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, 2002

                                       OR

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

                        For the transition period from to


                         Commission file number 0-24095

                           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)

                             450 South Orange Avenue
                           Orlando, Florida 32801-3336
          (Address of principal executive offices, including zip code)

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

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

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

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

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

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

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

         Indicate by check mark whether the registrant is an  accelerated  filer
(as defined in Exchange Act Rule 12b-2):  Yes___ No  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. The offering  terminated on February 6, 1998, at which date the
maximum  offering  proceeds of $35,000,000  had been received from investors who
were admitted to the Partnership as limited partners (the "Limited Partners").

         The  Partnership  was organized to acquire both newly  constructed  and
existing  restaurant  properties,  as well as properties upon which  restaurants
were to be  constructed  (the  "Properties"),  which  are  leased  primarily  to
operators of national and regional  fast-food,  family-style  and casual  dining
restaurant  chains (the  "Restaurant  Chains").  Net proceeds to the Partnership
from its  offering of Units,  after  deduction  of  organizational  and offering
expenses,  totalled  $30,810,000  and were used to acquire 24 Properties  (which
included one Property  owned by a joint  venture in which the  Partnership  is a
co-venturer) and to pay acquisition fees and certain acquisition expenses. As of
December 31, 1999,  the  Partnership  owned 24  Properties,  either  directly or
indirectly  through  joint  venture or tenancy in common  arrangements.  In June
2000,  the  Partnership  reinvested the net sales proceeds from the 1999 sale of
the Property in Atlanta, Georgia in a joint venture arrangement, TGIF Pittsburgh
Joint Venture, with CNL Income Fund VII, Ltd., CNL Income Fund XV, Ltd., and CNL
Income Fund XVI, Ltd.,  each an affiliate of the General  Partners,  to purchase
one Property in Homestead, Pennsylvania. In January 2001, the Partnership sold a
portion of its interest in TGIF Pittsburgh Joint Venture to CNL Income Fund VII,
Ltd., a Florida limited  partnership  and an affiliate of the General  Partners,
for approximately  $500,000.  The Partnership used the net sales proceeds to pay
liabilities of the  Partnership  and to meet the  Partnership's  working capital
needs.  During 2001, the Partnership  sold its Properties in Timonium,  Maryland
and Henderson, Nevada and reinvested the majority of these net sales proceeds in
a Property in Denver, Colorado, as tenants-in-common, with CNL Income Fund VIII,
Ltd., a Florida limited partnership and an affiliate of the General Partners. In
addition,  in December  2001, the  Partnership  sold its Property in Santa Rosa,
California.  In January  2002 the  Partnership  reinvested  a portion of the net
sales  proceeds  from the sale of the  Property in Santa Rosa,  California  in a
Property  in  Houston,   Texas  and  in  a  Property   in  Austin,   Texas,   as
tenants-in-common,  with CNL Income Fund X, Ltd., a Florida limited  partnership
and an affiliate of the General Partners.  During 2002, the Partnership sold its
two Properties in San Antonio, Texas and its Property in Raleigh, North Carolina
and  reinvested  the majority of the net sales proceeds from the sale of the two
San Antonio Properties in another Property in San Antonio, Texas. As of December
31, 2002, the  Partnership  owned 18 Properties  directly,  and five  Properties
indirectly  through  joint  venture or tenancy  in common  arrangements.  The 18
Properties  include  one  Property  consisting  of land only.  In  general,  the
Partnership  leases  the  Properties  on a  triple-net  basis  with the  lessees
responsible  for all repairs and  maintenance,  property  taxes,  insurance  and
utilities.

         The  Partnership  holds  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  consider  factors such as potential  capital
appreciation,  net cash flow and  federal  income  tax  considerations.  Certain
lessees also have been granted options to purchase Properties,  generally at the
Property's  then fair market  value after a specified  portion of the lease term
has elapsed.  The  Partnership has no obligation to sell all or any portion of a
Property  at any  particular  time,  except as may be  required  under  property
purchase options granted to certain lessees.

