was
recognized due to this being accounted for as a non-monetary exchange of similar
assets.

     In June 1997, the Partnership sold its Property in Alpharetta, Georgia, and
received net sales proceeds of $1,053,571, resulting in a gain for financial
reporting purposes of $199,643.  This Property was originally acquired by the
Partnership in September 1991 and had a cost of approximately $711,200,
excluding acquisition fees and miscellaneous acquisition expenses; therefore,
the Partnership sold the Property for approximately $342,400 in excess of its
original purchase price.  In July 1997, the Partnership reinvested approximately
$1,049,800 of these net sales proceeds in an IHOP Property in Englewood,
Colorado, as tenants-in-common, with an affiliate of the General Partners. 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 each co-venturer's percentage interest.  As of
December 31, 1998, the Partnership owned a 67 percent interest in the Property.
This transaction, or a portion thereof, relating to the sale of the Property in
Alpharetta, Georgia, and the reinvestment of the proceeds in an IHOP Property in
Englewood, Colorado, was structured as a like-kind exchange transaction for
federal income tax purposes.

     In February and March 1999, the Partnership sold its Properties in Corpus
Christi, Texas, and Rochester, New York, and received net sales proceeds in
excess of the carrying value of the Properties.  The Partnership intends to
reinvest the net sales proceeds in additional Properties.

     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.

     Currently, rental income from the Partnership's Properties and net sales
proceeds from the sale of Properties, pending reinvestment in additional
Properties, are invested in money market accounts or other short-term highly
liquid investments such as demand deposit accounts at commercial banks, CDs and
money market accounts with less than a 30-day maturity date, pending the
Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At December 31, 1998, the Partnership had
$1,287,379 invested in such short-term investments as compared to $1,250,388 at
December 31, 1997. As of December 31, 1998, the average interest rate earned on
the rental income deposited in demand deposit accounts at commercial banks was
approximately two percent annually. The funds remaining at December 31, 1998,
after the payment of distributions and other liabilities, will be used to meet
the Partnership's working capital and other 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

                                       9
<PAGE>

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 of the Partnership, to the extent that the
General Partners determine that such funds are available for distribution.
Based on cash from operations, the Partnership declared distributions to the
Limited Partners of $3,220,004, $3,150,004, and $3,185,004 for the years ended
December 31, 1998, 1997, and 1996, respectively.  This represents a distribution
of $0.92, $0.90, and $0.91 per Unit for the years ended December 31, 1998, 1997,
and 1996, respectively. No amounts distributed to the Limited Partners for the
years ended December 31, 1998, 1997, and 1996, 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 1998, 1997, and 1996, affiliates of the General Partners incurred on
behalf of the Partnership $111,596, $77,999, and $97,032, respectively, for
certain operating expenses. As of December 31, 1998 and 1997, the Partnership
owed $24,187 and $4,619, respectively, to affiliates for such amounts and
accounting and administrative services. As of March 11, 1999, the Partnership
had reimbursed the affiliates all such amounts. Other liabilities, including
distributions payable, decreased to $860,973 at December 31, 1998, from $944,578
at December 31, 1997, partially as the result of a decrease in accrued real
estate tax expense and a decrease in rents paid in advance at December 31, 1998.
The General Partners believe that the Partnership has sufficient cash on hand to
meet its current working capital needs.

Long-Term Liquidity

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

Results of Operations

     During the years ended December 31, 1998, 1997, and 1996, the Partnership
owned and leased 28 wholly-owned Properties (including one Property in
Alpharetta, Georgia, which was sold in June 1997).  In addition, during 1998,
1997, and 1996, 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.  During 1998 and 1997, the Partnership also owned and
leased one Property with an affiliate as tenants-in-common.  As of December 31,
1998, the Partnership owned, either directly or through joint venture
arrangements, 41 Properties, which are 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 $51,500 to
$171,400.  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, 1998, 1997 and 1996, the Partnership
earned $2,354,610, $2,572,954, and $2,771,319, respectively, in rental income
from operating leases (net of adjustments to accrued rental income) and earned
income from direct financing leases from the Partnership's wholly owned
Properties.  The decrease in rental and earned income during 1998 and 1997, each
as compared to the previous year, is due to the fact that the Partnership
established an allowance for doubtful accounts of approximately $93,800 and
$68,800 during 1998 and 1997, respectively, relating to the Perkins Properties
in Williamsville and Rochester, New York, which were leased by the same tenant,
due to financial difficulties the tenant is experiencing.  No such allowance was
established during 1996.  In May 1998, the tenant of these Properties filed for
bankruptcy and rejected the lease relating to one of the Properties.  As a
result, during 1998, the Partnership wrote off approximately $267,600 of accrued
rental income (non-cash accounting adjustments relating to the straight-lining
of future scheduled rent increases over the lease term in accordance with
generally accepted accounting principles) relating to both Properties.  The
Partnership will not recognize rental and earned income from the rejected
Property until a new tenant is located or until the Property is sold and the
proceeds

                                       10
<PAGE>

from such sale are reinvested in an additional Property. The lost revenues
resulting from the lease that was rejected could have an adverse effect on the
results of operations of the Partnership if the Partnership is unable to re-
lease the Property in a timely manner. The General Partners are currently
seeking either a new tenant or purchaser for the Property with the rejected
lease. The Partnership continued receiving rental payments on the lease that was
not rejected and in March 1999, the Partnership sold this Property to a third
party. The Partnership intends to reinvest the net sales proceeds in an
additional Property.

     The decrease during 1998, as compared to 1997, is also partially
attributable to a decrease of approximately $52,000 during 1998, due to the fact
that the leases relating to the Burger King Properties in Shelby, North
Carolina; Maple Heights, Ohio; Watertown, New York and Carrboro, North Carolina
were amended to provide for rent reductions.  Rental and earned income relating
to these Properties are expected to remain at reduced amounts as a result of
these amendments.

     The decrease in rental and earned income during 1998, as compared to 1997,
is partially offset by an increase of approximately $93,800 for rental amounts
relating to the Partnership's Properties in Blufton, Alliance and North
Baltimore, Ohio, during 1998.  During 1994, the leases relating to these
Properties were amended to provide for the payment of reduced annual base rent
with no scheduled rent increases.  In accordance with a provision in the
amendments, as a result of the former tenant assigning the leases to a new
tenant during 1998, the rents under the assigned leases, reverted back to those
that were required under the original lease agreements.

