UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K

(Mark One)

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

                   For the fiscal year ended December 31, 1997

                                       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 33-90998-01

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

                     Florida                             59-3295394
         (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) 422-1574

               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:

                                      None
                                (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  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>



                                     PART I


Item 1.  Business

         CNL Income Fund XVIII, Ltd. (the "Registrant" or the  "Partnership") is
a limited  partnership which was organized  pursuant to the laws of the State of
Florida on February 10, 1995. 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 September  20, 1996,  the
Partnership offered for sale up to $35,000,000 of limited partnership  interests
(the  "Units")  (3,500,000  Units at $10 per Unit)  pursuant  to a  registration
statement on Form S-11 under the Securities  Act of 1933, as amended,  effective
August  11,  1995.  As of  December  31,  1997,  the  Partnership  had  accepted
subscriptions  for 3,500,000  Units and had received  subscription  proceeds for
3,414,576  Units,  representing  $34,145,759  of capital  contributed by limited
partners. The remaining proceeds of $854,241,  representing the remaining 85,424
Units, were received during the period January 1, 1998 through February 6, 1998.


         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,  family-style  and casual  dining
restaurant  chains (the  "Restaurant  Chains").  As of December  31,  1997,  net
proceeds to the  Partnership  from its  offering of Units,  after  deduction  of
organizational  and offering  expenses,  totalled  $30,022,641.  During the year
ended December 31, 1996, the Partnership acquired two Properties. As of December
31, 1997, the Partnership had invested approximately $27,645,000 of the proceeds
described  above in 22  Properties  (one of which was under  construction  as of
December  31,  1997),  and to  pay  acquisition  fees  and  certain  acquisition
expenses,  leaving  approximately  $2,377,700 of net offering proceeds available
for  investment  in  Properties.  The  Partnership  will use the  remaining  net
offering  proceeds,  together with proceeds from the sale of Units subsequent to
December 31, 1997, to acquire additional Properties, to pay acquisition fees and
acquisition  expenses  and to pay  expenses  relating to the sale of Units.  The
Properties are leased on a triple-net basis with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.

         The  Partnership's  primary  investment  objectives  are  to  preserve,
protect and enhance Partnership capital,  while providing (i) cash distributions
commencing in the initial year of Partnership operations in amounts which exceed
current   taxable  income  (due  to  the  fact  that   depreciation   deductions
attributable to the Properties reduce taxable income even though depreciation is
not a cash expenditure); (ii) an anticipated minimum level of income through the
long-term  rental of  Properties to selected  operators of certain  national and
regional  fast-food,  family-style and casual dining  restaurant  chains;  (iii)
additional  income and protection  against inflation by participation in certain
restaurant  gross sales  through the receipt of  percentage  rent  payments and,
typically,  automatic  increases in the minimum  annual  rent;  and (iv) capital
appreciation through the potential increase in value of the Properties.

         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.  In  general,  the General  Partners  plan to seek the sale of the
Properties commencing seven to 12 years after their acquisition. 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.

Description of Leases

         The leases of the  Properties  owned by the  Partnership as of December
31,  1997,  provide for initial  terms  ranging from 15 to 26 years (the average
being 17 years) and expire between 2012 and 2023. All leases are on a triple-net
basis,  with the lessees  responsible for all repairs and maintenance,  property
taxes,  insurance  and  utilities.  The  leases  for the  Properties  that  were
operational  as of December  31, 1997,  provide for minimum  base annual  rental
payments  (payable in equal  monthly  installments)  ranging from  approximately
$60,400 to $243,600. The majority

                                        1

<PAGE>



of the  leases  provide  for  percentage  rent  based on sales  in  excess  of a
specified  amount.  In  addition,  the  majority  of the  leases  provide  that,
commencing in specified lease years (generally the sixth lease year), the annual
base rent required under the terms of the lease will increase.

         Generally, the leases 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  the  Properties  after a specified
portion of the lease term has elapsed. The option purchase price is equal to the
Partnership's  original cost of the Property (including acquisition costs), plus
a specified  percentage  or the  Property's  fair  market  value at the time the
purchase option is exercised, whichever is greater.

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

Major Tenants

         During  1997,   five  lessees  of  the   Partnership,   Golden   Corral
Corporation,  Foodmaker,  Inc.,  Tiffany,  L.L.C.,  IHOP  Properties,  Inc.  and
Platinum  Rotisserie,  L.L.C.,  each  contributed  more than ten  percent of the
Partnership's  total  rental  income.  As of December 31,  1997,  Golden  Corral
Corporation  and Foodmaker,  Inc. were each the lessees under leases relating to
four restaurants,  Tiffany,  L.L.C. was the lessee under a lease relating to one
restaurant,  IHOP  Properties,  Inc. was the lessee under leases relating to two
restaurants  and  Platinum  Rotisserie,  L.L.C.  was  the  lessee  under a lease
relating to one restaurant.  In addition,  four Restaurant Chains, Golden Corral
Family Steakhouse Restaurants ("Golden Corral"), Jack in the Box, Boston Market,
and IHOP each  accounted  for more than ten percent of the  Partnership's  total
rental  income  for 1997.  Because  the  Partnership's  first  Property  was not
purchased until December 1996, the foregoing  information  regarding the lessees
and   Restaurant   Chains  which   contributed  a  significant   amount  of  the
Partnership's  total rental income during 1997, may or may not be representative
of the  lessees  and  Restaurant  Chains  which will  account  for more than ten
percent of the  Partnership's  rental income during 1998 and  subsequent  years.
Because the  Partnership has not completed its acquisition of Properties as yet,
it is not  possible  to  determine  which  lessees  or  Restaurant  Chains  will
contribute more than ten percent of the Partnership's  rental income during 1998
and subsequent  years.  In the event that certain  lessees or Restaurant  Chains
contribute  more than ten  percent  of the  Partnership's  rental  income in the
future years, any failure of such lessees or Restaurant  Chains could materially
adversely affect the  Partnership's  income.  As of December 31, 1997, no single
tenant  or  group of  affiliated  tenants  lease  Properties  with an  aggregate
carrying value,  excluding acquisition fees and certain acquisition expenses, in
excess of 20 percent of the  anticipated  total assets of the  Partnership  upon
completion of the offering of Units.

Management Services

         CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain  services  relating  to  the  management  of  the  Partnership  and  its
Properties pursuant to a management  agreement with the Partnership.  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.

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

Competition

         The fast-food,  family-style,  and casual dining restaurant business is
characterized  by intense  competition.  The  restaurants  on the  Partnership's
Properties compete with independently owned restaurants, restaurants which are

                                        2

<PAGE>



part of local or regional chains,  and restaurants in other well-known  national
chains, including those offering different types of food and service.

         The  Partnership  also will be in  competition  with other  persons and
entities both to locate suitable  Properties to acquire and to locate purchasers
for its  Properties.  The  Partnership  also will compete  with other  financing
sources  such as banks,  mortgage  lenders,  and  sale/leaseback  companies  for
suitable Properties and tenants.

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, 1997, the Partnership  owned 22 Properties,  located
in 14 states.  Reference is made to the Schedule of Real Estate and  Accumulated
Depreciation  filed with this report for a listing of the  Properties  and their
costs, including acquisition fees and certain acquisition expenses.

         The Partnership is negotiating to acquire additional Properties, but as
of March 13, 1998, had not acquired any such Properties.

Description of Properties

         Land. As of December 31, 1997, the Partnership's  Property sites ranged
from  approximately  27,000 to 120,400  square feet depending upon building size
and  local  demographic  factors.  Sites  purchased  or to be  purchased  by the
Partnership are or will be in locations zoned for commercial use which have been
reviewed for traffic patterns and volume.

         Buildings.  The Properties  owned by the Partnership as of December 31,
1997,  currently  include or will include a building that is one of a Restaurant
Chain's approved designs. The buildings to be acquired or constructed  generally
will be rectangular and constructed from various combinations of stucco,  steel,
wood,  brick and tile.  Building sizes range from  approximately  2,200 to 9,700
square  feet.  All  buildings  on  Properties  acquired or to be acquired by the
Partnership  will  be  freestanding  and  surrounded  by  paved  parking  areas.
Buildings   will  be  suitable  for   conversion  to  various   uses,   although
modifications may be required prior to use for other than restaurant operations.

         Generally,  a lessee is required or is expected to be  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.

         Leases  with Major  Tenants.  The terms of each of the leases  with the
Partnership's  major  tenants,  as of December 31, 1997 (See Item 1.  Business -
Major  Tenants),  are  substantially  the  same as  those  described  in Item 1.
Business - Description of Leases.

         Golden Corral  Corporation leases four Golden Corral  restaurants.  The
initial  term of each  lease is 15 years  (expiring  in  2012)  and the  average
minimum base annual rent is approximately  $160,300 (ranging from  approximately
$148,400 to $170,400).


                                        3

<PAGE>



         Foodmaker,  Inc. leases four Jack in the Box  restaurants.  The initial
term of each lease is 18 years  (expiring in 2015) and the average  minimum base
annual rent is approximately  $112,100  (ranging from  approximately  $77,900 to
$132,200).

         Tiffany,  L.L.C. leases one Golden Corral restaurant.  The initial term
of the lease is 20 years  (expiring in 2017) and the minimum base annual rent is
approximately $189,700.

         IHOP Properties, Inc. leases two IHOP Restaurants.  The initial term of
each lease is 20 years  (expiring  in 2017) and the average  minimum base annual
rent  is  approximately   $137,200  (ranging  from  approximately   $130,200  to
$144,100).

         Platinum  Rotisserie,  L.L.C. leases one Boston Market restaurant.  The
initial  term of the lease is 15 years  (expiring  in 2012) and the minimum base
annual rent is approximately $122,600.


Item 3.  Legal Proceedings

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


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

         Not applicable.



                                     PART II


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

         As of March 13, 1998,  there were 1,570 holders of record of the Units.
There is no public trading market for the Units,  and it is not anticipated that
a public  market for the Units will develop.  Limited  Partners who wish to sell
their  Units  may  offer  the  Units  for  sale  pursuant  to the  Partnership's
distribution  reinvestment  plan (the "Plan"),  and Limited Partners who wish to
have their  distributions  used to acquire additional Units (to the extent Units
are  available  for  purchase),  may do so  pursuant  to such Plan.  The General
Partners have the right to prohibit  transfers of Units.  Since  inception,  the
price to be paid for any Unit  transferred  pursuant to the Plan has been $10.00
per Unit. The price to be paid for any Unit  transferred  other than pursuant to
the Plan is subject to  negotiation  by the  purchaser  and the selling  Limited
Partner.  For the year ended December 31, 1997, no Units were transferred  other
than pursuant to the Plan. The Partnership will not redeem or repurchase Units.

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

         For the  years  ended  December  31,  1997 and  1996,  the  Partnership
declared cash  distributions  of $1,310,885  and $57,846,  respectively,  to the
Limited  Partners.  No  amounts  distributed  to  partners  for the years  ended
December  31,  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.  No distributions have
been made to the General  Partners to date.  As  indicated  in the chart  below,
these   distributions   were  declared  following  the  close  of  each  of  the
Partnership's  calendar  quarters  following  the  first  admission  of  Limited
Partners to the Partnership. These amounts include monthly distributions made in
arrears for the Limited Partners electing to receive such  distributions on this
basis.


                                        4

<PAGE>



         Quarter Ended               1997            1996
         -------------            ---------        ----------
         March 31                  $154,476      $        -
         June 30                    266,507               -
         September 30               379,266               -
         December 31                510,636           57,846

         For  the  period  January  1,  1996  through   October  11,  1996,  the
Partnership  did not make  any cash  distributions  because  operations  had not
commenced.

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


Item 6.  Selected Financial Data

         The following  selected  financial  data should be read in  conjunction
with the financial statements and related notes in Item 8. hereof.
<TABLE>
<CAPTION>

                                                                                          For the Period
                                                                                         February 10, 1995
                                                     Year Ended         Year Ended      (Date of Inception)
                                                     December 31,       December 31,      through December 31,
                                                         1997              1996                  1995
<S> <C>
    Revenues                                        $  1,453,242       $    31,614         $        -
    Net income                                         1,154,760            26,910                  -
    Cash distributions declared (2)                    1,310,885            57,846                  -
    Net income per Unit                                      .51               .05                  -
    Cash distributions declared per Unit (2)                 .57               .11                  -
    Weighted average number of
        Limited Partner Units outstanding (3)          2,279,801           503,436                  -

                                                                      As of December 31,
                                                     1997               1996                        1995

    Total assets                                     $31,823,613         $7,240,324            $  256,890
    Total partners' capital                           29,846,580          6,996,213                 1,000

</TABLE>

    (1)  Operations  did not commence until October 12, 1996, the date following
         when  the  Partnership   received  the  minimum  offering  proceeds  of
         $1,500,000, and such proceeds were released from escrow.