Leases

         The leases of the Properties  provide for initial terms ranging from 15
to 20 years (the average being 18 years) and expire  between 2012 and 2020.  The
leases are generally on a triple-net basis, with the lessee  responsible for all
repairs and  maintenance,  property taxes,  insurance and utilities.  The leases
provide  for minimum  base  annual  rental  payments  (payable in equal  monthly
installments)  ranging from approximately  $58,400 to $259,900.  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.

         Generally, the leases provide for two to five five-year renewal options
subject to the same terms and conditions as the initial lease.  Lessees of 15 of
the  Partnership's  23 Properties 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 of the Property's
fair market value at the time the  purchase  option is  exercised,  whichever is
greater.  Fair  market  value  will be  determined  through an  appraisal  by an
independent appraisal firm.

         The leases 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.

         During  2002,  the  Partnership  reinvested  the net sales  proceeds it
received from the sale of the Property in Santa Rosa, California,  in a Property
in Austin, Texas, with CNL Income Fund X, Ltd., as  tenants-in-common,  and in a
wholly  owned  Property  in  Houston,  Texas.  In  June  2002,  the  Partnership
reinvested  the  majority  of the  net  sales  proceeds  from  the  sale  of two
Properties in San Antonio, Texas in another Property in San Antonio,  Texas. The
lease terms for these Properties are substantially the same as the Partnership's
other leases, as described above.

         Effective  May 2002,  the lease  relating  to the  Arby's  Property  in
Lexington,  North  Carolina was amended to eliminate  guaranteed  scheduled rent
increases.  The General  Partners do not believe that the rent  reductions  will
have a material  adverse effect on the results of operations of the Partnership.
All other lease terms remain unchanged.

Major Tenants

         During  2002,   four  lessees  of  the   Partnership,   Golden   Corral
Corporation,  Chevy's,  Inc., Jack in the Box Inc., and S&A Properties and Steak
and Ale of Colorado,  Inc. (under common control of Metromedia Restaurant Group,
hereinafter  referred to as Metromedia  Restaurant Group), each contributed more
than ten percent of the  Partnership's  total  rental  revenues  (including  the
Partnership's  share of rental  revenues from joint ventures and Properties held
as  tenants-in-common  with affiliates).  As of December 31, 2002, Golden Corral
Corporation was the lessee relating to four leases,  Chevy's Inc. was the lessee
relating  to one lease,  Jack in the Box Inc.  was the lessee  relating to three
leases,  and Metromedia  Restaurant Group was the lessee relating to two leases.
It is  anticipated  that based on the minimum  rental  payments  required by the
leases,  these four  lessees  will each  continue  to  contribute  more than ten
percent of the Partnership's  total rental revenues (including the Partnership's
share  of  rental   revenues  from  joint  ventures  and   Properties   held  as
tenants-in-common with affiliates) in 2003. In addition, four Restaurant Chains,
Golden Corral, Chevy's, Jack in the Box, and Bennigan's, each accounted for more
than ten percent of the  Partnership's  total  rental  revenues  (including  the
Partnership's  share of rental  revenues from joint ventures and Properties held
as  tenants-in-common  with affiliates)  during 2002. In 2003, it is anticipated
that these four Restaurant  Chains will each contribute more than ten percent of
the Partnership's  rental revenues  (including the Partnership's share of rental
revenues  from joint  ventures and  Properties  held as  tenants-in-common  with
affiliates) to which the  Partnership is entitled under the terms of the leases.
Any failure of such  lessees or  Restaurant  Chains could  materially  adversely
affect the  Partnership's  income if the  Partnership is not able to re-lease or
sell the Properties in a timely manner.  As of December 31, 2002,  Golden Corral
Corporation  leased Properties with an aggregate carrying value in excess of 20%
of the total assets of the Partnership.


<PAGE>


Joint Venture and Tenancy in Common Arrangements

         The  Partnership  has  entered  into the  following  joint  venture and
tenancy in common arrangements as of December 31, 2002:
<TABLE>
<CAPTION>

         Entity Name             Year      Ownership               Partners                   Property

 <c>
Columbus  Joint Venture          1998       39.93 %     CNL Income Fund XII,  Ltd.       Columbus, OH
                                                        CNL Income Fund XVI, Ltd.