     In addition, rental and earned income decreased approximately $47,700 and
$51,800 during 1998 and 1997, respectively, as a result of the sale of the
Property in Alpharetta, Georgia, in June 1997.  In July 1997, the Partnership
reinvested the net sales proceeds in a Property in Englewood, Colorado, as
tenants-in-common, with an affiliate of the General Partners, as discussed above
in "Capital Resources."

     The decrease in rental and earned income during 1998, as compared to 1997,
is partially offset by an increase in rental and earned income of approximately
$49,100 during 1998, as a result of the Partnership re-leasing the Property in
Copley Township, Ohio, for which rent commenced in 1997.  The former operator of
the Property ceased operations of the Property in April 1997, resulting in a
decrease in rental income of approximately $65,000 during 1997, as compared to
1996.

     In addition, for the years ended December 31, 1998, 1997, and 1996, the
Partnership earned $79,780, $74,867, and $120,999, respectively, in contingent
rental income.  The decrease in contingent rental income for 1997, as compared
to 1996, is primarily attributable to a change, beginning in 1997, in the
contingent rent formula (consisting of an increase to the sales breakpoint on
which contingent rents are computed) in accordance with the terms of the leases,
for certain restaurant Properties requiring the payment of contingent rental
income.

     During the years ended December 31, 1998, 1997, and 1996, the Partnership
also earned $596,166, $537,853, and $460,400, 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 1998
and 1997, each as compared to the previous year, is primarily due to the fact
that in July 1997, the Partnership reinvested the net sales proceeds it received
from the sale of the Property in Alpharetta, Georgia, in an IHOP Property
located in Englewood, Colorado, as tenants-in-common, with an affiliate of the
General Partners.

     During the year ended December 31, 1998, five of the Partnership's lessees
(or group of affiliated lessees), Carrols Corporation, TPI Restaurants, Inc.,
Flagstar Enterprises, Inc., Golden Corral Corporation and Burger King
Corporation, each contributed more than ten percent of the Partnership's total
rental income (including the Partnership's share of rental income from 13
Properties owned by joint ventures and one Property owned as tenants-in-common).
As of December 31, 1998, Carrols Corporation was the lessee under leases
relating to four restaurants, TPI Restaurants, Inc. was the lessee under leases
relating to five 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 owned by joint ventures and Golden Corral
Corporation was the lessee under leases relating to two restaurants.  It is
anticipated that, based on the minimum rental payments required by the leases,
these five lessees or groups of affiliated lessees each will continue to
contribute more than ten percent of the Partnership's total rental income in
1999.  In addition, four Restaurant Chains, Burger King, Hardee's, Golden
Corral, Family Steakhouse Restaurants, and Shoney's, each accounted for more
than ten percent of the Partnership's total rental income during 1998 (including
the Partnership's share of the rental

                                       11
<PAGE>

income from 13 Properties owned by joint ventures and one Property owned as
tenants-in-common). 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.

     Operating expenses, including depreciation and amortization expense, were
$499,212, $492,354, and $443,767 for the years ended December 31, 1998, 1997,
and 1996, respectively.  The increase in operating expenses during 1998, as
compared to 1997 is partially attributable to the fact that the Partnership
incurred $19,041 in transaction costs related to the General Partners retaining
financial and legal advisors to assist them in evaluating and negotiating the
proposed Merger with APF, as described below.  If the Limited Partners reject
the Merger, the Partnership will bear the portion of the transaction costs based
upon the percentage of "For" votes and the General Partners will bear the
portion of such transaction costs based upon the percentage of "Against" votes
and abstentions.  The increase in operating expenses during 1998 was also
attributable to an increase in legal fees incurred in conjunction with the
tenant of the Properties in Williamsville and Rochester, New York filing for
bankruptcy, as described above.

     The increase during 1998, as compared to 1997, is partially offset by, and
the increase for 1997, as compared to 1996, is partially attributable to, the
fact that during 1997, the Partnership recorded bad debt expense of $21,000
relating to the Property in Copley Township, Ohio.  The former tenant ceased
operating the Property in April 1997, and the General Partners ceased collection
efforts.  In addition, the increase in operating expenses during 1997, as
compared to 1996, was partially due to the fact that, the Partnership recorded
past due real estate taxes relating to the Property in Copley Township, Ohio of
$23,191 and $9,906 during 1997 and 1996, respectively.  Due to the fact that the
Property was re-leased to a new tenant in September 1997, no such expenses were
recorded during 1998.

     During the year ended December 31, 1998, the Partnership established an
allowance for loss on building and an impairment in carrying value of net
investment in direct financing lease for a total of $314,775 for financial
reporting purposes relating to the Properties in Williamsville and Rochester,
New York, due to the fact that, during 1998, the tenant, Brambury Associates,
filed for bankruptcy.  The losses represent the difference between each
Property's carrying value at December 31, 1998, and the current estimate of net
realizable value at December 31, 1998 for each Property.  No such allowance was
established during the years ended December 31, 1997 and 1996.

     As a result of the 1997 sale of the Property in Alpharetta, Georgia, as
described above in "Capital Resources," the Partnership recognized a gain for
financial reporting purposes of $199,643 for the year ended December 31, 1997.
No Properties were sold during 1998 or 1996.

     The Partnership's leases as of December 31, 1998, 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. Management expects that increases in restaurant sales volumes due
to inflation and real sales growth should result in an increase in rental income
over time.  Continued inflation also 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.

Proposed Merger

     On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with APF, pursuant to which the Partnership would be merged with and into
a subsidiary of APF.  As consideration for the Merger, APF has agreed to issue
3,700,097 APF Shares.  In order to assist the General Partners in evaluating the
proposed merger consideration, the General Partners retained Valuation
Associates, a nationally recognized real estate appraisal firm, to appraise the
Partnership's restaurant property portfolio.  Based on Valuation Associates'
appraisal, the fair value of the Partnership's property portfolio and other
assets was $36,414,830 as of December 31, 1998.  The APF Shares are expected to
be listed for trading on the New York Stock Exchange concurrently with the
consummation of the Merger, and, therefore, would be freely tradable at the
option of the former Limited Partners.  At a special meeting of the Limited
Partners that is expected to be held in the fourth quarter of 1999, Limited
Partners holding in excess of 50% of the Partnership's outstanding limited
partnership interests must approve the Merger prior to consummation of the
transaction.  If the Limited Partners at the special meeting approve the Merger,
APF will own the Properties and other assets of the Partnership.  The General
Partners intend to recommend that the Limited

                                       12
<PAGE>

Partners of the Partnership approve the Merger. In connection with their
recommendation, the General Partners will solicit the consent of the Limited
Partners at the special meeting.