    (2)  Approximately  12% and 53% of cash  distributions  ($0.07 and $0.06 per
         Unit,  respectively)  for the years ended  December  31, 1997 and 1996,
         respectively,  represents  a  return  of  capital  in  accordance  with
         generally accepted accounting  principles ("GAAP").  Cash distributions
         treated as a return of capital on a GAAP basis  represent the amount of
         cash distributions in excess of accumulated net income on a GAAP basis.
         The Partnership has not treated such amounts as a return of capital for
         purposes of calculating the Limited  Partners' return on their invested
         capital contributions.

    (3)  Represents the weighted average number of Units outstanding  during the
         period the Partnership was operational.

                                        5

<PAGE>






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

         The  Partnership  was  organized on February  10, 1995,  to acquire for
cash,  either  directly  or  through  joint  venture  arrangements,  both  newly
constructed  and  existing  restaurant  Properties,  as well as land upon  which
restaurants  were to be constructed,  which are leased primarily to operators of
selected  national  and  regional  fast-food,  family-style  and  casual  dining
Restaurant Chains. The leases are triple-net leases,  with the lessees generally
responsible  for all repairs and  maintenance,  property  taxes,  insurance  and
utilities.  The  Partnership's  primary  investment  objectives are to preserve,
protect and enhance Partnership capital,  while providing (i) cash distributions
commencing in the initial year of Partnership operations in amounts which exceed
current   taxable  income  (due  to  the  fact  that   depreciation   deductions
attributable to the Properties reduce taxable income even though depreciation is
not a cash expenditure); (ii) an anticipated minimum level of income through the
long-term  rental of  Properties to selected  operators of certain  national and
regional  fast-food,  family-style and casual dining  Restaurant  Chains;  (iii)
additional  income and protection  against inflation by participation in certain
restaurant  gross sales  through the receipt of  percentage  rent  payments and,
typically,  automatic  increases in the minimum  annual  rent;  and (iv) capital
appreciation through the potential increase in value of the Properties.

         As of December 31, 1997, the  Partnership  owned 22 Properties,  one of
which was under construction.

Liquidity and Capital Resources

         On September  20, 1996,  the  Partnership  commenced an offering to the
public of up to 3,500,000 Units of limited  partnership  interest  pursuant to a
registration  statement  on Form  S-11  under  the  Securities  Act of 1933,  as
amended, effective August 11, 1995. As of December 31, 1997, the Partnership had
accepted  subscriptions  for  3,500,000  Units  and  had  received  subscription
proceeds for 3,414,576 Units, representing $34,145,759 of capital contributed by
Limited Partners. The remaining proceeds of $854,241, representing the remaining
85,424 Units were received during the period January 1, 1998 through February 6,
1998.

         As of December  31,  1997,  net  proceeds to the  Partnership  from its
offering of Units,  after  deduction of  organizational  and offering  expenses,
totalled  $30,022,641.  During 1996, the  Partnership  invested or committed for
investment  approximately  $2,960,800 of such proceeds in two  Properties and to
pay  acquisition  fees  and  certain  acquisition  expenses.  During  1997,  the
Partnership  completed  construction of the Property under  construction in 1996
and acquired 20 additional Properties (one of which was under construction as of
December 31, 1997).  As a result of the above  transactions,  as of December 31,
1997, the Partnership had invested approximately $27,645,000 of the net proceeds
in 22 Properties,  and to pay  acquisition  fees and  miscellaneous  acquisition
expenses,  leaving  approximately  $2,377,700 of net offering proceeds available
for investment in Properties.  As of December 31, 1997, the Partnership had paid
$1,536,559 in acquisition fees to an affiliate of the General Partners.

         The  building  under   construction   at  December  31,  1997,   became
operational in February 1998. In connection  with the purchase of this Property,
the Partnership, as lessor entered into a long-term lease agreement.

         As of March 13,  1998,  the  Partnership  had sold a total of 3,500,000
Units,  for an  aggregate  of  $35,000,000  in gross  offering  proceeds and had
invested or committed for investment approximately  $28,056,645 of such proceeds
in 22 Properties and to pay acquisition fees and certain  acquisition  expenses,
leaving  approximately   $2,746,400  in  net  offering  proceeds  available  for
investment in  Properties.  As of March 13, 1998, the  Partnership  had incurred
$1,575,000 in acquisition fees to an affiliate of the General Partners.

         The  Partnership   presently  is  negotiating  to  acquire   additional
Properties,  but as of March 13, 1998, had not acquired any such Properties. The
Partnership will use the remaining net offering proceeds,  to acquire additional
Properties,  to pay  acquisition  expenses and in the  discretion of the General
Partners, to create operating reserves.

         Currently,  the  Partnership's  primary  source of capital is cash from
operations  (which  includes cash  received from tenants and interest  received,
less cash paid for  expenses).  Cash from  operations was $1,361,610 and $27,146
for the years  ended  December  31,  1997 and 1996.  The  increase  in cash from
operations for the year ended

                                        6

<PAGE>



December 31, 1997, as compared to the year ended December 31, 1996, is primarily
a result of  changes  in  income  and  expenses  as  described  in  "Results  of
Operations" below and changes in the Partnership's working capital.

         None of the Properties owned or to be acquired by the Partnership is or
may be encumbered.  Subject to certain  restrictions on borrowing,  however, the
Partnership  may borrow  funds but will not encumber  any of the  Properties  in
connection  with any such  borrowing.  The  Partnership  will not borrow for the
purpose of returning capital to the Limited Partners or under  arrangements that
would make the Limited  Partners  liable to  creditors of the  Partnership.  The
General  Partners  further have  represented that they will use their reasonable
efforts to structure any borrowing so that it will not  constitute  "acquisition
indebtedness"   for  federal  income  tax  purposes  and  also  will  limit  the
Partnership's  outstanding  indebtedness  to  three  percent  of  the  aggregate
adjusted tax basis of its  Properties.  Affiliates of the General  Partners from
time to time incur certain  expenses on behalf of the  Partnership for which the
Partnership reimburses the affiliates without interest.

         Until  Properties  are  acquired by the  Partnership,  all  Partnership
proceeds are held in  short-term,  highly liquid  investments  which the General
Partners  believe  to have  appropriate  safety of  principal.  This  investment
strategy provides high liquidity in order to facilitate the Partnership's use of
these  funds to  acquire  Properties  at such time as  Properties  suitable  for
acquisition  are located.  At December 31, 1997, the  Partnership had $4,143,327
invested in such short-term  investments,  as compared to $5,371,325 at December
31,  1996.  The decrease in the amount  invested in  short-term  investments  is
primarily a result of the payment during 1997, of costs relating to the Property
that  was  under  construction  at  December  31,  1996 and the  acquisition  of
additional Properties during 1997. The funds remaining at December 31, 1997 will
be used to pay  construction  costs  relating  to several  Properties  that were
incurred  but unpaid at December 31,  1997,  to purchase and develop  additional
Properties,  to  pay  acquisition  costs,  to pay  distributions,  to  meet  the
Partnership's  working  capital and other  needs and,  in the General  Partners'
discretion, to create cash reserves.

         During  the years  ended  December  31,  1997 and 1996,  and the period
February 10, 1995 (date of inception)  through December 31, 1995,  affiliates of
the General Partners  incurred on behalf of the Partnership  $211,216,  $285,858
and $196,174, respectively, for certain organizational and offering expenses. In
addition,  during  1997 and 1996,  affiliates  incurred  $134,138  and  $18,036,
respectively,   for  certain   acquisition   expenses   and  $44,166  and  $893,
respectively,  for certain operating expenses. As of December 31, 1997 and 1996,
the Partnership owed $118,231 and $83,889,  respectively, to related parties for
such  amounts,  fees  and  other  reimbursements.  As of  March  13,  1998,  the
Partnership  had reimbursed the affiliates all such amounts.  Amounts payable to
other  parties,  including  distributions  payable,  increased to  $1,629,719 at
December 31, 1997, as compared to $160,222 at December 31, 1996,  primarily as a
result of an  increase  in  distributions  payable  to Limited  Partners  and an
increase  in  construction  costs  payable at  December  31,  1997.  The General
Partners  believe that the  Partnership  has sufficient cash on hand to meet its
current working capital needs.

         Based on cash from operations,  the Partnership declared  distributions
to the Limited Partners of $1,310,885 and $57,846,  respectively,  for the years
ended December 31, 1997 and 1996 (representing  distributions of $0.57 and $0.11
per  Unit,  respectively,   based  on  the  weighted  average  number  of  Units
outstanding  during the  period the  Partnership  was  operational).  No amounts
distributed  or to be  distributed  to the Limited  Partners for the years ended
December  31,  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,  although some Limited  Partners,  in
accordance with their election,  receive  monthly  distributions,  for an annual
fee.

         The General  Partners have obtained  contingent  liability and property
coverage for the  Partnership.  This insurance  policy 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.

         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 generate cash flow in excess
of operating  expenses.  Partnership net income is expected to increase in 1998,
as rental income  increases  due to the  acquisition  of  additional  Properties
during 1998 and the fact that  Properties  acquired during 1997 will earn rental
income  for a full  year in  1998,  as  compared  to a  partial  year  in  1997.
Accordingly, the General Partners believe that the anticipated decrease in the

                                        7

<PAGE>



Partnership's  liquidity in 1998,  due to its  investment  of the  remaining net
offering proceeds in additional Properties and the payment of construction costs
relating to several  Properties  incurred but unpaid at December 31, 1997,  will
not have an adverse effect on the Partnership's operations during 1998.

         Due to low  operating  expenses,  ongoing cash flow from rental  income
obtained  from  Properties  after  they  are  acquired  and the  fact  that  the
Partnership  will not enter into a  commitment  to  purchase  a  Property  until
sufficient  cash is available  for such  purchase,  the General  Partners do not
believe that working  capital  reserves are necessary at this time. In addition,
because all of the leases for the  Partnership's  Properties are on a triple-net
basis,  it is not  anticipated  that a  permanent  reserve for  maintenance  and
repairs is necessary at this time. To the extent,  however, that the Partnership
has insufficient  funds for such purposes,  the General Partners will contribute
to the  Partnership  an  aggregate  amount of up to one percent of the  offering
proceeds for  maintenance  and repairs.  The General  Partners have the right to
cause  the  Partnership  to  maintain  reserves  if, in their  discretion,  they
determine such reserves are required to meet the  Partnership's  working capital
needs.

         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.

Results of Operations

         No significant  operations commenced until the Partnership received and
released from escrow the minimum offering  proceeds of $1,500,000 on October 11,
1996.

         The  Partnership  owned  and  leased  two  Properties  in  1996  and 22
Properties  in 1997  (including  one Property  which was under  construction  at
December 31, 1997), which are subject to long-term triple-net leases. The leases
of the Properties  provide for minimum base annual rental  payments  (payable in
monthly  installments)  ranging  from  approximately  $60,400 to  $243,600.  The
majority of the leases provide for percentage rent based on sales in excess of a
specified  amount.  In  addition,  the  majority  of the  leases  provide  that,
commencing in specified lease years (generally the sixth lease year), the annual
base rent  required  under the terms of the lease will  increase.  For a further
description of the Partnership's  leases and Properties,  see Item 1. Business -
Leases and Item 2. Properties.

         During the years  ended  December  31, 1997 and 1996,  the  Partnership
earned  $1,290,621  and $1,373,  respectively,  in rental income from  operating
leases and earned income from direct  financing  leases.  The increase in rental
and earned income during 1997, as compared to 1996, is primarily attributable to
the  acquisition  of  additional  Properties  subsequent  to December  31, 1996.
Because  the  Partnership  did not  commence  significant  operations  until  it
received  the minimum  offering  proceeds on October 11,  1996,  and has not yet
acquired all of its Properties, Partnership revenues for the year ended December
31, 1997, represent only a portion of revenues which the Partnership is expected
to earn  during  the  full  year  in  which  the  Partnership's  Properties  are
operational.