CNL Portsmouth     Joint         1999       57.20 %     CNL Income Fund XI, Ltd.         Portsmouth, VA
     Venture

TGIF Pittsburgh Joint            2000       19.78%      CNL Income Fund VII,  Ltd.       Homestead, PA
Venture                                                 CNL Income   Fund  XV, Ltd.
                                                        CNL Income Fund XVI, Ltd.

CNL Income  Fund  VIII,  Ltd.,   2001       80.70%      CNL Income Fund VIII, Ltd.       Denver, CO
     and   CNL   Income   Fund
     XVIII,  Ltd.,  Tenants in
     Common

CNL Income  Fund X, Ltd.,  and   2002       18.35%      CNL Income Fund X, Ltd.          Austin, TX
     CNL  Income  Fund  XVIII,
     Ltd., Tenants in Common
</TABLE>

         Each of the joint  ventures or  tenancies  in common was formed to hold
one Property.  Each CNL Income Fund is an affiliate of the General  Partners and
is a limited partnership organized pursuant to the laws of the state of Florida.
The  Partnership  shares  management  control equally with the affiliates of the
General Partners.

         The joint  venture and tenancy in common  arrangements  provide for the
Partnership and its partners to share in all costs and benefits in proportion to
each partner's  percentage  interest in the business entity. The Partnership and
its partners are also jointly and  severally  liable for all debts,  obligations
and other  liabilities of the joint venture or tenancy in common.  Net cash flow
from  operations  is  distributed  to each  joint  venture  or tenancy in common
partner in accordance  with its respective  percentage  interest in the business
entity.

         Each  joint  venture  has an initial  term of 20 years  and,  after the
expiration of the initial term,  continues in existence from year to year unless
terminated  at the option of either joint  venturer by an event of  dissolution.
Events of dissolution  include the bankruptcy,  insolvency or termination of any
joint  venturer,  sale of the  Property  owned by the joint  venture  and mutual
agreement of the Partnership and its joint venture partner to dissolve the joint
venture.  Any  liquidation  proceeds,  after  paying  joint  venture  debts  and
liabilities and funding reserves for contingent liabilities, will be distributed
first to the joint venture  partners with positive  capital account  balances in
proportion to such balances  until such balances  equal zero,  and thereafter in
proportion  to each joint  venture  partner's  percentage  interest in the joint
venture.

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

         In January  2002,  the  Partnership  reinvested  a portion of the sales
proceeds  from the 2001 sale of the  Property  in Santa  Rosa,  California  in a
Property in Austin,  Texas, as  tenants-in-common,  with CNL Income Fund X, Ltd.
The  Partnership  entered into a long-term,  triple-net  lease for this Property
with terms substantially the same as its other leases.

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

Certain Management Services

         RAI Restaurants,  Inc. (formerly known as CNL Restaurants XVIII, Inc.),
an affiliate of the General  Partners,  provides  certain  services  relating to
management  of the  Partnership  and its  Properties  pursuant  to a  management
agreement with the Partnership. CNL APF Partners, LP assigned its rights in, and
its  obligations  under,  the management  agreement with the  Partnership to CNL
Restaurants XVIII, Inc. ("Advisor")  effective January 1, 2002. All of the terms
and  conditions  of the  management  agreement,  including  the payment of fees,
remained  unchanged.  Under  this  agreement,  the  Advisor is  responsible  for
collecting rental payments, inspecting the Properties and the tenants' books and
records,  assisting  the  Partnership  in  responding  to tenant  inquiries  and
notices,  and providing  information to the Partnership  about the status of the
leases and the  Properties.  The Advisor  also  assists the General  Partners in
negotiating the leases.  For these  services,  the Partnership had agreed to pay
the  Advisor an annual fee of one  percent of the sum of gross  rental  revenues
from Properties wholly owned by the Partnership plus the Partnership's allocable
share of gross  revenues  of  joint  ventures  in  which  the  Partnership  is a
co-venturer, but not in excess of competitive fees for comparable services.