Year 2000 Readiness Disclosure

Overview of Year 2000 Problem

     The year 2000 problem concerns the inability of information and non-
information technology systems to properly recognize and process date sensitive
information beyond January 1, 2000.  The failure to accurately recognize the
year 2000 could result in a variety of problems from data miscalculations to the
failure of entire systems.

Information and Non-Information Technology Systems

     The Partnership does not have any information or non-information technology
systems.  The General Partners and their affiliates provide all services
requiring the use of information and non-information technology systems pursuant
to a management agreement with the Partnership.  The information technology
system of the General Partners' affiliates consists of a network of personal
computers and servers built using hardware and software from mainstream
suppliers.  The non-information technology systems of the affiliates are
primarily facility related and include building security systems, elevators,
fire suppressions, HVAC, electrical systems and other utilities.  The affiliates
have no internally generated programmed software coding to correct, because
substantially all of the software utilized by the affiliates is purchased or
licensed from external providers.  The maintenance of non-information technology
systems at the Partnership's restaurant properties is the responsibility of the
tenants of such properties in accordance with the terms of the Partnership's
leases.

The Y2K Team

     In early 1998, the General Partners and their affiliates formed a Year 2000
committee (the "Y2K Team") for the purpose of identifying, understanding and
addressing the various issues associated with the year 2000 problem.  The Y2K
Team consists of the General Partners and members from their affiliates,
including representatives from senior management, information systems,
telecommunications, legal, office management, accounting and property
management.

Assessing Year 2000 Readiness

     The Y2K Team's initial step in assessing year 2000 readiness consists of
identifying any systems that are date-sensitive and, accordingly, could have
potential year 2000 problems.  The Y2K Team has conducted inspections,
interviews and tests to identify which of the systems used by the Partnership
could have a potential year 2000 problem.

     The information system of the General Partners' affiliates is comprised of
hardware and software applications from mainstream suppliers.  Accordingly, the
Y2K Team has contacted and is evaluating documentation from the respective
vendors and manufacturers to verify the year 2000 compliance of their products.
The Y2K Team has also requested and is evaluating documentation from the non-
information technology systems providers of the affiliates.

     In addition, the Y2K Team has requested and is evaluating documentation
from other companies with which the Partnership has material third party
relationships.  Such third parties, in addition to the providers of information
and non-information technology systems, consist of the Partnership's transfer
agent and financial institutions.  The Partnership depends on its transfer agent
to maintain and track investor information and its financial institutions for
availability of cash.

     As of September 15, 1999, the Y2K Team had received responses from
approximately 60% of the third parties.  All of the responses were in writing.
Of the third parties responding, all indicated that they are currently year 2000
compliant or will be year 2000 compliant prior to the year 2000.  Although the
Y2K Team continues to receive positive responses from the companies with which
the Partnership has third party relationships regarding

                                       13
<PAGE>

their year 2000 compliance, the General Partners cannot be assured that the
third parties have adequately considered the impact of the year 2000.

     In addition, the Y2K Team has requested documentation from the
Partnership's tenants.  The Y2K Team is in the process of evaluating the
responses and expects to complete this process by October 31, 1999.  The
Partnership has also instituted a policy of requiring any new tenants to
indicate that their systems are year 2000 compliant or are expected to be year
2000 compliant prior to the year 2000.

Achieving Year 2000 Compliance

     The Y2K Team has identified and completed upgrades of the hardware
equipment that was not year 2000 compliant.  In addition, the Y2K Team has
identified and completed upgrades of the software applications that were not
year 2000 compliant, although the General Partners cannot be assured that the
upgrade solutions provided by the vendors have addressed all possible year 2000
issues.

     The cost for these upgrades and other remedial measures is the
responsibility of the General Partners and their affiliates.  The General
Partners do not expect that the Partnership will incur any costs in connection
with year 2000 remedial measures.

Assessing the Risks to the Partnership of Non-Compliance and Developing
Contingency Plans

Risk of Failure of Information and Non-Information Technology Systems Used by
the Partnership

     The General Partners believe that the reasonably likely worst case scenario
with regard to the information and non-information technology systems used by
the Partnership is the failure of one or more of these systems as a result of
year 2000 problems.  Because the Partnership's major source of income is rental
payments under long-term triple-net leases, any failure of information or non-
information technology systems used by the Partnership is not expected to have a
material impact on the results of operations of the Partnership.  Even if such
systems failed, the payment of rent under the Partnership's leases would not be
affected.  In addition, the Y2K Team is expected to correct any Y2K problems
within the control of the General Partners and their affiliates before the year
2000.

     The Y2K Team has determined that a contingency plan to address this risk is
not necessary at this time.  However, if the Y2K Team identifies additional
risks associated with the year 2000 compliance of the information or non-
information technology systems used by the Partnership, the Y2K Team will
develop a contingency plan if deemed necessary at that time.

Risk of Inability of Transfer Agent to Accurately Maintain Partnership Records

     The General Partners believe that the reasonably likely worst case scenario
with regard to the Partnership's transfer agent is that the transfer agent will
fail to achieve year 2000 compliance of its systems and will not be able to
accurately maintain the records of the Partnership.  This could result in the
inability of the Partnership to accurately identify its Limited Partners for
purposes of distributions, delivery of disclosure materials and transfer of
units.  The Y2K Team has received certification from the Partnership's transfer
agent of its year 2000 compliance.  Despite the positive response from the
transfer agent, the General Partners cannot be assured that the transfer agent
has addressed all possible year 2000 issues.

     The Y2K Team has developed a contingency plan pursuant to which the General
Partners and their affiliates would maintain the records of the Partnership
manually, in the event that the systems of the transfer agent are not year 2000
compliant.  The General Partners and their affiliates would have to allocate
resources to internally perform the functions of the transfer agent.  The
General Partners do not anticipate that the additional cost of these resources
would have a material impact on the results of operations of the Partnership.

Risk of Loss of Short-Term Liquidity from Failure of Financial Institutions to
Achieve Year 2000 Compliance

     The General Partners believe that the reasonably likely worst case scenario
with regard to the Partnership's financial institutions is that some or all of
its funds on deposit with such financial institutions may be temporarily

                                       14
<PAGE>

unavailable.  The Y2K Team has received responses from 93% of the Partnership's
financial institutions indicating that their systems are currently year 2000
compliant or are expected to be year 2000 compliant prior to the year 2000.
Despite the positive responses from the financial institutions, the General
Partners cannot be assured that the financial institutions have addressed all
possible year 2000 issues.  The loss of short-term liquidity could affect the
Partnership's ability to pay its expenses on a current basis.  The General
Partners do not anticipate that a loss of short-term liquidity would have a
material impact on the results of operations of the Partnership.