         During at least one of the years ended  December 31, 1997 and 1996, six
lessees,  or group of  affiliated  lessees,  of the  Partnership,  Golden Corral
Corporation,  Foodmaker, Inc., Tiffany, L.L.C., IHOP Properties,  Inc., Platinum
Rotisserie,  L.L.C.  and  Carrols  Corporation  each  contributed  more than ten
percent of the  Partnership's  total  rental  income.  As of December  31, 1997,
Golden Corral Corporation and Foodmaker,  Inc. were each the lessee under leases
relating  to four  restaurants,  Tiffany,  L.L.C.  was the lessee  under a lease
relating to one restaurant,  IHOP  Properties,  Inc. was the lessee under leases
relating to two restaurants,  Platinum Rotisserie, L.L.C. was the lessee under a
lease relating to one restaurant and Carrols  Corporation was the lessee under a
lease relating to one restaurant.  In addition, during at least one of the years
ended December 31, 1997 and 1996, five Restaurant Chains, Golden Corral, Jack in
the Box,  Boston  Market,  IHOP and Burger King each accounted for more than ten
percent of the  Partnership's  total rental  income.  Because the  Partnership's
first Property was not purchased until December 1996, the foregoing  information
regarding  the lessees and  Restaurant  Chains which  contributed  a significant
amount of the Partnership's  total rental income during the years ended December
31,  1997  and  1996,  may  or may  not be  representative  of the  lessees  and
Restaurant  Chains  which  will  account  for  more  than  ten  percent  of  the
Partnership's  rental  income  during  1998 and  subsequent  years.  Because the
Partnership  has not completed its  acquisition  of Properties as yet, it is not
possible to determine  which lessees or Restaurant  Chains will  contribute more
than ten  percent of the  Partnership's  total  rental  income  during  1998 and
subsequent  years.  In the event  that  certain  lessees  or  Restaurant  Chains
contribute  more than ten percent of the  Partnership's  rental income in future
years,  any  failure  of such  lessees or  Restaurant  Chains  could  materially
adversely affect the Partnership's income.

                                        8

<PAGE>




         During the years  ended  December  31, 1997 and 1996,  the  Partnership
earned $162,621 and $30,241 in interest income from  investments in money market
accounts  or other  short-term,  highly  liquid  investments.  The  increase  in
interest  income during 1997, as compared to 1996, is primarily  attributable to
the increase in the amount of funds invested in short-term liquid investments as
a result of additional Limited Partner capital  contributions during 1997. As of
December 31, 1997,  the majority of these funds had been invested in Properties;
therefore, the Partnership expects interest income to decrease in 1998.

         Operating expenses,  including  depreciation and amortization  expense,
were  $298,482 and $4,704 for the years ended  December  31, 1997 and 1996.  The
increase in  operating  expenses  during 1997 is  primarily  attributable  to an
increase in depreciation expenses as the result of the acquisition of additional
Properties  during 1997.  Operating  expenses  also  increased  during 1997,  as
compared  to  1996,  as a  result  of an  increase  in  administrative  expenses
associated  with operating the Partnership and its Properties and an increase in
management  fees as a result of the  increase  in rental  revenues.  The  dollar
amount of operating expenses is expected to increase,  and the amount of general
operating  and  administrative  expenses as a  percentage  of total  revenues is
expected to decrease,  in 1998 as the Partnership acquires additional Properties
and the Property under construction becomes operational.

         The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on their computer  package  software.
The  hardware and  built-in  software  are  believed to be year 2000  compliant.
Accordingly, the General Partners do not expect this matter to materially impact
how the  Partnership  conducts  business  nor its  current or future  results of
operations or financial position.

         The  Partnership's  leases as of December 31, 1997,  and the leases the
Partnership  expects to enter into,  are or are  expected to be on a  triple-net
basis and contain provisions that management  believes will 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.


Item 8.   Financial Statements and Supplementary Data

                                        9

<PAGE>



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

                                    CONTENTS








                                                   Page

Report of Independent Accountants                   11

Financial Statements:

  Balance Sheets                                    12

  Statements of Income                              13

  Statements of Partners' Capital                   14

  Statements of Cash Flows                          15

  Notes to Financial Statements                     17

                                       10

<PAGE>







                        Report of Independent Accountants




To the Partners
CNL Income Fund XVIII, Ltd.


We have audited the financial statements and the financial statement schedule of
CNL Income Fund XVIII, Ltd. (a Florida limited partnership) listed in Item 14(a)
of this Form 10-K. These financial  statements and financial  statement schedule
are the responsibility of the Partnership's management. Our responsibility is to
express  an  opinion  on these  financial  statements  and  financial  statement
schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards 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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of CNL Income Fund XVIII, Ltd. as
of December 31, 1997 and 1996,  and the results of its  operations  and its cash
flows for the year ended December 31, 1997 and 1996 and the period  February 10,
1995 (date of inception) through December 31, 1995, in conformity with generally
accepted  accounting  principles.  In addition,  in our opinion,  the  financial
statement  schedule  referred to above, when considered in relation to the basic
financial  statements  taken  as a  whole,  presents  fairly,  in  all  material
respects, the information required to be included therein.



/s/ Coopers & Lybrand
-------------------------

Orlando, Florida
February 4, 1998

                                       11

<PAGE>



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

                                 BALANCE SHEETS


                                                         December 31,
                ASSETS                             1997              1996
                ------                          -----------       -------

Land and buildings on operating leases,
  less accumulated depreciation                 $21,311,062       $1,530,768
Net investment in direct financing
  leases                                          6,004,878               -
Cash and cash equivalents                         4,143,327        5,371,325
Receivables                                          68,000            3,711
Organization costs, less accumulated
  amortization of $2,411 and $411                     7,589            9,589
Accrued rental income                               128,225              146
Other assets                                        160,532          324,785
                                                -----------       ----------

                                                $31,823,613       $7,240,324
                                                ===========       ==========

    LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                                $    10,456       $  104,514
Accrued construction
  costs payable                                   1,108,627               -
Distributions payable                               510,636           55,708
Due to related parties                              118,231           83,889
Rents paid in advance                                28,277               -
Deferred rental income                              200,806               -
                                                -----------       ---------
    Total liabilities                             1,977,033          244,111

Partners' capital                                29,846,580        6,996,213
                                                -----------       ----------

                                                $31,823,613       $7,240,324
                                                ===========       ==========





                 See accompanying notes to financial statements.

                                       12

<PAGE>



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

                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>


                                                                                                     February 10,
                                                                                                      1995 (Date
                                                                                                     of Inception)
                                                            Year Ended          Year Ended              through
                                                           December 31,         December 31,           December 31,
                                                              1997                 1996                    1995
                                                          -------------        ------------            ------------
<S> <C>
Revenues:
  Rental income from
    operating leases                                       $  950,316           $    1,373             $       -
  Earned income from direct
    financing leases                                          340,305                   -                      -
  Interest and other income                                   162,621               30,241                     -
                                                           ----------           ----------             ---------
                                                            1,453,242               31,614                     -
                                                           ----------           ----------             ---------

Expenses:
  General operating and
    administrative                                            123,708                3,980                     -
  Professional services                                        20,429                   -                      -
  Management fees to related
    party                                                      11,842                   12                     -
  State and other taxes                                           424                   -                      -
  Depreciation and amortization                               142,079                  712                     -
                                                           ----------           ----------             ---------
                                                              298,482                4,704                     -
                                                           ----------           ----------             ---------

Net Income                                                 $1,154,760           $   26,910             $       -
                                                           ==========           ==========             =========

Allocation of Net Income:
  General partners                                         $   (1,421)          $       (7)            $       -
  Limited partners                                          1,156,181               26,917                     -
                                                           ----------           ----------             ---------

                                                           $1,154,760           $   26,910             $       -
                                                           ==========           ==========             =========

Net Income per Limited Partner
  Unit                                                     $     0.51           $     0.05            $       -
                                                           ==========           ==========            =========

Weighted Average Number of
  Limited Partner Units
  Outstanding                                               2,279,801              503,436                    -
                                                           ==========           ==========            =========

</TABLE>


                 See accompanying notes to financial statements.

                                       13

<PAGE>



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

                         STATEMENTS OF PARTNERS' CAPITAL

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995
<TABLE>
<CAPTION>



                                      General Partners                         Limited Partners
                                                 Accumu-                                    Accumu-
                                    Contri-      lated         Contri-        Distri-       lated     Syndication
                                    butions      Losses        butions        butions      Earnings      Costs           Total
                                    -------     --------     -----------    -----------   ----------  -----------     ----------
<S> <C>
Balance, February 10, 1995
  (Date of Inception)               $    -     $    -        $        -     $        -    $       -   $        -      $        -

  Contributions from
    general partners                  1,000         -                 -              -            -            -            1,000
                                    -------    -------       -----------    -----------   ----------  -----------     -----------

Balance, December 31, 1995            1,000         -                 -              -            -            -            1,000

  Contributions from
    limited partners                     -          -          8,421,815             -            -            -        8,421,815
  Distributions to limited
    partners ($0.11 per
    limited partner unit)                -          -                 -         (57,846)          -            -          (57,846)
  Syndication costs                      -          -                 -              -            -    (1,395,666)     (1,395,666)
  Net income                             -          (7)               -              -        26,917           -           26,910
                                    -------    -------       -----------    -----------   ----------  -----------     -----------

Balance, December 31, 1996            1,000         (7)        8,421,815        (57,846)      26,917   (1,395,666)      6,996,213

  Contributions from
    limited partners                     -          -         25,723,944             -            -            -       25,723,944
  Distributions to limited
    partners ($0.57 per
    limited partner unit)                -          -                 -      (1,310,885)          -            -       (1,310,885)
  Syndication costs                      -          -                 -              -            -    (2,717,452)     (2,717,452)
  Net income                             -      (1,421)               -              -     1,156,181           -        1,154,760
                                    -------    -------       -----------    -----------   ----------  -----------     -----------

Balance, December 31, 1997          $ 1,000    $(1,428)      $34,145,759    $(1,368,731)  $1,183,098  $(4,113,118)    $29,846,580
                                    =======    =======       ===========    ===========   ==========  ===========     ===========


</TABLE>



                 See accompanying notes to financial statements.

                                       14

<PAGE>



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

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                                                    February 10,
                                                                                                     1995 (Date
                                                                                                     of Inception)
                                                          Year Ended           Year Ended              through
                                                         December 31,         December 31,           December 31,
                                                             1997                 1996                   1995
                                                         ------------         ------------          -------------
<S> <C>
Increase (Decrease) in Cash
  and Cash Equivalents:

    Cash Flows From Operating
      Activities:
        Cash received from
          tenants                                        $  1,353,968         $         -             $        -
        Interest received                                     161,826               30,241                     -
        Cash paid for expenses                               (154,038)              (3,095)                    -
                                                         ------------         ------------            ----------
            Net cash provided by
                    operating activities                    1,361,756               27,146                     -
                                                         ------------         ------------            ----------

    Cash Flows From Investing
      Activities:
        Additions to land and
          buildings on
             operating leases                             (18,581,999)          (1,533,446)                    -
        Investment in direct
          financing leases                                 (5,962,087)                  -                      -
           Increase in other
             assets                                                -              (276,848)                    -
           Other                                                  107                 (107)                   (20)
                                                         ------------         ------------            -----------
            Net cash used in
                    investing activities                  (24,543,979)          (1,810,401)                   (20)
                                                         ------------         ------------            -----------

    Cash Flows From Financing
      Activities:
           Reimbursement of
             acquisition,
             organization and
             syndication costs
             paid by related
             parties on behalf of
             the Partnership                                 (396,548)            (497,420)                    -
           Contributions from
             general partners                                      -                    -                   1,000
           Contributions from
             limited partners                              25,723,944            8,498,815                     -
        Distributions to
             limited partners                                (855,957)              (2,138)                    -
        Payment of syndication
             costs                                         (2,450,214)            (845,657)                    -
        Other                                                 (67,000)                  -                      -
                                                         ------------         ------------            ----------
            Net cash provided
                    by financing
                    activities                             21,954,225            7,153,600                  1,000
                                                         ------------         ------------            -----------

Net Increase (Decrease) in
  Cash and Cash Equivalents                                (1,227,998)           5,370,345                    980

Cash and Cash Equivalents at
  Beginning of Period                                       5,371,325                  980                     -
                                                         ------------         ------------            ----------

Cash and Cash Equivalents at
  End of Period                                          $  4,143,327         $  5,371,325            $       980
                                                         ============         ============            ===========
</TABLE>

                 See accompanying notes to financial statements.