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

Employees

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


Item 2.  Properties

         As of December 31, 2002, the Partnership owned 23 Properties. Of the 23
Properties,  18 are  owned by the  Partnership  in fee  simple,  three are owned
through joint venture  arrangements  and two are owned through tenancy in common
arrangements.  See Item 1.  Business  - Joint  Venture  and  Tenancy  in  Common
Arrangements.  The Partnership is not permitted to encumber its Properties under
the terms of its  partnership  agreement.  Reference  is made to the Schedule of
Real Estate and  Accumulated  Depreciation  for a listing of the  Properties and
their  respective  costs,  including  acquisition  fees and certain  acquisition
expenses.

Description of Properties

         Land. As of December 31, 2002, the Partnership's  Property sites ranged
from  approximately  24,400 to 148,500  square feet depending upon building size
and  local  demographic  factors.  Sites  purchased  by the  Partnership  are in
locations zoned for commercial use which have been reviewed for traffic patterns
and volume.

         The  following  table lists the  Properties  owned by the  Partnership,
either  directly  or  indirectly  though  joint  venture  or  tenancy  in common
arrangements  as of  December  31,  2002 by  state.  More  detailed  information
regarding  the location of the  Properties  is contained in the Schedule of Real
Estate and Accumulated Depreciation for the year ended December 31, 2002.

               State                               Number of Properties

               Arizona                                       1
               California                                    1
               Colorado                                      1
               Florida                                       2
               Illinois                                      1
               Kentucky                                      1
               Minnesota                                     1
               New York                                      1
               North Carolina                                2
               Ohio                                          2
               Pennsylvania                                  1
               Tennessee                                     1
               Texas                                         7
               Virginia                                      1
                                                       --------------
               TOTAL PROPERTIES                             23
                                                       ==============

         Buildings.  Each of the  Properties  owned by the  Partnership,  either
directly or indirectly though joint venture or tenancy in common arrangements as
of December 31, 2002,  includes a building  that is one of a Restaurant  Chain's
approved designs.  The buildings  generally are 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 by the  Partnership  are  freestanding  and surrounded by paved parking
areas.   Buildings  are  suitable  for  conversion  to  various  uses,  although
modifications may be required prior to use for other than restaurant operations.
As of December 31, 2002,  the  Partnership  had no plans for  renovation  of the
Properties.  Depreciation  expense is computed for  buildings  and  improvements
using the straight line method using a depreciable  life of 40 years for federal
income tax purposes.

         As of December 31, 2002, the aggregate cost of the Properties  owned by
the  Partnership  and  joint  ventures  for  federal  income  tax  purposes  was
$21,723,728 and $7,337,654, respectively.


<PAGE>


         The  following  table lists the  Properties  owned by the  Partnership,
either  directly  or  indirectly  though  joint  venture  or  tenancy  in common
arrangements as of December 31, 2002 by Restaurant Chain.

                Restaurant Chain                        Number of Properties

                Arby's                                            2
                Bennigan's                                        2
                Boston Market                                     1
                Burger King                                       1
                Chevy's Fresh Mex                                 1
                Golden Corral                                     4
                Ground Round                                      1
                IHOP                                              1
                Jack in the Box                                   3
                NI's International Buffet                         1
                Taco Bell                                         1
                Taco Cabana                                       3
                T.G.I. Friday's                                   1
                Wendy's                                           1
                                                            --------------
                TOTAL PROPERTIES                                 23
                                                            ==============

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

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

         Leases.  The Partnership leases the Properties to operators of selected
national and  regional  fast-food,  family-style  and casual  dining  restaurant
chains. The leases are generally on a long-term "triple net" basis, meaning that
the tenant is responsible for repairs,  maintenance,  property taxes,  utilities
and insurance.