     Based upon the responses received from the Partnership's financial
institutions and the inability of the Y2K Team to identify a suitable
alternative for the deposit of funds that is not subject to potential year 2000
problems, the Y2K Team has determined not to develop a contingency plan to
address this risk.

Risks of Late Payment or Non-Payment of Rent by Tenants

     The General Partners believe that the reasonably likely worst case scenario
with regard to the Partnership's tenants is that some of the tenants may make
rental payments late as the result of the failure of the tenants to achieve year
2000 compliance of their systems used in the payment of rent, the failure of the
tenant's financial institutions to achieve year 2000 compliance, or the
temporary disruption of the tenants' businesses.  The Y2K Team is in the process
of requesting responses from the Partnership's tenants indicating the extent to
which their systems are currently year 2000 compliant or are expected to be year
2000 compliant prior to the year 2000.  The General Partners cannot be assured
that the tenants have addressed all possible year 2000 issues.  The late payment
of rent by one or more tenants would affect the results of operations of the
Partnership in the short-term.

     The General Partners are also aware of predictions that the year 2000
problem, if uncorrected, may result in a global economic crisis.  The General
Partners are not able to determine if such predictions are true.  A widespread
disruption of the economy could affect the ability of the Partnership's tenants
to pay rent and, accordingly, could have a material impact on the results of
operations of the Partnership.

     Because payment of rent is under the control of the Partnership's tenants,
the Y2K Team is not able to develop a contingency plan to address these risks.
In the event of late payment or non-payment of rent, the General Partners will
assess the remedies available to the Partnership under its lease agreements.

Item 8.   Financial Statements and Supplementary Data

                                       15
<PAGE>

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

                                   CONTENTS
                                   --------



                                                                          Page
                                                                          ----

Report of Independent Accountants                                          17

Financial Statements:

  Balance Sheets                                                           18

  Statements of Income                                                     19

  Statements of Partners' Capital                                          20

  Statements of Cash Flows                                                 21

  Notes to Financial Statements                                            22

                                       16
<PAGE>

                       Report of Independent Accountants
                       ---------------------------------


To the Partners
CNL Income Fund IX, Ltd.


In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund IX, Ltd. (a Florida limited partnership) at December 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.  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 generally accepted auditing
standards 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 the opinion expressed above.



/s/ PricewaterhouseCoopers LLP

Orlando, Florida
February 2, 1999, except for Note 10 for which the date is March 11, 1999

                                       17
<PAGE>

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

                                BALANCE SHEETS
                                --------------


<TABLE>
<CAPTION>
                                                                        December 31,
                                                                 1998                 1997
                                                              -----------         -----------
<S>                                                           <C>                 <C>
                   ASSETS
                   ------

Land and buildings on operating leases, less
   accumulated depreciation and allowance
   for loss on building                                       $15,066,178         $14,163,111
Net investment in direct financing leases, less
   allowance for impairment in carrying value                   5,905,995           7,482,757
Investment in joint ventures                                    6,473,381           6,619,364
Cash and cash equivalents                                       1,287,379           1,250,388
Receivables, less allowance for doubtful
   accounts of $206,052 and $108,316                               93,569              96,134
Prepaid expenses                                                    3,185               3,924
Lease costs, less accumulated amortization
   of $1,577 and $77                                               13,423              14,923
Accrued rental income                                           1,255,968           1,465,820
                                                              -----------         -----------

                                                              $30,099,078         $31,096,421
                                                              ===========         ===========


          LIABILITIES AND PARTNERS' CAPITAL
          ---------------------------------

Accounts payable                                              $     1,103         $     4,490
Accrued and escrowed real estate taxes payable                      9,022              45,591
Distributions payable                                             787,501             787,501
Due to related parties                                             24,187               4,619
Rents paid in advance and deposits                                 63,347             106,996
                                                              -----------         -----------
       Total liabilities                                          885,160             949,197

Partners' capital                                              29,213,918          30,147,224
                                                              -----------         -----------

                                                              $30,099,078         $31,096,421
                                                              ===========         ===========
</TABLE>

                See accompanying notes to financial statements.

                                       18
<PAGE>

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

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                         1998                        1997                          1996
                                                  ------------------          ------------------         -------------------
<S>                                               <C>                         <C>                        <C>
Revenues:
 Rental income from operating leases              $        1,804,248          $        1,742,351         $         1,854,245
 Adjustments to accrued rental income                       (267,600)                         --                          --
 Earned income from direct                                   826,962                     830,603                     917,074
   financing leases
 Contingent rental income                                     79,780                      74,867                     120,999
 Interest and other income                                    61,129                      44,669                      51,348
                                                  ------------------          ------------------         -------------------
                                                           2,504,519                   2,692,490                   2,943,666
                                                  ------------------          ------------------         -------------------
Expenses:
 General operating and administrative                        142,996                     153,175                     152,437
 Professional services                                        43,685                      24,658                      26,610
 Bad debt expense                                              5,133                      21,000                          --
 Real estate taxes                                             6,247                      30,835                       9,906
 State and other taxes                                        14,337                      11,126                       2,775
 Depreciation and amortization                               267,773                     251,560                     252,039
 Transaction costs                                            19,041                          --                          --
                                                  ------------------          ------------------         -------------------
                                                             499,212                     492,354                     443,767
                                                  ------------------          ------------------         -------------------

Income Before Equity in Earnings of Joint
 Ventures, Gain on Sale of Land and
 Building, and Provision for Loss on
 Building and Impairment in Carrying
 Value of Net Investment in Direct
 Financing Lease                                           2,005,307                   2,200,136                   2,499,899

Equity in Earnings of Joint Ventures                         596,166                     537,853                     460,400

Gain on Sale of Land and Building                                 --                     199,643                          --

Provision for Loss on Building and
 Carrying
 Value of Net Investment in Direct
 Financing Lease                                            (314,775)                         --                          --
                                                  ------------------          ------------------         -------------------

Net Income                                        $        2,286,698          $        2,937,632         $         2,960,299
                                                  ==================          ==================         ===================

Allocation of Net Income:
 General partners                                 $           23,991          $           27,380         $            29,603
 Limited partners                                          2,262,707                   2,910,252                   2,930,696
                                                  ------------------          ------------------         -------------------

                                                  $        2,286,698          $        2,937,632         $         2,960,299
                                                  ==================          ==================         ===================

Net Income Per Limited Partner Unit               $             0.65          $             0.83         $              0.84
                                                  ==================          ==================         ===================

Weighted Average Number of
 Limited Partner Units Outstanding                         3,500,000                   3,500,000                   3,500,000
                                                  ==================          ==================         ===================
</TABLE>

                See accompanying notes to financial statements.