                                       15

<PAGE>



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

                      STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>

                                                                                                     February 10,
                                                                                                      1995 (Date
                                                                                                     of Inception)
                                                          Year Ended           Year Ended              through
                                                         December 31,         December 31,           December 31,
                                                             1997                 1996                   1995
                                                         ------------         ------------          -------------
<S> <C>
Reconciliation of Net Income
  to Net Cash Provided by
  Operating Activities:

    Net income                                           $  1,154,760         $     26,910          $          -
                                                         ------------         ------------          ------------
    Adjustments to reconcile
         net income to net cash
         provided by operating
         activities:
        Depreciation                                          140,079                  301                     -
        Amortization                                            2,000                  411                     -
        Increase in receivables                               (66,771)              (1,227)                    -
        Decrease in net
          investment in direct
          financing leases                                     28,084                   -                      -
        Increase in accrued
          rental income                                      (128,079)                (146)                    -
        Increase in accounts
             payable                                              398                   57                     -
        Increase in due to
             related parties,
             excluding acquisition,
             organization and
             syndication costs paid
             on behalf of the
             Partnership                                        2,202                  820                     -
        Increase in rents paid in
          advance                                              28,277                   -                      -
           Increase in deferred
             rental income                                    200,806                   -                      -
           Other                                                   -                    20                     -
                                                         ------------         ------------          ------------
            Total adjustments                                 206,996                  236                     -
                                                         ------------         ------------          ------------

Net Cash Provided by Operating
  Activities                                             $  1,361,756         $     27,146          $          -
                                                         ============         ============          ============

Supplemental Schedule of
  Non-Cash Investing and
  Financing Activities:

    Related parties paid certain
      acquisition, organization and
      syndication costs on behalf of
      the Partnership as follows:
           Acquisition costs                             $    134,138         $     18,036          $          -
           Organization costs                                      -                    -                  10,000
           Syndication costs                                  211,216              285,858                186,174
                                                         ------------         ------------          -------------

                                                         $    345,354         $    303,894          $     196,174
                                                         ============         ============          =============

    Distributions declared
         and unpaid at
         December 31                                     $    510,636         $     55,708          $          -
                                                         ============         ============          ============
</TABLE>

                 See accompanying notes to financial statements.

                                       16

<PAGE>



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

                          NOTES TO FINANCIAL STATEMENTS

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


1.       Significant Accounting Policies:

         Organization and Nature of Business - CNL Income Fund XVIII,  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,  family-style and casual dining restaurant chains.
         Under the terms of a registration  statement  filed with the Securities
         and  Exchange  Commission,  the  Partnership  is  authorized  to sell a
         maximum  of  3,500,000  units   ($35,000,000)  of  limited  partnership
         interest.   A  total  of  3,414,576  units   ($34,145,759)  of  limited
         partnership interest had been sold as of December 31, 1997.

         The  Partnership was a development  stage  enterprise from February 10,
         1995  through  October  11,  1996.  Since  operations  had  not  begun,
         activities  through  October 11, 1996,  were devoted to organization of
         the Partnership.

         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 the direct  financing  or  operating  methods.  Such  methods are
         described below:

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

                                       17

<PAGE>



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

                          NOTES TO FINANCIAL STATEMENTS

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


1.       Significant Accounting Policies - Continued:

                  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  (including rental payments,  if
                  any,  required  during the  construction  of a property)  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.

                  Accrued  rental  income  represents  the  aggregate  amount of
                  income  recognized  on a  straight-line  basis  in  excess  of
                  scheduled  rental  payments  to date.  In  contrast,  deferred
                  rental income  represents  the  aggregate  amount of scheduled
                  rental payments to date (including  rental payments due during
                  construction  and  prior  to  the  property  being  placed  in
                  service)  in excess of income  recognized  on a  straight-line
                  basis over the lease term  commencing on the date the property
                  is placed in service.

         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 properties for
         impairment  whenever events or changes in  circumstances  indicate that
         the  carrying  amount  of the  assets  may not be  recoverable  through
         operations.  The general  partners  determine  whether an impairment in
         value has occurred by comparing the estimated future  undiscounted cash
         flows, including the residual value of the property,  with the carrying
         cost of the  individual  property.  If an impairment is indicated,  the
         assets are adjusted to the fair value.

                                       18

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


1.       Significant Accounting Policies - Continued:

         Cash and Cash Equivalents - The Partnership considers all highly liquid
         investments  with a maturity of three months or less when  purchased to
         be cash  equivalents.  Cash  and cash  equivalents  consist  of  demand
         deposits at commercial  banks and money market funds (some of which are
         backed by government  securities).  Cash equivalents are stated at cost
         plus accrued interest, which approximates market value.

         Cash  accounts  maintained  on  behalf  of the  Partnership  in  demand
         deposits  at  commercial  banks  and  money  market  funds  may  exceed
         federally insured levels;  however, the Partnership has not experienced
         any losses in such  accounts.  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.

         Organization  Costs - Organization  costs are amortized over five years
         using the straight-line method upon commencement of operations.

         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 (Note 5).

         Rents Paid in  Advance - Rents  paid in  advance by lessees  for future
         periods are deferred upon receipt and are recognized as revenues during
         the period in which the rental income is earned.  Rents paid in advance
         include "interim rent" payments  required to be paid under the terms of
         certain leases for  construction  properties  equal to a pre-determined
         rate  times the  amount  funded by the  Partnership  during  the period
         commencing  with the  effective  date of the lease to the date  minimum
         annual rent becomes payable. Once minimum annual rent

                                       19

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


1.       Significant Accounting Policies - Continued:

         becomes payable, the "interim rent" payments are amortized and recorded
         as income  either  (i) over the lease  term so as to produce a constant
         periodic  rate of return  for  leases  accounted  for using the  direct
         financing  method,  or (ii) over the lease term using the straight-line
         method for leases accounted for using the operating  method,  whichever
         is applicable.

         Weighted Average Number of Limited Partner Units Outstanding Net income
         and  distributions  per limited partner unit are calculated  based upon
         the weighted  average number of units of limited  partnership  interest
         outstanding during the period the Partnership was operational.

         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.  Actual results could differ from those
         estimates.

         Reclassification   -  Certain  items  in  the  prior  years'  financial
         statements  have been  reclassified  to conform  to 1997  presentation.
         These  reclassifications  had no effect  on  partners'  capital  or net
         income.

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  Partnership's
         leases are  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 the land
         portions of the majority of the leases are operating leases. The leases
         have  initial  terms of 15 to 26 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

                                       20

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


2.       Leases - Continued:

         damage,  fire and extended coverage.  The lease options generally allow
         the  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:

                                                   1997          1996
                                               -----------    -----------

                  Land                         $10,812,849    $   852,578
                  Building                       9,476,977        659,134
                                               -----------    -----------
                                                20,289,826      1,511,712
                  Less accumulated
                    depreciation                  (140,380)          (301)
                                               -----------    -----------
                                                20,149,446      1,511,411
                  Construction in progress       1,161,616         19,357
                                               -----------    -----------

                                               $21,311,062    $ 1,530,768
                                               ===========    ===========

         Generally,  the 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  years  ended  December  31,  1997 and  1996,  the  Partnership
         recognized $128,079 and $146, respectively, of such rental income.

         The following is a schedule of the future  minimum lease payments to be
         received on the noncancellable operating leases at December 31, 1997:

                  1998                             $ 1,840,935
                  1999                               1,855,422
                  2000                               1,857,340
                  2001                               1,858,867
                  2002                               1,934,126
                  Thereafter                        23,592,272
                                                   -----------

                                                   $32,938,962


                                       21

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


3.       Land and Buildings on Operating Leases - Continued:

         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 term. 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 tenant's gross sales.

4.       Net Investment in Direct Financing Leases:

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

                                                   1997           1996
                                                -----------    ----------

                  Minimum lease payments
                    receivable                  $13,241,374    $        -
                  Estimated residual
                    values                        1,773,526             -
                  Less unearned income           (9,010,022)            -
                                                -----------    ----------

                  Net investment in
                    direct financing
                    leases                      $ 6,004,878    $        -
                                                ===========    ==========


         The  following  is a schedule of future  minimum  lease  payments to be
         received on direct financing leases at December 31, 1997:

                  1998                          $   677,167
                  1999                              677,167
                  2000                              677,167
                  2001                              677,167
                  2002                              683,170
                  Thereafter                      9,849,536
                                                -----------

                                                $13,241,374

         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).




                                       22

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


5.       Syndication Costs:

         Syndication  costs  consisting  of  legal  fees,  commissions,  the due
         diligence  expense  reimbursement  fee,  printing  and  other  expenses
         incurred  in  connection  with the  offering  totalled  $2,717,452  and
         $1,395,666   for  the  years   ended   December   31,  1997  and  1996,
         respectively.  These  offering  expenses  were  charged to the  limited
         partners'  capital  accounts to reflect the net capital proceeds of the
         offering.  All organizational and offering expenses,  as defined in the
         Partnership's prospectus, which exceed three percent of the total gross
         proceeds  received  from the sale of units of the  Partnership  will be
         paid  or  reimbursed  by  the  general  partners  and  will  not be the
         responsibility of the Partnership.

6.       Allocations and Distributions:

         Generally,  distributions  of net cash flow,  as defined in the limited
         partnership  agreement of the  Partnership,  are made 95 percent to the
         limited  partners and five percent to the general  partners;  provided,
         however,  that for any  particular  year,  the five percent of net cash
         flow to be distributed to the general  partners will be subordinated to
         receipt  by the  limited  partners  in that  year of an  eight  percent
         noncumulative, noncompounded return on their aggregate invested capital
         contributions (the "Limited Partners' 8% Return").

         Generally,  net income  (determined  without regard to any depreciation
         and  amortization  deductions  and  gains and  losses  from the sale of
         properties) is allocated  between the limited  partners and the general
         partners  first,  in  an  amount  not  to  exceed  the  net  cash  flow
         distributed  to the  partners  attributable  to such  year in the  same
         proportions as such net cash flow is distributed;  and  thereafter,  99
         percent  to the  limited  partners  and  one  percent  to  the  general
         partners.   All  deductions  for   depreciation  and  amortization  are
         allocated  99 percent to the  limited  partners  and one percent to the
         general partners.



                                       23

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


6.       Allocations and Distributions - Continued:

         Net  sales  proceeds  from the  sale of a  property  generally  will be
         distributed  first to the limited  partners in an amount  sufficient to
         provide them with the return of their invested  capital  contributions,
         plus their cumulative Limited Partners' 8% Return. The general partners
         will then receive a return of their capital  contributions  and, to the
         extent  previously  subordinated and unpaid, a five percent interest in
         all net cash flow distributions.  Any remaining net 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 will be, in general,  allocated in
         the same manner as net sales proceeds are distributable.  Any loss will
         be allocated  first,  on a pro rata basis to the partners with positive
         balances in their capital accounts;  and thereafter,  95 percent to the
         limited partners and five percent to the general partners.

         During the years  ended  December  31, 1997 and 1996,  the  Partnership
         declared  distributions  to the  limited  partners  of  $1,310,885  and
         $57,846.  No  distributions  have been made to the general  partners to
         date.

                                       24

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


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, 1997 and 1996 and the period February 10, 1995 (date
         of inception) through December 31, 1995:
<TABLE>
<CAPTION>

                                                                1997             1996              1995
                                                             ----------       ----------        -------
<S> <C>
                  Net income for
                    financial reporting
                    purposes                                 $1,154,760       $   26,910        $       -

                  Depreciation for tax
                    reporting purposes
                    in excess of
                    depreciation for
                    financial reporting
                    purposes                                    (45,009)            (386)               -

                  Direct financing leases
                    recorded as operating
                    leases for tax
                    reporting purposes                           28,084               -                 -

                  Capitalization of admin-
                    strative expenses for
                    tax reporting purposes                           -             3,662

                  Accrued rental income                        (128,079)            (146)               -

                  Deferred rental income                        281,415               -

                  Rents paid in advance                          28,277               -                 -

                  Amortization for
                    financial reporting
                    purposes (less than)
                    in excess of amortiza-
                    tion for tax reporting
                    purposes                                       (732)             183                -

                  Other                                              34               -                 -
                                                             ----------       ----------        ---------

                  Net income for federal
                    income tax purposes                      $1,318,750       $   30,223        $       -
                                                             ==========       ==========        =========
</TABLE>

                                       25

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


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 parent company of
         CNL Securities Corp. and CNL Fund Advisors,  Inc. James M. Seneff,  Jr.
         is director and chief executive  officer of CNL Securities Corp. and is
         director,  chairman  of the  board of  directors  and  chief  executive
         officer  of CNL  Fund  Advisors,  Inc.  The  other  individual  general
         partner,  Robert A. Bourne, is director and president of CNL Securities
         Corp.,  is  director,  vice  chairman  of the  board of  directors  and
         treasurer  of CNL Fund  Advisors,  Inc.  and served as president of CNL
         Fund Advisors, Inc through October 1997.