         At December 31, 2002,  2001,  2000,  1999, and 1998 the Properties were
96%, 83%, 80%, 96%, and 96% occupied,  respectively. The following is a schedule
of the average rent per Property for each of the years ended December 31:
<TABLE>
<CAPTION>
                                     2002              2001              2000               1999               1998
                                 -------------     -------------    ---------------     --------------     -------------

 <c>
  Rental Revenues (1)(2)         $   2,653,429      $ 2,564,402        $ 2,888,408        $ 3,141,240       $ 2,953,285
  Properties (2)                            22               19                 20                 23                24
  Average rent per
      property                   $      120,610       $ 134,969          $ 144,420          $ 136,576         $ 123,054
</TABLE>

(1)      Rental  revenues  includes the  Partnership's  share of rental revenues
         from the  Properties  owned through joint venture and tenancy in common
         arrangements.

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


<PAGE>



         The following is a schedule of lease expirations for leases in place as
of December 31, 2002 for the next ten years and thereafter.
<TABLE>
<CAPTION>

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

 <c>
              2003                             --                       --                      --
              2004                             --                       --                      --
              2005                             --                       --                      --
              2006                             --                       --                      --
              2007                             --                       --                      --
              2008                             --                       --                      --
              2009                             --                       --                      --
              2010                             --                       --                      --
              2011                             --                       --                      --
              2012                              4                $ 762,097                  27.70%
              Thereafter                       18                1,989,638                  72.30%
                                        ----------            -------------           -------------
              Total (1)                        22              $ 2,751,735                 100.00%
                                        ==========            =============           =============
</TABLE>

(1)      Excludes one Property which was vacant at December 31, 2002.

         Leases  with Major  Tenants.  The terms of each of the leases  with the
Partnership's  major  tenants,  as of December 31, 2002 (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 to  2013)  and the
average  minimum  base  annual  rent is  approximately  $164,400  (ranging  from
approximately $156,700 to $178,200).

         Jack in the Box Inc.  leases  three  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  $122,100 (ranging from  approximately
$84,000 to $142,800).

         Metromedia  Restaurant  Group leases two  Bennigan's  restaurants.  The
initial term of one lease is 18 years (expiring in 2019) and the initial term of
the other  lease is 20 years  (expiring  in 2018) and the average  minimum  base
annual rent is approximately  $218,400 (ranging from  approximately  $200,200 to
$236,600).

Item 3.  Legal Proceedings

         On August 10, 1998,  DJD Partners VII, LLC served a lawsuit filed on or
about July 28, 1998 against Finest  Foodservice,  LLC and the  Partnership,  DJD
Partners VII, LLC v. Finest Foodservice,  LLC, et al, Case No. CT 98-014942,  in
the  District  Court  of  the  Fourth  Judicial  District  of  Hennepin  County,
Minnesota,  alleging a breach of a contract entered into by Finest  Foodservice,
LLC and assigned to the  Partnership in connection  with the  construction  of a
Boston  Market  property  in  Minnetonka,  Minnesota.  In  October  1998  Finest
Foodservice,  LLC filed for  bankruptcy  and  rejected  its lease,  causing  the
obligations of the contract to become the responsibility of the Partnership.  On
May 4, 2001, the District Court awarded a judgment of  approximately  $85,400 to
the plaintiff,  which the  Partnership  has paid. The  Partnership  appealed the
judgment  but lost.  The  Partnership  and DJD  Partners  VII,  LLC have certain
unresolved  legal issues  relating to this  Property.  Among other  things,  DJD
Partners  VII,  LLC claims to have a right to  repurchase  the  Property  for an
unlimited duration, which may prevent the Partnership from selling or re-leasing
the Property.


<PAGE>


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

         Not applicable.
                                     PART II


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

(a)      As of March 10, 2003,  there were 1,554 holders of record of the Units.
There is no public trading market for the Units,  and it is not anticipated that
a public market for the Units will develop.  During 2002,  Limited  Partners who
wished to sell their Units may have  offered the Units for sale  pursuant to the
Partnership's  distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their  distributions used to acquire additional Units (to the
extent Units were  available  for  purchase),  may have done so pursuant to such
Plan. The General  Partners have the right to prohibit  transfers of Units.  The
price paid for any Unit  transferred  pursuant to the Plan through  December 31,
2002 range from $8.57 to $9.50 per Unit. The price paid for any Unit transferred
other than pursuant to the Plan was subject to  negotiation by the purchaser and
the selling  Limited  Partner.  The  Partnership  will not redeem or  repurchase
Units.