                                       19
<PAGE>

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

                       STATEMENTS OF PARTNERS' CAPITAL
                       -------------------------------

                 Years Ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>
                                       General Partners                                Limited Partners
                                 ----------------------------     ------------------------------------------------------------
                                                  Accumulated                                        Accumulated   Syndication
                                  Contributions     Earnings      Contributions    Distributions       Earnings       Costs
                                 --------------   -----------     -------------    -------------     -----------   -----------

<S>                              <C>              <C>             <C>              <C>               <C>           <C>
Balance, December 31, 1995       $        1,000   $   132,789     $  35,000,000    $ (13,505,579)    $13,146,091   $(4,190,000)

 Distributions to limited
   partners ($0.91 per
   limited partner unit)                     --            --                --       (3,185,004)             --            --
 Net income                                  --        29,603                --               --       2,930,696            --
                                 --------------   -----------     -------------    -------------     -----------   -----------
Balance, December 31, 1996                1,000       162,392        35,000,000      (16,690,583)     16,076,787    (4,190,000)

 Distributions to limited
   partners ($0.90 per
   limited partner unit)                     --            --                --       (3,150,004)                           --
 Net income                                  --        27,380                --               --       2,910,252            --
                                 --------------   -----------     -------------    -------------     -----------   -----------

Balance, December 31, 1997                1,000       189,772        35,000,000      (19,840,587)     18,987,039    (4,190,000)

 Distributions to limited
   partners ($0.92 per
   limited partner unit)                     --            --                --       (3,220,004)             --            --
 Net income                                  --        23,991                --               --       2,262,707            --
                                 --------------   -----------     -------------    -------------     -----------   -----------

Balance, December 31, 1998       $        1,000   $   213,763     $  35,000,000    $ (23,060,591)    $21,249,746   $(4,190,000)
                                 ==============   ===========     =============    =============     ===========   ===========


<CAPTION>
                                       Total
                                     ----------

<S>                                  <C>
Balance, December 31, 1995           $30,584,301

 Distributions to limited
   partners ($0.91 per
   limited partner unit)              (3,185,004)
 Net income                            2,960,299
                                     -----------

Balance, December 31, 1996            30,359,596

 Distributions to limited
   partners ($0.90 per
   limited partner unit)              (3,150,004)
 Net income                            2,937,632
                                     -----------

Balance, December 31, 1997            30,147,224

 Distributions to limited
   partners ($0.92 per
   limited partner unit)              (3,220,004)
 Net income                            2,286,698
                                     -----------

Balance, December 31, 1998           $29,213,918
                                     ===========
</TABLE>

                See accompanying notes to financial statements.

                                       20
<PAGE>

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

                           STATEMENTS OF CASH FLOWS
                           ------------------------


<TABLE>
<CAPTION>
                                                                                    Year Ended December 31,
                                                                   1998                      1997                    1996
                                                             ----------------         -----------------        -----------------
<S>                                                          <C>                      <C>                      <C>
Increase (Decrease) in Cash and Cash
Equivalents:

Cash Flows from Operating Activities:
     Cash received from tenants                              $      2,695,934         $       2,666,373        $       2,900,048
     Distributions from joint ventures                                738,544                   676,806                  603,833
     Cash paid for expenses                                          (223,753)                 (229,884)                (186,126)
     Interest received                                                 42,665                    44,669                   38,485
       Net cash provided by operating activities                    3,253,390                 3,157,964                3,356,240
                                                             ----------------         -----------------        -----------------

   Cash Flows from Investing Activities:
     Proceeds from sale of land and building                               --                 1,053,571                       --
     Investment in joint venture                                        3,605                (1,049,762)                      --
     Payment of lease costs                                                --                   (15,000)                      --
                                                             ----------------         -----------------        -----------------
       Net cash provided by (used in)
         operating activities                                           3,605                   (11,191)                      --
                                                             ----------------         -----------------        -----------------

   Cash Flows from Financing Activities:
     Distributions to limited partners                             (3,220,004)               (3,185,003)              (3,185,004)
                                                             ----------------         -----------------        -----------------
         Net cash used in financing activities                     (3,220,004)               (3,185,003)              (3,185,004)
                                                             ----------------         -----------------        -----------------

Net Increase (Decrease) in Cash and Cash Equivalents                   36,991                   (38,230)                 171,236

Cash and Cash Equivalents at Beginning of Year                      1,250,388                 1,288,618                1,117,382
                                                             ----------------         -----------------        -----------------

Cash and Cash Equivalents at End of Year                     $      1,287,379         $       1,250,388        $       1,288,618
                                                             ================         =================        =================
</TABLE>

                See accompanying notes to financial statements.

                                       21
<PAGE>

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

                     STATEMENTS OF CASH FLOWS - CONTINUED
                     ------------------------------------

<TABLE>
<CAPTION>

                                                                          1998                  1997                 1996
                                                                      -----------           ------------         -----------

Reconciliation of Net Income to Net Cash Provided by
 Operating Activities:

<S>                                                                   <C>                   <C>                  <C>
   Net income                                                         $ 2,286,698           $  2,937,632         $ 2,960,299
                                                                      -----------           ------------         -----------
   Adjustments to reconcile net income to net cash
      provided  by operating activities:
       Bad debt expense                                                     5,133                 21,000                  --
       Depreciation                                                       266,273                251,483             251,483
       Amortization                                                         1,500                     77                 556
       Equity in earnings of joint ventures, net of
         distributions                                                    142,378                138,953             143,433
       Gain on sale of land and building                                       --               (199,643)                 --
       Provision for loss on building and
         impairment in carrying value of net
         investment in direct financing lease                             314,775                     --                  --
       Decrease (increase) in receivables                                  (2,568)               (41,878)             87,823
       Decrease (increase) in prepaid expenses                                739                    (79)             (2,913)
       Decrease in net investment in direct
         financing leases                                                  92,647                121,311              89,696
       Decrease (increase) in accrued rental income                       209,852                (70,837)           (225,434)
       Increase (decrease) in accounts payable and
         accrued expenses                                                 (39,956)               (16,524)             12,111
       Increase (decrease) in due to related parties                       19,568                  3,214              (4,639)
       Increase (decrease) in rents paid in advance
         and deposits                                                     (43,649)                13,255              43,825
                                                                      -----------           ------------         -----------
          Total adjustments                                               966,692                220,332             395,941
                                                                      -----------           ------------         -----------
Net Cash Provided by Operating Activities                             $ 3,253,390           $  3,157,964         $ 3,356,240
                                                                      ===========           ============         ===========

Supplemental Schedule of Non-Cash Investing and
 Financing Activities:

   Land and building under operating lease exchanged
     for land and building under operating lease                      $        --             $       --          $  406,768
                                                                      ===========           ============         ===========
   Distributions declared and unpaid at December 31                   $   787,501             $  787,501          $  822,500
                                                                      ===========           ============         ===========
</TABLE>

                See accompanying notes to financial statements.