         CNL  Securities  Corp.  is  entitled  to  receive  selling  commissions
         amounting to 8.5% of the total amount  raised from the sale of units of
         limited  partnership  interest  for  services  in  connection  with the
         formation of the  Partnership  and the offering of units, a substantial
         portion of which is paid as  commissions to other  broker-dealers.  For
         the years ended  December 31, 1997 and 1996, the  Partnership  incurred
         $2,186,535 and $715,854,  respectively,  as syndication  costs for such
         fees, of which  $2,050,986 and $673,534,  respectively,  was or will be
         reallowed to other broker-dealers.

         In  addition,  CNL  Securities  Corp.  is  entitled  to  receive  a due
         diligence  expense  reimbursement fee equal to 0.5% of the total amount
         raised  from  the  sale of units of  limited  partnership  interest,  a
         portion  of which may be  reallowed  to other  broker-dealers  and from
         which all due  diligence  expenses  will be paid.  For the years  ended
         December  31, 1997 and 1996,  the  Partnership  incurred  $128,620  and
         $42,109,  respectively,  of such fees.  The majority of these fees were
         reallowed  to  other  broker-dealers  for  payment  of  bona  fide  due
         diligence expenses.

         CNL Fund  Advisors,  Inc. is entitled to receive  acquisition  fees for
         services in finding,  negotiating and acquiring properties on behalf of
         the Partnership  equal to 4.5% of the total amount raised from the sale
         of units of limited partnership interest.  For the years ended December
         31, 1997 and 1996, the  Partnership  incurred  $1,157,577 and $378,982,
         respectively,  of such  fees.  Such  fees  are  included  in  land  and
         buildings, net investment in direct financing leases and other assets.


                                       26

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


8.       Related Party Transactions - Continued:

         The  Partnership  and CNL  Fund  Advisors,  Inc.  have  entered  into a
         management agreement pursuant to which CNL Fund Advisors, Inc. receives
         annual management fees 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.  The management
         fee,  which will not  exceed  fees which are  competitive  for  similar
         services in the same geographic area, may or may not be taken, in whole
         or in part as to any year, in the sole discretion of CNL Fund Advisors,
         Inc.  All or any  portion  of the  management  fee not  taken as to any
         fiscal year shall be deferred without interest and may be taken in such
         other fiscal year as CNL Fund Advisors,  Inc. shall determine.  For the
         years  ended  December  31,  1997 and 1996,  the  Partnership  incurred
         $11,842 and $12, respectively, for such management fees.

         During  the years  ended  December  31,  1997 and 1996,  and the period
         February 10, 1995 (date of inception)  through  December 31, 1995,  CNL
         Fund  Advisors,   Inc.  and  its  affiliates  provided  accounting  and
         administrative  services to the Partnership  (including  accounting and
         administrative  services in connection with the offering of units) on a
         day-to-day  basis.  For the years ended December 31, 1997 and 1996, and
         the period February 10, 1995 (date of inception)  through  December 31,
         1995,  the expenses  incurred for these  services  were  classified  as
         follows:

                                             1997         1996         1995
                                           --------     --------     -------

                  Syndication costs        $212,279     $106,887     $ 37,586
                  General operating
                    and administrative
                    expenses                 98,207        2,980           -
                                           --------     --------     -------

                                           $310,486     $109,867     $ 37,586
                                           ========     ========     ========

                                       27

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


8.       Related Party Transactions - Continued:

         The due to related parties consisted of the following at December 31:

                                                       1997       1996
                                                     --------   ------

                  Due to CNL Securities
                    Corp.:
                      Commissions                    $ 79,069   $ 44,186
                      Marketing support and
                        due diligence expense
                        reimbursement fee               5,191      2,599
                                                     --------   --------
                                                       84,260     46,785
                                                     --------   --------

                  Due to CNL Fund Advisors,
                    Inc. and its affiliates:
                      Expenditures incurred
                        on behalf of the
                        Partnership                     1,737      2,788
                      Acquisition fees                 29,757     23,392
                      Accounting and admini-
                        strative services               1,921     10,912
                      Management fees                     556         12
                                                     --------   --------
                                                       33,971     37,104
                                                     --------   --------

                                                     $118,231   $ 83,889
                                                     ========   ========



                                       28

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


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 for at least one of the
         periods ended:
<TABLE>
<CAPTION>

                                                                                        February 10,
                                                                                         1995 (Date
                                                                                         of Inception)
                                                                                           through
                                             December 31,         December 31,           December 31,
                                                 1997                 1996                   1995
<S> <C>
                  Golden Corral Corp.        $241,395              $     -               $     -
                  Foodmaker, Inc.             240,261                    -                     -
                  Tiffany, L.L.C.             154,153                    -                     -
                  IHOP Properties, Inc.       152,343                    -                     -
                  Platinum Rotisserie,
                    L.L.C.                    133,591                    -                     -
                  Carrols Corporation         100,312                 1,373                    -
</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 for at
         least one of the periods ended:
<TABLE>
<CAPTION>

                                                                                    February 10,
                                                                                     1995 (Date
                                                                                     of Inception)
                                                                                       through
                                         December 31,         December 31,           December 31,
                                             1997                 1996                   1995
<S> <C>
                  Golden Corral          $395,548             $      -               $     -
                  Jack in the Box         240,261                    -                     -
                  Boston Market           231,489                    -                     -
                  IHOP                    152,343                    -                     -
                  Burger King             100,312                 1,373                    -

</TABLE>





                                       29

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              Years Ended December 31, 1997 and 1996 and the Period
                      February 10, 1995 (Date of Inception)
                            through December 31, 1995


9.       Concentration of Credit Risk - Continued:

         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. However, the general partners believe that the risk
         of such a default is reduced due to the  essential or important  nature
         of these properties for the ongoing operations of the lessees.

10.      Subsequent Events:

         During  the period  January  1, 1997  through  February  4,  1998,  the
         Partnership  received capital  contributions  for an additional  74,408
         units ($744,077) of limited partnership interest.



                                       30

<PAGE>



Item 9.   Changes in and Disagreements with Accountants on Accounting and
                              Financial Disclosure

         None.



                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

         The General Partners of the Registrant are James M. Seneff, Jr., Robert
A.  Bourne  and CNL  Realty  Corporation,  a Florida  corporation.  The  General
Partners  manage  and  control  the  Partnership's   affairs  and  have  general
responsibility   and  the  ultimate  authority  in  all  matters  affecting  the
Partnership's  business.  The  Partnership  has  available  to it the  services,
personnel and experience of CNL Fund Advisors,  Inc., CNL Group,  Inc. and their
affiliates, all of which are affiliates of the General Partners.

         James M. Seneff, Jr., age 51, is a principal  stockholder of CNL Group,
Inc., a diversified  real estate company,  and has served as its Chairman of the
Board of Directors,  director and Chief Executive Officer since its formation in
1980.  CNL Group,  Inc.  is the  parent  company of CNL  Securities  Corp.,  CNL
Investment Company, CNL Fund Advisors,  Inc., CNL Real Estate Advisors, Inc. and
prior to its merger with CNL Fund Advisors, Inc., effective January 1, 1996, CNL
Income Fund Advisors, Inc. Mr. Seneff is Chief Executive Officer, and has been a
director and registered  principal of CNL Securities Corp.,  which served as the
managing dealer in the Partnership's  offering of Units,  since its formation in
1979.  Mr.  Seneff also has held the position of President and a director of CNL
Management  Company,  a registered  investment  advisor,  since its formation in
1976,  has served as Chief  Executive  Officer and  Chairman of the Board of CNL
Investment  Company,  and Chief  Executive  Officer and Chairman of the Board of
Commercial Net Lease Realty,  Inc. since 1992, has served as the Chairman of the
Board and the Chief  Executive  Officer of CNL Realty  Advisors,  Inc. since its
inception in 1991 through  December 31, 1997, at which time CNL Realty Advisors,
Inc.  merged with Commercial Net Lease Realty,  Inc.,  served as Chairman of the
Board and Chief  Executive  Officer of CNL Income Fund Advisors,  Inc. since its
inception in 1994 through December 31, 1995, has served as a director,  Chairman
of the Board and Chief  Executive  Officer of CNL Fund Advisors,  Inc. since its
inception in 1994,  and has held the position of Chief  Executive  Officer and a
director of CNL Institutional  Advisors,  Inc., a registered investment advisor,
since its inception in 1990.  In addition,  Mr. Seneff has served as a director,
Chairman of the Board and Chief  Executive  Officer of CNL  American  Properties
Fund,  Inc. since 1994, and has served as a director,  Chairman of the Board and
Chief Executive  Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors,  Inc. since January 1997. Mr. Seneff  previously served on
the Florida State  Commission on Ethics and is a former member and past Chairman
of the State of Florida  Investment  Advisory  Council,  which recommends to the
Florida  Board  of  Administration  investments  for  various  Florida  employee
retirement  funds.  The Florida  Board of  Administration,  Florida's  principal
investment advisory and money management agency, oversees the investment of more
than $60 billion of retirement funds.  Since 1971, Mr. Seneff has been active in
the  acquisition,  development  and  management  of real  estate  projects  and,
directly or through an  affiliated  entity,  has served as a general  partner or
joint  venturer in over 100 real  estate  ventures  involved  in the  financing,
acquisition,  construction and rental of office buildings,  apartment complexes,
restaurants,  hotels  and other  real  estate.  Included  in these  real  estate
ventures are approximately 65 privately offered real estate limited partnerships
in which Mr.  Seneff,  directly or through an affiliated  entity,  serves or has
served as a general partner. Also included are CNL Income Fund, Ltd., CNL Income
Fund II, Ltd.,  CNL Income Fund III,  Ltd., CNL Income Fund IV, Ltd., CNL Income
Fund V, Ltd.,  CNL Income Fund VI, Ltd.,  CNL Income Fund VII,  Ltd., CNL Income
Fund VIII,  Ltd.,  CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income
Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income
Fund XIV,  Ltd.,  CNL Income Fund XV,  Ltd.,  CNL Income Fund XVI,  Ltd. and CNL
Income Fund XVII, Ltd. (the "CNL Income Fund Partnerships"),  public real estate
limited  partnerships  with  investment  objectives  similar  to  those  of  the
Partnership,  in which  Mr.  Seneff  serves  as a general  partner.  Mr.  Seneff
received his degree in Business  Administration from Florida State University in
1968.


                                       31

<PAGE>



         Robert A.  Bourne,  age 50, is  President  and  Treasurer of CNL Group,
Inc., President,  a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, and prior to its merger with
CNL Fund Advisors,  Inc.,  effective  January 1, 1996, CNL Income Fund Advisors,
Inc., and Chief Investment Officer,  Vice Chairman of the Board of Directors,  a
director  and  Treasurer  of CNL  Institutional  Advisors,  Inc.,  a  registered
investment  advisor.  Mr.  Bourne  served  as  President  of  CNL  Institutional
Advisors,  Inc. from the date of its inception  through June 30, 1997 and served
as President of CNL Fund Advisors,  Inc. from the date of its inception  through
October  1997.  Mr.  Bourne  currently  serves as Vice  Chairman of the Board of
Directors and as Treasurer of CNL Fund Advisors, Inc. Mr. Bourne also has served
as a director  since 1992,  as  President  from July 1992 to February  1996,  as
Secretary and Treasurer  from February  1996 through  December  1997,  and since
February  1996,  served as Vice Chairman of the Board of Directors of Commercial
Net Lease Realty,  Inc. In addition,  Mr. Bourne has served as a director  since
its  inception in 1991,  as President  from 1991 to February  1996, as Secretary
from February 1996 to July 1996, and since  February  1996,  served as Treasurer
and Vice Chairman of CNL Realty  Advisors,  Inc.  through  December 31, 1997, at
which time CNL Realty  Advisors,  Inc.  merged with Commercial Net Lease Realty,
Inc.  In  addition,  Mr.  Bourne has served as  President  and a director of CNL
American  Properties  Fund,  Inc.  since 1994, and has served as President and a
director of CNL  American  Realty Fund,  Inc.  since 1996 and of CNL Real Estate
Advisors, Inc. since January 1997. Upon graduation from Florida State University
in 1970, where he received a B.A. in Accounting,  with honors, Mr. Bourne worked
as a certified public accountant and, from September 1971 through December 1978,
was employed by Coopers & Lybrand,  Certified Public Accountants,  where he held
the  position of tax manager  beginning  in 1975.  From  January 1979 until June
1982, Mr. Bourne was a partner in the accounting firm of Cross & Bourne and from
July 1982  through  January  1987,  he was a partner in the  accounting  firm of
Bourne & Rose, P.A.,  Certified Public  Accountants.  Mr. Bourne, who joined CNL
Securities  Corp.  in 1979,  has  participated  as a  general  partner  or joint
venturer  in  over  100  real  estate   ventures   involved  in  the  financing,
acquisition,  construction and rental of office buildings,  apartment complexes,
restaurants,  hotels  and other  real  estate.  Included  in these  real  estate
ventures are approximately 64 privately offered real estate limited partnerships
in which Mr.  Bourne,  directly or through an affiliated  entity,  serves or has
served as a general partner. Also included are the CNL Income Fund Partnerships,
public real estate limited  partnerships with investment  objectives  similar to
those of the Partnership, in which Mr. Bourne serves as a general partner.

         CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida.  Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners.  CNL
Realty  Corporation  was organized to serve as the corporate  general partner of
real estate limited partnerships,  such as the Partnership,  organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.

         CNL  Fund  Advisors,  Inc.  provides  certain  management  services  in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation  organized  in 1994 under the laws of the State of Florida,  and its
principal  office is located at 400 East South Street,  Orlando,  Florida 32801.
CNL Fund  Advisors,  Inc. is a wholly  owned  subsidiary  of CNL Group,  Inc., a
diversified  real  estate  company,   and  was  organized  to  perform  property
acquisition, property management and other services.

         CNL  Group,  Inc.,  which is the parent  company of CNL Fund  Advisors,
Inc.,  was organized in 1980 under the laws of the State of Florida.  CNL Group,
Inc. is a diversified  real estate  company which  provides a wide range of real
estate,  development  and  financial  services to companies in the United States
through the  activities  of its  subsidiaries.  These  activities  are primarily
focused  on the  franchised  restaurant  and  hospitality  industries.  James M.
Seneff,  Jr., an individual General Partner of the Partnership,  is the Chairman
of the Board,  Chief Executive  Officer,  and a director of CNL Group,  Inc. Mr.
Seneff and his wife own all of the outstanding shares of CNL Group, Inc.

         The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or  subsidiaries  in the discretion of the Boards of Directors of
those companies,  but, except as specifically indicated, do not serve as members
of the Boards of Directors of those  entities.  The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.



                                       32

<PAGE>



         Curtis B. McWilliams,  age 42, joined CNL Fund Advisors,  Inc. in April
1997 and  currently  serves  as  President  of CNL Fund  Advisors,  Inc.  and as
Executive Vice President of CNL American Properties Fund, Inc. In addition,  Mr.
McWilliams  serves  as  Executive  Vice  President  of CNL  Group,  Inc.  and as
President of CNL Financial Services,  Inc. and certain other subsidiaries of CNL
Group,  Inc. From September 1983 through March 1997, Mr. McWilliams was employed
by Merrill  Lynch.  From  January  1991 to August  1996,  Mr.  McWilliams  was a
managing director in the corporate  banking group of Merrill Lynch's  investment
banking division.  During this time, he was a senior  relationship  manager with
Merrill  Lynch and as such was  responsible  for a number of the  firm's  larger
clients.  From February 1990 to February  1993, he also served as co-head of one
of the  Industrial  Banking  Groups within Merrill  Lynch's  investment  banking
division and had administrative responsibility for a group of bankers and client
relationships, including the firm's transportation group. From September 1996 to
March  1997,  Mr.  McWilliams  served as  Chairman  of Merrill  Lynch's  Private
Advisory Services. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton  University  in 1977 and a Masters of Business  Administration  with a
concentration in finance from the University of Chicago in 1983.

         John T. Walker,  age 39, is the Chief  Operating  Officer and Executive
Vice President of CNL Fund Advisors, Inc. and CNL American Properties Fund, Inc.
and serves as Executive Vice President of CNL American Realty Fund, Inc. and CNL
Real  Estate  Advisors,  Inc.  Mr.  Walker  joined CNL Fund  Advisors,  Inc.  in
September  1994,  as  Senior  Vice  President,   responsible  for  Research  and
Development.  From May 1992 to May 1994,  he was  Executive  Vice  President for
Finance and Administration and Chief Financial Officer of Z Music, Inc., a cable
television  network which was  subsequently  acquired by Gaylord  Entertainment,
where he was responsible for overall financial and administrative management and
planning.  From January 1990 through April 1992, Mr. Walker was Chief  Financial
Officer of the First Baptist Church in Orlando, Florida. From April 1984 through
December  1989, he was a partner in the accounting  firm of Chastang,  Ferrell &
Walker,  P.A.,  where he was the  partner  in  charge  of audit  and  consulting
services, and from 1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior
at  Price  Waterhouse.  Mr.  Walker  is a Cum  Laude  graduate  of  Wake  Forest
University with a B.S. in Accountancy and is a certified public accountant.

         Lynn E. Rose,  age 49, a  certified  public  accountant,  has served as
Chief  Financial  Officer of CNL Group,  Inc. since December 1993, has served as
Secretary of CNL Group,  Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until  December  1993. In addition,  Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She has
served as Chief Operating Officer, Vice President and Secretary of CNL Corporate
Services,  Inc. since November 1994. Ms. Rose also has served as Chief Financial
Officer and Secretary of CNL Institutional Advisors, Inc. since its inception in
1990, served as a director and Secretary of CNL Realty Advisors,  Inc. since its
inception in 1991 through  December 31, 1997, at which time CNL Realty Advisors,
Inc.  merged with  Commercial  Net Lease Realty,  Inc.,  Treasurer of CNL Realty
Advisors, Inc. from 1991 to February 1996, Secretary and Treasurer of Commercial
Net Lease Realty, Inc. from 1992 to February 1996,  Secretary of CNL Income Fund
Advisors,  Inc.  since its inception in 1994 to December  1995,  and a director,
Secretary and Treasurer of CNL Fund Advisors,  Inc. since 1994 and has served as
a director,  Secretary and  Treasurer of CNL Real Estate  Advisors,  Inc.  since
January  1997.  Ms.  Rose also has  served as  Secretary  and  Treasurer  of CNL
American  Properties  Fund,  Inc.  since 1994,  and has served as Secretary  and
Treasurer of CNL American  Realty Fund, Inc. since 1996. Ms. Rose also currently
serves as Secretary  for  approximately  50  additional  corporations.  Ms. Rose
oversees the management information services, administration,  legal compliance,
accounting,   tenant  compliance,  and  reporting  for  over  300  corporations,
partnerships,  and joint ventures.  Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose,  P.A.,  Certified
Public  Accountants.  Ms. Rose holds a B.A. in Sociology  from the University of
Central Florida. She was licensed as a certified public accountant in 1979.



                                       33

<PAGE>



         Jeanne A. Wall,  age 39, has served as Chief  Operating  Officer of CNL
Investment  Company and of CNL  Securities  Corp.  since  November  1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984,  Ms. Wall joined CNL  Securities  Corp.  In 1985,  Ms. Wall became Vice
President of CNL Securities Corp., in 1987, she became Senior Vice President and
in July 1997, she became  Executive  Vice  President of CNL Securities  Corp. In
this  capacity,  Ms. Wall serves as national  marketing  and sales  director and
oversees  the  national  marketing  plan  for the CNL  investment  programs.  In
addition, Ms. Wall oversees product development,  partnership administration and
investor  services for  programs  offered  through  participating  brokers,  and
corporate  communications for CNL Group, Inc. and Affiliates.  Ms. Wall also has
served  as  Senior  Vice  President  of  CNL  Institutional  Advisors,  Inc.,  a
registered  investment  advisor,  from 1990 to 1993,  as Vice  President  of CNL
Realty  Advisors,  Inc.  since  its  inception  in 1991  through  1997,  as Vice
President of  Commercial  Net Lease  Realty,  Inc.  from 1992 through  1997,  as
Executive Vice President of CNL Fund Advisors, Inc. since 1994, and as Executive
Vice President of CNL American  Properties  Fund,  Inc. since 1994. In addition,
Ms. Wall has served as Executive  Vice  President  of CNL Real Estate  Advisors,
Inc. since January 1997 and as Executive  Vice President of CNL American  Realty
Fund,  Inc.  since 1996. Ms. Wall holds a B.A. in Business  Administration  from
Linfield College and is a registered  principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program Association
and on the Direct  Participation  Program committee for the National Association
of Securities Dealers (NASD).

         Steven D. Shackelford, age 34, has served as Chief Financial Officer of
CNL Fund Advisors,  Inc. since September 1996 and as Chief Financial  Officer of
CNL American  Properties Fund, Inc. since January 1997. Mr.  Shackelford  joined
CNL Fund Advisors,  Inc. in September 1996. From March 1995 to July 1996, he was
a  senior  manager  in the  national  office  of Price  Waterhouse  where he was
responsible  for advising  foreign clients seeking to raise capital and a public
listing in the United  States.  From August  1992 to March 1995,  he served as a
manager  in  the  Price  Waterhouse,   Paris,   France  office  serving  several
multinational  clients. Mr. Shackelford was an audit staff and audit senior from
1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr. Shackelford
received  a  B.A.  in  Accounting,  with  honors,  and  a  Masters  of  Business
Administration   from  Florida  State  University  and  is  a  certified  public
accountant.


Item 11.  Executive Compensation

         Other than as  described in Item 13, the  Partnership  has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates.  There are no compensatory plans or arrangements  regarding
termination of employment or change of control.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         As of March 13,  1998,  no person was known to the  Registrant  to be a
beneficial owner of more than five percent of the Units.

         The following  table sets forth,  as of March 13, 1998,  the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>

                                                                 Amount and Nature of
           Title of Class               Name of Partner          Beneficial Ownership         Percent of Class
<S> <C>
    General Partnership Interests     James M. Seneff, Jr.                                           45%
                                      Robert A. Bourne                                               45%
                                      CNL Realty Corporation                                         10%
                                                                                                    ----
                                                                                                    100%

    Limited Partnership Interests     James M. Seneff, Jr.            2,500 Units                  0.07%
                                      Robert A. Bourne                2,500 Units                  0.07%
                                                                                                   -----
                                                                                                   0.14%
</TABLE>

                                       34

<PAGE>



         Neither the General  Partners,  nor any of their  affiliates,  owns any
interest in the  Registrant,  except as noted above.  There are no  arrangements
which at a subsequent date may result in a change in control of the Registrant.


Item 13.  Certain Relationships and Related Transactions

         The  table  below   summarizes  the  types,   recipients,   methods  of
computation and amounts of compensation,  fees and distributions paid or payable
by the  Partnership  to the General  Partners and their  affiliates for the year
ended  December 31, 1997,  exclusive of any  distributions  to which the General
Partners or their affiliates may be entitled in the event they purchase Units.
<TABLE>
<CAPTION>

==========================================================================================================================
                                                                                              Amount Incurred
         Type of Compensation                                                               For the Year Ended
              and Recipient                       Method of Computation                      December 31, 1997
        -----------------------                   ---------------------                    -------------------
<S> <C>
Selling commissions to CNL               Commissions of 8.5% per Unit on          $2,186,535, of which $2,050,986
Securities Corp., as managing            all Units sold, up to eight percent      was reallowed to other broker-
dealer of the Partnership's              of which may be reallowed to             dealers
offering of Units                        other dealers with respect to Units
                                         sold by such dealers.

Due diligence expense reim-              Fee equal to 0.5% of gross               $128,620, the majority of which
bursement fee to CNL Securities          offering proceeds, a portion of          was reallowed to other broker-
Corp.                                    which may be reallowed to other          dealers for the payment of bona
                                         dealers and from which all due           fide due diligence expenses were
                                         diligence expenses will be paid.         paid.