                                       22
<PAGE>

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

                         NOTES TO FINANCIAL STATEMENTS
                         -----------------------------

                 Years Ended December 31, 1998, 1997, and 1996


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 percent 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 Accounting - 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 on a triple-net
     basis, whereby the tenant is generally 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 method. 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.

                                       23
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


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 writes-off 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, will be removed from the accounts and gains
     or losses from sales will be reflected in income. The general partners of
     the Partnership review the 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 their 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, and to decrease
     rental or other income or increase bad debt expense for the current period,
     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 a property in Englewood, Colorado, for which the property is
     held as tenants-in-common with an affiliate, are accounted for using the
     equity method since the Partnership shares control with affiliates which
     have the same general partners.

     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.

                                       24
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


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

     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.  The Partnership limits investment of temporary cash investments
     to financial institutions with high credit standing; therefore, the
     Partnership believes it is not exposed to any significant credit risk on
     cash and cash equivalents.

     Lease costs - Lease costs associated with negotiating a new lease 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.

     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. 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 1998 presentation. These
     reclassifications had no effect on partners' capital or net income.

                                       25
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


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 15 to 20 years and
     provide for minimum and contingent rentals.  In addition, the tenant 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 five 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:

<TABLE>
<CAPTION>
                                         1998                1997
                                    -------------       -------------

<S>                                 <C>                 <C>
     Land                             $ 8,207,939         $ 8,207,939
     Buildings                          8,818,794           7,452,942
                                    -------------       -------------
                                       17,026,733          15,660,881

     Less accumulated depreciation     (1,711,187)         (1,497,770)
                                    -------------       -------------
                                       15,315,546         $14,163,111
     Less allowance for loss on
      building                           (249,368)                 --
                                    -------------       -------------
                                      $15,066,178         $14,163,111
                                    =============       =============
</TABLE>

                                       26
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996

3.   Land and Buildings - Continued:
     ------------------------------

     In June 1997, the Partnership sold its property in Alpharetta, Georgia, and
     received net sales proceeds of $1,053,571, resulting in a gain of $199,643
     for financial reporting purposes. This property was originally acquired by
     the Partnership in September 1991 and had a cost of approximately $711,200,
     excluding acquisition fees and miscellaneous acquisition expenses;
     therefore, the Partnership sold the property for approximately $342,400 in
     excess of its original purchase price.

     During 1998, the Partnership recorded a provision for loss on building in
     the amount of $249,368 for financial reporting purposes relating to the
     property in Williamsville, New York.  The tenant of this property filed for
     bankruptcy during 1998, and rejected the lease. The allowance represents
     the difference between the carrying value of the property at December 31,
     1998 and the current estimated net realizable value for this property.

     Some leases provide for escalating guaranteed minimum rents throughout the
     lease term.  Income from these scheduled rent increases is recognized on a
     straight-line basis over the terms of the leases.  For the year ended
     December 31, 1998, the Partnership recognized a loss of $209,852 (net of
     $267,600 in write-offs) and for the years ended December 31, 1997 and 1996,
     the Partnership recognized income of $70,837, and $225,434, respectively,
     of such rental income.

     The following is a schedule of the future minimum lease payments to be
     received on noncancellable operating leases at December 31, 1998:

             1999                                    $ 1,726,921
             2000                                      1,726,921
             2001                                      1,763,564
             2002                                      1,889,001
             2003                                      1,897,501
             Thereafter                                9,771,187
                                                     -----------

                                                     $18,775,095
                                                     ===========

     Since lease renewal periods are exercisable at the option of the tenant,
     the above table only presents future minimum lease payments due during the
     initial lease terms.  In addition, this table does not include any amounts
     for future contingent rentals which may be received on the leases based on
     a percentage of the tenant's gross sales.

                                       27
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


4.   Net Investment in Direct Financing Leases:
     -----------------------------------------

     The following lists the components of the net investment in direct
     financing leases at December 31:

                                            1998            1997
                                        -----------     -----------

Minimum lease payments receivable       $11,521,454     $13,764,606
Estimated residual values                 2,091,629       2,495,379
Less unearned income                     (7,641,681)     (8,777,228)
                                        -----------     -----------
                                          5,971,402       7,482,757
Less allowance for impairment in
 carrying value                             (65,407)             --
                                        -----------     -----------
Net investment in direct financing
 leases                                 $ 5,905,995     $ 7,482,757
                                        ===========     ===========

     In August 1998, four of the Partnership's leases were amended.  As a
     result, the Partnership reclassified the direct financing leases to
     operating leases.  In accordance with Statement of Financial Accounting
     Standards #13, "Accounting for Leases," the Partnership recorded each of
     the reclassified leases at the lower of original cost, present fair value,
     or present carrying amount.  No loss on termination of direct financing
     lease was recorded for financial reporting purposes.

     During 1998, the Partnership recorded a provision for loss on investment in
     direct financing lease of $65,407 for financial reporting purposes relating
     to the Property in Rochester, New York, due to the fact that the tenant
     filed for bankruptcy during 1998.  The allowance represents the difference
     between the carrying value of the Property at December 31, 1998 and the
     current estimated net realizable value for this Property.

                                       28
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


4.   Net Investment in Direct Financing Leases - Continued:
     -----------------------------------------------------


     The following is a schedule of future minimum lease payments to be received
     on the direct financing leases at December 31, 1998:

               1999                                    $   832,979
               2000                                        832,979
               2001                                        844,812
               2002                                        890,607
               2003                                        890,607
               Thereafter                                7,229,470
                                                       -----------

                                                       $11,521,454
                                                       ===========

     The above table does not include future minimum lease payments for renewal
     periods or for contingent rental payments that may become due in future
     periods (see Note 3).

5.   Investment in Joint Ventures:
     ----------------------------

     The Partnership has a 45.2%, a 50 percent and a 27.33% interest in the
     profits and losses of CNL Restaurant Investments II, CNL Restaurant
     Investments III and Ashland Joint Venture, respectively.  The remaining
     interests in these joint ventures are held by affiliates of the Partnership
     which have the same general partners.

     In July 1997, the Partnership used the net sales proceeds from the sale of
     the property in Alpharetta, Georgia, to acquire a 67 percent interest in an
     IHOP property located in Englewood, Colorado, as tenants-in-common with an
     affiliate of the general partners.  The Partnership accounts for its
     investment in this property using the equity method since the Partnership
     shares control with an affiliate, and amounts relating to its investment
     are included in investment in joint ventures.



                                       29
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


5.   Investment in Joint Ventures - Continued:
     ----------------------------------------

     CNL Restaurant Investments II and CNL Restaurant Investments III each own
     and lease six properties to an operator of national fast-food restaurants
     and Ashland Joint Venture owns and leases one property to an operator of
     national fast-food restaurants.  The Partnership and an affiliate, as
     tenants in common own and lease one property to an operator of a national
     family-style restaurant.  The following presents the joint ventures'
     combined, condensed financial information at December 31:

<TABLE>
<CAPTION>
                                                           1998               1997
                                                       --------------     ------------

          <S>                                          <C>                <C>
          Land and buildings on operating
           leases, less accumulated
           depreciation                                   $12,253,332      $12,582,754
          Net investment in direct financing lease            991,524        1,003,680
          Cash                                                  1,196           15,124
          Receivables                                          23,283           35,773
          Prepaid expenses                                     24,790           23,544
          Accrued rental income                                36,855           11,620
          Liabilities                                           1,641           14,280
          Partners' capital                                13,329,339       13,658,215
          Revenues                                          1,576,778        1,506,380
          Net income                                        1,208,451        1,141,755
</TABLE>

     The Partnership recognized income totaling $596,166, $537,853, and $460,400
     for the years ended December 31, 1998, 1997, and 1996, respectively, from
     these joint ventures.

6.   Allocations and Distributions:
     -----------------------------

     Generally, all net income and net losses of the Partnership, excluding
     gains and losses from the sale of properties, are allocated 99 percent to
     the limited partners and one percent to the general partners.
     Distributions of net cash flow are made 99 percent to the limited  partners
     and one percent to the general partners; provided, however, that the one
     percent of net cash flow to be distributed to the general partners 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").

                                       30
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


6.   Allocations and Distributions - Continued:
     -----------------------------------------

     Generally, net sales proceeds from the sale of properties, not in
     liquidation of the Partnership, to the extent distributed, will be
     distributed first to the limited partners in an amount sufficient to
     provide them with their 10% Preferred Return, plus the return of their
     adjusted capital contributions.  The general partners will then receive, to
     the extent previously subordinated and unpaid, a one percent interest in
     all prior distributions of net cash flow and a return of their capital
     contributions. Any remaining sales proceeds will be distributed 95 percent
     to the limited partners and five percent to the general partners.  Any gain
     from the sale of a property, not in liquidation of the Partnership, is, in
     general, allocated in the same manner as net sales proceeds are
     distributable. Any loss from the sale of a property is, allocated first, on
     a pro rata basis, to partners with positive balances in their capital
     accounts; and thereafter, 95 percent to the limited partners and five
     percent to the general partners.

     Generally, net sales proceeds from a liquidating sale of properties, will
     be used in the following order: i) first to pay and discharge all of the
     Partnership's liabilities to creditors, ii) second, to establish reserves
     that may be deemed necessary for any anticipated or unforeseen liabilities
     or obligations of the Partnership, iii) third, to pay all of the
     Partnership's liabilities, if any, to the general and limited partners, iv)
     fourth, after allocations of net income, gains and/or losses, to distribute
     to the partners with positive capital accounts balances, in proportion to
     such balances, up to amounts sufficient to reduce such positive balances to
     zero, and v) thereafter, any funds remaining shall then be distributed 95
     percent to the limited partners and five percent to the general partners.

     During the years ended December 31, 1998, 1997, and 1996, the Partnership
     declared distributions to the limited partners of $3,220,004, $3,150,004,
     and $3,185,004, respectively.  No distributions have been made to the
     general partners to date.

                                       31
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


7.   Income Taxes:
     ------------

     The following is a reconciliation of net income for financial reporting
     purposes to net income for federal income tax purposes for the years ended
     December 31:

<TABLE>
<CAPTION>
                                                                      1998                  1997                  1996
                                                               ---------------          -------------         --------------

          <S>                                                  <C>                      <C>                   <C>
          Net income for financial reporting
           purposes                                                 $2,286,698             $2,937,632             $2,960,299

          Depreciation for tax reporting purposes in
           excess of depreciation for financial
           reporting purposes                                          (97,473)              (116,620)              (123,734)

          Direct financing leases recorded as
           operating leases for tax reporting
           purposes                                                     92,647                121,311                 89,696

          Gain on sale of land and building for
           financial reporting purposes in excess
           of gain for tax reporting purposes                               --               (195,820)                    --

          Equity in earnings of joint ventures for
           tax reporting purposes in excess
           of equity in earnings of joint ventures
           for financial reporting purposes                              8,256                 36,745                 37,469

          Capitalization of transaction costs for
           tax reporting purposes                                       19,041                     --                     --

          Accrued rental income                                        209,852                (70,837)              (225,434)

          Rents paid in advance                                        (44,149)                13,255                 43,825

          Allowance for loss on building and
           investment in direct financing leases                       314,775                     --                     --

          Allowance for doubtful accounts                               97,736                 79,333                 14,221
                                                               ---------------          -------------         --------------

          Net income for federal income tax
           purposes                                                 $2,887,383             $2,804,999             $2,796,342
                                                               ===============          =============         ==============
</TABLE>

                                       32
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


8.   Related Party Transactions:
     --------------------------

     One of the individual general partners, James M. Seneff, Jr., is one of the
     principal shareholders of CNL Group, Inc., the majority stockholder of CNL
     Fund Advisors, Inc.  The other individual general partner, Robert A.
     Bourne, serves as treasurer, director and vice chairman of the board of CNL
     Fund Advisors.  During the years ended December 31, 1998, 1997, and 1996,
     CNL Fund Advisors, Inc. (hereinafter referred to as the "Affiliate")
     performed certain services for the Partnership, as described below.