Reimbursement to General                 Actual  expenses  incurred, except       $423,495
Partners and their affiliates for        that the General Partners will pay
organizational and offering              all such expenses in excess of
expenses incurred in connection          three percent of the gross offering
with the Partnership's offering of       proceeds.
Units

Acquisition fees and expenses to         Fees equal to 4.5% of gross              Acquisition fees:  $1,157,577
CNL Fund Advisors, Inc.                  offering proceeds to CNL Fund
                                         Advisors, Inc., plus reimburse-          Acquisition expenses:
                                         ment to the General Partners and         $134,138
                                         their affiliates for expenses
                                         actually incurred.

Reimbursement to CNL Fund                Operating expenses are reimbursed        Operating expenses incurred
Advisors, Inc. and affiliates for        at the lower of cost or 90 percent       on behalf of the Partnership:
operating expenses                       of the prevailing rate at which          $44,166
                                         comparable services could have
                                         been obtained in the same                Accounting and administra-
                                         geographic area.  Affiliates of the      tive services:  $98,207
                                         General  Partners  from  time  to  time
                                         incur  certain  operating  expenses  on
                                         behalf of the Partnership for which the
                                         Partnership  reimburses  the affiliates
                                         without interest.
==========================================================================================================================
</TABLE>


                                       35

<PAGE>


<TABLE>
<CAPTION>


==========================================================================================================================
                                                                                              Amount Incurred
         Type of Compensation                                                               For the Year Ended
              and Recipient                       Method of Computation                      December 31, 1997
        -----------------------                   ---------------------                    -------------------
<S> <C>
Annual management fee to CNL             One percent of the sum of gross             $11,842
Fund Advisors, Inc.                      revenues (excluding noncash lease
                                         accounting adjustments) 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.
                                         The  management  fee,  which  will  not
                                         exceed competi-tive fees for comparable
                                         services in the same  geographic  area,
                                         may or may not be taken, in whole or in
                                         part  as  to  any  year,  in  the  sole
                                         discretion of CNL Fund  Advisors,  Inc.
                                         All or any  portion  of the  management
                                         fee not  taken  as to any  fiscal  year
                                         shall be deferred  without interest and
                                         may be taken in such other  fiscal year
                                         as  CNL  Fund   Advisors,   Inc.  shall
                                         determine.

Deferred, subordinated real estate       A deferred, subordinated real               $ - 0 -
disposition fee payable to CNL           estate disposition fee, payable
Fund Advisors, Inc.                      upon sale of one or more
                                         Properties,  in an amount  equal to the
                                         lesser of (i) one-half of a competitive
                                         real estate  commission,  or (ii) three
                                         percent  of the  sales  price  of  such
                                         Property or Properties. Payment of such
                                         fee  shall  be made  only  if CNL  Fund
                                         Advisors,  Inc.  provides a substantial
                                         amount of services in  connection  with
                                         the sale of a  Property  or  Properties
                                         and shall be  subordinated  to  certain
                                         minimum    returns   to   the   limited
                                         partners.

General Partners' deferred, sub-         A deferred, subordinated share              $ - 0 -
ordinated share of Partnership net       equal to five percent of
cash flow                                Partnership distributions of net
                                         cash flow, subordinated to certain
                                         minimum returns to the limited
                                         partners.
==========================================================================================================================
</TABLE>



                                       36

<PAGE>


<TABLE>
<CAPTION>


==========================================================================================================================
                                                                                              Amount Incurred
         Type of Compensation                                                               For the Year Ended
              and Recipient                       Method of Computation                      December 31, 1997
        -----------------------                   ---------------------                    -------------------
<S> <C>
General Partners' deferred, sub-         A deferred, subordinated share              $ - 0 -
ordinated share of Partnership net       equal to five percent of
sales proceeds from a sale or            Partnership distributions of such
sales                                    net sales proceeds, subordinated to
                                         certain minimum returns to the
                                         limited partners.
==========================================================================================================================

</TABLE>


                                       37

<PAGE>



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)      The following documents are filed as part of this report.

         1.  Financial Statements

                  Report of Independent Accountants

                  Balance Sheets at December 31, 1997 and 1996

                  Statements of Income for the years ended December 31, 1997 and
                  1996 and the period  February  10,  1995  (date of  inception)
                  through December 31, 1995

                  Statements of Partners'  Capital for the years ended  December
                  31,  1997 and 1996 and the period  February  10, 1995 (date of
                  inception) through December 31, 1995

                  Statements of Cash Flows for the years ended December 31, 1997
                  and 1996 and the period  February 10, 1995 (date of inception)
                  through December 31, 1995

                  Notes to Financial Statements

         2.  Financial Statement Schedule

                  Schedule  III - Real Estate and  Accumulated  Depreciation  at
                  December 31, 1997

                  Notes  to  Schedule   III  -  Real   Estate  and   Accumulated
                  Depreciation at December 31, 1997

                  All other Schedules are omitted as the required information is
                  inapplicable  or is presented in the  financial  statements or
                  notes thereto.

         3.  Exhibits

               **3.1       Affidavit and  Certificate of Limited  Partnership of
                           CNL Income Fund XVIII,  Ltd. (Filed as Exhibit 3.2 to
                           the Registrant's Registration Statement on Form S-11,
                           No. 33-90998, incorporated herein by reference.)

               **3.2       Amended and Restated Agreement of Limited Partnership
                           of CNL Income Fund XVIII,  Ltd.  (Included as Exhibit
                           4.2 to  Form  10-K  filed  with  the  Securities  and
                           Exchange   Commission   on  March   21,   1996,   and
                           incorporated herein by reference.)

               **4.1       Affidavit and  Certificate of Limited  Partnership of
                           CNL Income Fund XVIII, Ltd.  (Included as Exhibit 3.2
                           to  Registration  Statement No.  33-90998-01  on Form
                           S-11 and incorporated herein by reference.)

               **4.2       Amended and Restated Agreement of Limited Partnership
                           of CNL Income Fund XVIII,  Ltd.  (Included as Exhibit
                           4.2 to  Form  10-K  filed  with  the  Securities  and
                           Exchange   Commission   on  March   21,   1996,   and
                           incorporated herein by reference.)

               **4.3       Form of Agreement  between CNL Income Fund XVII, Ltd.
                           and MMS Escrow and Transfer Agency,  Inc. and between
                           CNL  Income  Fund  XVIII,  Ltd.  and MMS  Escrow  and
                           Transfer  Agency,  Inc.  relating to the Distribution
                           Reinvestment  Plans  (Filed  as  Exhibit  4.4  to the
                           Registrant's Registration Statement on Form S-11, No.
                           33-90998, incorporated herein by reference.)

                                       38

<PAGE>




               **8.4       Opinion  of  Baker  &  Hostetler   regarding  certain
                           material   issues   relating   to  the   Distribution
                           Reinvestment  Plan of CNL  Income  Fund  XVIII,  Ltd.
                           (Filed as Exhibit 8.4 to  Amendment  No. Three to the
                           Registrant's Registration Statement on Form S-11, No.
                           33-90998, incorporated herein by reference.)

               **10.1      Management  Agreement  between CNL Income Fund XVIII,
                           Ltd. and CNL Fund Advisors, Inc. (Included as Exhibit
                           10.1 to Form  10-K  filed  with  the  Securities  and
                           Exchange   Commission   on  March   20,   1997,   and
                           incorporated herein by reference.)

               **10.2      Form of Joint Venture  Agreement  for Joint  Ventures
                           with Unaffiliated  Entities (Filed as Exhibit 10.2 to
                           the Registrant's Registration Statement on Form S-11,
                           No. 33-90998, incorporated herein by reference.)

               **10.3      Form of Joint Venture  Agreement  for Joint  Ventures
                           with  Affiliated  Programs  (Filed as Exhibit 10.3 to
                           the Registrant's Registration Statement on Form S-11,
                           No. 33-90998, incorporated herein by reference.)

               **10.4      Form of Development  Agreement (Filed as Exhibit 10.5
                           to the  Registrant's  Registration  Statement on Form
                           S-11,   No.   33-90998,    incorporated   herein   by
                           reference.)

               **10.5      Form of  Indemnification  and Put Agreement (Filed as
                           Exhibit   10.6  to  the   Registrant's   Registration
                           Statement on Form S-11,  No.  33-90998,  incorporated
                           herein by reference.)

               **10.6      Form  of  Unconditional   Guarantee  of  Payment  and
                           Performance   (Filed   as   Exhibit   10.7   to   the
                           Registrant's Registration Statement on Form S-11, No.
                           33-90998, incorporated herein by reference.)

               **10.7      Form  of  Lease  Agreement  for  Existing  Restaurant
                           (Filed   as   Exhibit   10.8   to  the   Registrant's
                           Registration  Statement on Form S-11,  No.  33-90998,
                           incorporated herein by reference.)

               **10.8      Form  of  Lease   Agreement  for   Restaurant  to  be
                           Constructed   (Filed   as   Exhibit   10.9   to   the
                           Registrant's Registration Statement on Form S-11, No.
                           33-90998, incorporated herein by reference.)

               **10.9      Form of Premises  Lease for Golden Corral  Restaurant
                           (Filed   as   Exhibit   10.10  to  the   Registrant's
                           Registration  Statement on Form S-11,  No.  33-90998,
                           incorporated herein by reference.)

               **10.10     Form of Agreement  between CNL Income Fund XVII, Ltd.
                           and MMS Escrow and Transfer Agency,  Inc. and between
                           CNL  Income  Fund  XVIII,  Ltd.  and MMS  Escrow  and
                           Transfer  Agency,  Inc.  relating to the Distribution
                           Reinvestment  Plans  (Filed  as  Exhibit  4.4  to the
                           Registrant's Registration Statement on Form S-11, No.
                           33-90998, incorporated herein by reference.)

               **10.11     Form of Cotenancy  Agreement with Unaffiliated Entity
                           (Filed as Exhibit  10.12 to Amendment  No. One to the
                           Registrant's Registration Statement on Form S-11, No.
                           33- 90998, incorporated herein by reference.)

               **10.12     Form of Cotenancy  Agreement with  Affiliated  Entity
                           (Filed as Exhibit  10.13 to Amendment  No. One to the
                           Registrant's Registration Statement on Form S-11, No.
                           33- 90998, incorporated herein by reference.)


                                       39

<PAGE>



               **10.13     Form of Registered  Investor Advisor Agreement (Filed
                           as  Exhibit   10.14  to  Amendment  No.  One  to  the
                           Registrant's Registration Statement on Form S-11, No.
                           33-90998, incorporated herein by reference.)

                27         Financial Data Schedule (Filed herewith.)

         (b)      The Registrant  filed no reports on Form 8-K during the period
                  October 1, 1997 through December 31, 1997.


**previously filed

                                       40

<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 26th day of
March, 1998.

                                     CNL INCOME FUND XVIII, 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.



<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>
/s/ Robert A. Bourne                     President,  Treasurer and  Director                  March 26, 1998
---------------------------------------- (Principal  Financial  and
Robert A. Bourne                         Accounting  Officer)


/s/ James M. Seneff, Jr.                 Chief Executive Officer,                             March 26, 1998
---------------------------------------- Chairman and Director (Principal
James M. Seneff, Jr.                     Executive Officer)


==========================================================================================================================
</TABLE>

<PAGE>



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

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 1997

<TABLE>
<CAPTION>


                                                                                           Costs Capitalized
                                                                                               Subsequent
                                                            Initial Cost                     To Acquisition
                                                                         Buildings
                                        Encum-                              and             Improve-      Carrying
                                       brances           Land           Improvements         ments         Costs
<S> <C>
Properties the Partnership
  has Invested in Under
  Operating Leases:

    Arby's Restaurant:
      Lexington, North Carolina        $    -         $   210,369       $         -        $       -      $     -

    Boston Market Restaurants:
      Raleigh, North Carolina               -             700,361            597,806               -            -
      Timonium, Maryland                    -             768,286                 -           429,011           -
      San Antonio, Texas                    -             676,288                 -           225,926           -
      Minnetonka, Minnesota                 -             574,291                 -                -            -

    Burger King Restaurant:
      Kinston, North Carolina               -             261,805            661,670               -            -

    Chevy's Fresh Mex Restaurant:
      Mesa, Arizona                         -           1,027,746          1,596,063               -            -

    Golden Corral Family
      Steakhouse Restaurants:
        Houston, Texas                      -             888,446                 -           765,352           -
        Stow, Ohio                          -             489,090                 -                -            -
        Galveston, Texas                    -             686,534                 -           751,467           -
        Elizabethtown, Kentucky             -             488,082                 -         1,041,209           -
        Destin, Florida                     -             563,723                 -         1,161,616           -

    Ground Round Restaurant:
      Rochester, New York                   -             525,130            582,038               -            -