     During the years ended December 31, 1998, 1997, and 1996, the Affiliate
     acted as manager of the Partnership's properties pursuant to a management
     agreement with the Partnership.  In connection therewith, the Partnership
     agreed to pay the Affiliate an annual, noncumulative, subordinated
     management fee of one percent of the sum of gross revenues from properties
     wholly owned by the Partnership and the Partnership's allocable share of
     gross revenues from joint ventures, but not in excess of competitive fees
     for comparable services.  These fees will be incurred and will be payable
     only after the limited partners receive their 10% Preferred Return.  Due to
     the fact that these fees are noncumulative, if the limited partners have
     not received their 10% Preferred Return in any particular year, no
     management fees will be due or payable for such year.  As a result of such
     threshold, no management fees were incurred during the years ended December
     31, 1998, 1997, and 1996.

     The Affiliate is also entitled to receive a deferred, subordinated real
     estate disposition fee, payable upon the sale of one or more properties
     based on the lesser of one-half of a competitive real estate commission or
     three percent of the sales price if the Affiliate provides a substantial
     amount of services in connection with the sale.  However, if the net sales
     proceeds are reinvested in a replacement property, no such real estate
     disposition fees will be incurred until such replacement property is sold
     and the net sales proceeds are distributed.  The payment of the real estate
     disposition fee is subordinated to receipt by the limited partners of their
     aggregate 10% Preferred Return, plus their adjusted capital contributions.
     No deferred, subordinated real estate disposition fees have been incurred
     since inception.

     During the years ended December 31, 1998, 1997, and 1996, the Affiliate
     provided accounting and administrative services to the Partnership on a
     day-to-day basis.  The Partnership incurred $94,808, $79,234, and $82,487
     for the years ended December 31, 1998, 1997, and 1996, respectively, for
     such services.

     The due to related parties at December 31, 1998 and 1997, totalled $24,187
     and $4,619, respectively.

                                       33
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


9.   Concentration of Credit Risk:
     ----------------------------

     The following schedule presents total rental and earned income from
     individual lessees, each representing more than ten percent of the
     Partnership's total rental and earned income (including the Partnership's
     share of total rental and earned income from joint ventures), for each of
     the years ended December 31:

<TABLE>
<CAPTION>
                                                        1998              1997              1996
                                                   -------------     -------------     -------------
<S>                                                <C>               <C>               <C>
        Burger King Corporation and BK
         Acquisition, Inc.                              $647,953          $649,445          $623,949
        TPI Restaurants, Inc.                            557,000           556,700           565,351
        Carrols Corporation                              388,121           440,057           442,286
        Flagstar Enterprises, Inc.                       367,211           436,312           460,762
        Golden Corral Corporation                        360,555           337,337               N/A
</TABLE>

     In addition, the following schedule presents total rental and earned income
     from individual restaurant chains, each representing more than ten percent
     of the Partnership's total rental and earned income (including the
     Partnership's share of total rental and earned income from joint ventures),
     for each of the years ended December 31:

<TABLE>
<CAPTION>
                                                         1998                1997                1996
                                                   ---------------     ---------------     ---------------

     <S>                                           <C>                 <C>                 <C>
     Burger King                                        $1,143,522          $1,249,715          $1,310,994
     Shoney's                                              805,729             808,675             889,148
     Hardees                                               438,324             436,312             460,762
     Golden Corral Family Steakhouse
      Restaurants                                          360,555             337,337                 N/A
</TABLE>

     The information denoted by N/A indicates that for each period
     presented, the tenant and the chains did not represent more than ten
     percent of the Partnership's total rental and earned income.

     Although the Partnership's properties are geographically diverse throughout
     the United States and the Partnership's lessees operate a variety of
     restaurant concepts, default by any one of these lessees or restaurant
     chains could significantly impact the results of operations of the
     Partnership if the Partnership is not able to re-lease the properties in a
     timely manner.

                                       34
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1998, 1997, and 1996


10.  Subsequent Event:
     ----------------

     On March 11, 1999, the Partnership entered into an Agreement and Plan of
     Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which
     the Partnership would be merged with and into a subsidiary of APF (the
     "Merger").  As consideration for the Merger, APF has agreed to issue
     3,700,097 shares of its common stock, par value $0.01 per shares (the "APF
     Shares").  In order to assist the general partners in evaluating the
     proposed merger consideration, the general partners retained Valuation
     Associates, a nationally recognized real estate appraisal firm, to appraise
     the Partnership's restaurant property portfolio.  Based on Valuation
     Associates' appraisal, the fair value of the Partnership's property
     portfolio and other assets was $36,414,830 as of December 31, 1998.  The
     APF Shares are expected to be listed for trading on the New York Stock
     Exchange concurrently with the consummation of the Merger, and, therefore,
     would be freely tradable at the option of the former limited partners.  At
     a special meeting of the partners, limited partners holding in excess of
     50% of the Partnership's outstanding limited partnership interests must
     approve the Merger prior to consummation of the transaction.  The general
     partners intend to recommend that the limited partners of the Partnership
     approve the Merger.  In connection with their recommendation, the general
     partners will solicit the consent of the limited partners at the special
     meeting.  If the limited partners reject the Merger, the Partnership will
     bear the portion of the transaction costs based upon the percentage of
     "For" votes and the general partners will bear the portion of such
     transaction costs based upon the percentage of "Against" votes and
     abstentions.

                                       35
<PAGE>

                                  SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 28th day of
October, 1999.

                         CNL INCOME FUND IX, LTD.

                         By: CNL REALTY CORPORATION
                             General Partner

                             /s/ Robert A. Bourne
                             ---------------------------
                             ROBERT A. BOURNE, President


                         By: ROBERT A. BOURNE
                             General Partner

                             /s/ Robert A. Bourne
                             ---------------------------
                             ROBERT A. BOURNE


                         By: JAMES M. SENEFF, JR.
                             General Partner

                             /s/ James M. Seneff, Jr.
                             ---------------------------
                             JAMES M. SENEFF, JR.

                                       36
<PAGE>

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

       Signature                                   Title                                    Date
       ---------                                   -----                                    ----
<S>                                    <C>                                               <C>

/s/ Robert A. Bourne                   President, Treasurer and Director                 October 28, 1999
-------------------------------        (Principal Financial and Accounting
Robert A. Bourne                       Officer)

/s/ James M. Seneff, Jr.               Chief Executive Officer and Director              October 28, 1999
-------------------------------        (Principal Executive Officer)
James M. Seneff, Jr.
</TABLE>

                                       37