    IHOP Restaurant:
      Santa Rosa, California                -             499,771                 -                -            -

    Jack in the Box Restaurants:
      Centerville, Texas                    -             261,222                 -           541,645           -
      Echo Park, California                 -             672,867                 -           657,618           -
      Henderson, Nevada                     -             521,361                 -           606,942           -
      Houston, Texas                        -             776,237                 -           587,970           -

     Wendy's Restaurant:
       Sparta, Tennessee                    -             221,240                 -           432,260           -
                                      --------        -----------        -----------       ----------      ------

                                      $     -         $10,812,849        $ 3,437,577       $7,201,016      $    -
                                      ========        ===========        ===========       ==========      ======

Properties the Partnership
  has Invested in Under
  Direct Financing Leases:

    Arby's Restaurant:
      Lexington, North Carolina             -         $        -         $   457,680       $       -       $    -


</TABLE>


<PAGE>








<TABLE>
<CAPTION>



                                                                                                                         Life
                                                                                                                       on Which
                   Gross Amount at Which Carried                                                                    Depreciation
                       at Close of Period (b)                                                                        in Latest
                            Buildings                                                  Date                             Income
                               and                                Accumulated         of Con-          Date          Statement is
          Land             Improvements           Total           Depreciation       struction       Acquired          Computed
       -----------         ------------        -----------        ------------       ---------       --------        ----------

<S> <C>




       $   210,369              (f)           $   210,369         $         -           1997           07/97               (d)


           700,361              597,806          1,298,167              18,758          1994           01/97               (b)
           768,286              429,011          1,197,297               6,659          1997           05/97               (b)
           676,288              225,926            902,214               2,798          1997           04/97               (b)
           574,291              (f)                574,291                  -           1997           04/97               (d)


           261,805              661,670            923,475              22,358          1994           12/96               (b)


         1,027,746            1,596,063          2,623,809                 146          1994           12/97               (b)



           888,446              765,352          1,653,798              19,115          1997           12/96               (b)
           489,090              (f)                489,090                  -           1997           04/97               (d)
           686,534              751,467          1,438,001              15,504          1997           01/97               (b)
           488,082            1,041,209          1,529,291               6,830          1997           05/97               (b)
           563,723            1,161,616          1,725,339                (h)           (g)            09/97               (h)


           525,130              582,038          1,107,168               3,871          1981           10/97               (b)


           499,771               (f)               499,771                  -           1997           05/97               (d)


           261,222              541,645            802,867              12,680          1997           01/97                (b)
           672,867              657,618          1,330,485              11,260          1997           01/97                (b)
           521,361              606,942          1,128,303              10,171          1997           01/97                (b)
           776,237              587,970          1,364,207               5,276          1997           05/97                (b)


           221,240              432,260            653,500               4,954          1997           04/97                (b)
       -----------         ------------        -----------        ------------

       $10,812,849         $ 10,638,593        $21,451,442        $    140,380
       ===========         ============        ===========        ============






       $        -              (f)              $     (f)               (d)             1997           07/97               (d)
</TABLE>


                                       F-1

<PAGE>



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

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 1997

<TABLE>
<CAPTION>


                                                                                                Costs Capitalized
                                                                                                    Subsequent
                                                              Initial Cost                       To Acquisition
                                                                           Buildings
                                          Encum-                              and             Improve-      Carrying
                                         brances           Land           Improvements         ments         Costs
<S> <C>
    Black-eyed Pea Restaurant
      Atlanta, Georgia                        -                  -                  -           652,012           -

    Golden Corral Family
      Steakhouse Restaurant:
        Stow, Ohio                            -                  -           1,279,131               -            -

    IHOP Restaurants:
      Bridgeview, Illinois                    -             353,714          1,149,532               -            -
      Santa Rosa, California                  -                  -             856,829               -            -

    On the Border Restaurant:
      San Antonio, Texas                      -                  -                  -         1,284,064           -
                                         -------        -----------        -----------       ----------     -------

                                         $    -         $   353,714        $ 3,743,172       $1,936,076     $     -
                                         =======        ===========        ===========       ==========     =======

</TABLE>


<PAGE>








<TABLE>
<CAPTION>



                                                                                                                         Life
                                                                                                                       on Which
                  Gross Amount at Which Carried                                                                     Depreciation
                      at Close of Period (b)                                                                          in Latest
                            Buildings                                                  Date                             Income
                               and                                Accumulated         of Con-          Date          Statement is
          Land             Improvements           Total           Depreciation       struction       Acquired          Computed
       -----------         ------------        -----------        ------------       ---------       --------        ----------
<S> <C>

            -                  (f)                  (f)                 (d)             1991           03/97               (d)



            -                  (f)                  (f)                 (d)             1997           04/97               (d)


           (f)                 (f)                  (f)                 (d)             1972           07/97               (e)
            -                  (f)                  (f)                 (d)             1994           05/97               (d)


            -                  (f)                  (f)                 (d)             1997           04/97               (d)

</TABLE>

                                       F-2

<PAGE>



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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 1997



(a)      Transactions  in real estate and accumulated  depreciation  during 1997
         and 1996 are summarized as follows:
<TABLE>
<CAPTION>

                                                                                 Accumulated
                                                                 Cost (b)       Depreciation
<S> <C>
                    Properties the Partnership
                      has Invested in Under
                      Operating Leases:

                        Balance, December 31, 1995           $        -          $        -
                        Acquisitions                           1,531,069                  -
                        Depreciation expense                          -                  301
                                                             -----------         -----------

                        Balance, December 31, 1996             1,531,069                 301
                        Acquisitions                          19,920,373                  -
                        Depreciation expense                          -              140,079
                                                             -----------         -----------

                        Balance, December 31, 1997           $21,451,442         $   140,380
                                                             ===========         ===========
</TABLE>


(b)        Depreciation expense is computed for buildings and improvements based
           upon estimated lives of 30 years.

(c)        As of December 31, 1997, the aggregate  cost of the Properties  owned
           by the Partnership  for federal income tax purposes was  $26,322,788.
           All of the leases are treated as operating  leases for federal income
           tax purposes.

(d)        For financial reporting  purposes,  the portion of the lease relating
           to the building has been recorded as a direct financing  leases.  The
           cost of the building has been  included in net  investment  in direct
           financing leases; therefore, depreciation is not applicable.

(e)        For financial reporting purposes, the lease for the land and building
           has been recorded as a direct  financing  lease. The cost of the land
           and building has been included in net investment in direct  financing
           leases; therefore, depreciation is not applicable.

(f)        For financial  reporting  purposes,  certain  components of the lease
           relating  to  land  and  building  have  been  recorded  as a  direct
           financing lease.  Accordingly,  costs relating to these components of
           this lease are not shown.

(g)        Scheduled for completion in 1998.

(h)        Property  was  not  placed  in  service  as  of  December  31,  1997;
           therefore, no depreciation was taken.



                                       F-3

<PAGE>



                                    EXHIBITS


<PAGE>



                                  EXHIBIT INDEX


Exhibit Number                                                             Page

    **3.1         Affidavit and Certificate of Limited Partnership of CNL Income
                  Fund XVIII,  Ltd.  (Included  as Exhibit  3.2 to  Registration
                  Statement No. 33-90998-01 on Form S-11 and incorporated herein
                  by reference.)

    **3.2         Amended and Restated  Agreement of Limited  Partnership of CNL
                  Income Fund XVIII, Ltd.  (Included as Exhibit 4.2 to Form 10-K
                  filed with the Securities and Exchange Commission on March 21,
                  1996, and incorporated herein by reference.)

    **4.1         Affidavit and Certificate of Limited Partnership of CNL Income
                  Fund XVIII,  Ltd.  (Included  as Exhibit  3.2 to  Registration
                  Statement No. 33-90998-01 on Form S-11 and incorporated herein
                  by reference.)

    **4.2         Amended and Restated  Agreement of Limited  Partnership of CNL
                  Income Fund XVIII, Ltd.  (Included as Exhibit 4.2 to Form 10-K
                  filed with the Securities and Exchange Commission on March 21,
                  1996, and incorporated herein by reference.)

    **4.3         Form of Agreement  between CNL Income Fund XVII,  Ltd. and MMS
                  Escrow and Transfer  Agency,  Inc. and between CNL Income Fund
                  XVIII, Ltd. and MMS Escrow and Transfer Agency,  Inc. relating
                  to the Distribution  Reinvestment  Plans (Filed as Exhibit 4.4
                  to the Registrant's  Registration  Statement on Form S-11, No.
                  33-90998, incorporated herein by reference.)

    **8.4         Opinion of Baker & Hostetler regarding certain material issues
                  relating to the Distribution  Reinvestment  Plan of CNL Income
                  Fund XVIII,  Ltd. (Filed as Exhibit 8.4 to Amendment No. Three
                  to the Registrant's  Registration  Statement on Form S-11, No.
                  33-90998, incorporated herein by reference.)

    **10.1        Management  Agreement  between CNL Income Fund XVIII, Ltd. and
                  CNL Fund Advisors, Inc. (Included as Exhibit 10.1 to Form 10-K
                  filed with the Securities and Exchange Commission on March 20,
                  1997, and incorporated herein by reference.)

    **10.2        Form of  Joint  Venture  Agreement  for  Joint  Ventures  with
                  Unaffiliated   Entities   (Filed  as   Exhibit   10.2  to  the
                  Registrant's   Registration   Statement  on  Form  S-11,   No.
                  33-90998, incorporated herein by reference.)

    **10.3        Form of  Joint  Venture  Agreement  for  Joint  Ventures  with
                  Affiliated Programs (Filed as Exhibit 10.3 to the Registrant's
                  Registration   Statement   on   Form   S-11,   No.   33-90998,
                  incorporated herein by reference.)

    **10.4        Form of  Development  Agreement  (Filed as Exhibit 10.5 to the
                  Registrant's   Registration   Statement  on  Form  S-11,   No.
                  33-90998, incorporated herein by reference.)

    **10.5        Form of  Indemnification  and Put Agreement  (Filed as Exhibit
                  10.6 to the Registrant's  Registration Statement on Form S-11,
                  No. 33-90998, incorporated herein by reference.)

    **10.6        Form of  Unconditional  Guarantee  of Payment and  Performance
                  (Filed  as  Exhibit  10.7  to  the  Registrant's  Registration
                  Statement on Form S-11, No. 33-90998,  incorporated  herein by
                  reference.)


                                        i

<PAGE>


    **10.7        Form of Lease  Agreement  for  Existing  Restaurant  (Filed as
                  Exhibit  10.8 to the  Registrant's  Registration  Statement on
                  Form S-11, No. 33-90998, incorporated herein by reference.)

    **10.8        Form of  Lease  Agreement  for  Restaurant  to be  Constructed
                  (Filed  as  Exhibit  10.9  to  the  Registrant's  Registration
                  Statement on Form S-11, No. 33-90998,  incorporated  herein by
                  reference.)

    **10.9        Form of Premises Lease for Golden Corral  Restaurant (Filed as
                  Exhibit 10.10 to the  Registrant's  Registration  Statement on
                  Form S-11, No. 33-90998, incorporated herein by reference.)

    **10.10       Form of Agreement  between CNL Income Fund XVII,  Ltd. and MMS
                  Escrow and Transfer  Agency,  Inc. and between CNL Income Fund
                  XVIII, Ltd. and MMS Escrow and Transfer Agency,  Inc. relating
                  to the Distribution  Reinvestment  Plans (Filed as Exhibit 4.4
                  to the Registrant's  Registration  Statement on Form S-11, No.
                  33-90998, incorporated herein by reference.)

    **10.11       Form of Cotenancy Agreement with Unaffiliated Entity (Filed as
                  Exhibit  10.12  to  Amendment  No.  One  to  the  Registrant's
                  Registration   Statement   on  Form   S-11,   No.  33-  90998,
                  incorporated herein by reference.)

    **10.12       Form of Cotenancy  Agreement with Affiliated  Entity (Filed as
                  Exhibit  10.13  to  Amendment  No.  One  to  the  Registrant's
                  Registration   Statement   on  Form   S-11,   No.  33-  90998,
                  incorporated herein by reference.)

    **10.13       Form  of  Registered  Investor  Advisor  Agreement  (Filed  as
                  Exhibit  10.14  to  Amendment  No.  One  to  the  Registrant's
                  Registration   Statement   on   Form   S-11,   No.   33-90998,
                  incorporated herein by reference.)

     27           Financial Data Schedule (Filed herewith.)


**previously filed

                                       ii