         The following table reflects,  for each calendar quarter, the high, low
and average  sales prices for transfers of Units during 2002 and 2001 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>

                                           2002 (1)                                      2001(1)
                             --------------------------------------     ------------------------------------------
                               High          Low          Average           High           Low          Average
                             ----------   ----------    -------------   -------------   -----------   -------------

 <c>
      First Quarter               6.57         6.00             6.36           $6.86        $ 6.80         $  6.83
      Second Quarter                (2 )         (2 )             (2 )          6.57          6.57            6.57
      Third Quarter               6.43         6.43             6.43            6.30          6.30            6.30
      Fourth Quarter              7.90         6.56             7.17            8.00          8.00            8.00
</TABLE>

(1)      A total of 5,986 and 22,500 Units were transferred  other than pursuant
         to  the  Plan  for  the  years  ended   December  31,  2002  and  2001,
         respectively.

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

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

         For each of the years ended December 31, 2002 and 2001, the Partnership
declared cash distributions of $2,800,000 to the Limited Partners. Distributions
of $700,000  were  declared at the close of each of the  Partnership's  calendar
quarters  during 2002 and 2001, to the Limited  Partners.  These amounts include
monthly  distributions  made in arrears  for the  Limited  Partners  electing to
receive such distributions on this basis. No amounts distributed to partners for
the years  ended  December  31, 2002 and 2001,  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.

         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. If the General Partners do not elect to
make  additional  capital  contributions  or  loans  to  the  Partnership,   the
Partnership may consider lowering the distribution rate.

(b)      Not applicable.




<PAGE>


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>

                                         2002          2001            2000             1999            1998
                                      ------------ --------------  --------------  ---------------  -------------

 <c>
    Year Ended December 31:
    Continuing Operations (5):
        Revenues                       $2,289,032   $  2,483,770     $ 2,629,592     $  2,909,581    $ 2,857,028
        Equity earnings of joint
           ventures                       308,632        197,013         112,863           61,656             --
        Income from continuing
           operations (2) (3)             730,714      1,616,472       1,245,394        2,321,606      2,088,903

    Discontinued Operations (5):
        Revenues                               --            500         278,670          221,134        240,729
        Income (loss) from
           discontinued operations (4)   (353,644 )     (447,707 )      (128,197 )        193,750        213,419

    Net income                            377,070      1,168,765       1,117,197        2,515,356      2,302,322

    Net income (loss) per Unit:
        Continuing operations           $    0.21     $     0.45       $    0.36       $     0.66      $    0.60
        Discontinued operations             (0.10 )        (0.12 )         (0.04 )           0.06           0.06
                                      ------------ --------------  --------------  ---------------  -------------
             Total                       $   0.11     $     0.33       $    0.32       $     0.72      $    0.66
                                      ============ ==============  ==============  ===============  =============

    Cash distributions declared        $2,800,000   $  2,800,000     $ 2,800,000     $  2,799,998    $ 2,657,764

    Cash distributions declared
      per Unit:                              0.80           0.80            0.80             0.80           0.76

    Weighted average number
          of Limited Partner
          Units outstanding (1)         3,500,000      3,500,000       3,500,000        3,500,000      3,495,278

    At December 31:
        Total assets                  $25,021,532   $ 27,511,695     $29,112,352    $  30,866,006    $31,112,617
        Total partners' capital        24,246,887     26,669,817      28,301,052       29,983,855     30,268,497

</TABLE>
(1)      Represents the weighted average number of Units outstanding  during the
         period the Partnership was operational.

(2)      Income  from  continuing  operations  includes  $1,052,735,   $321,239,
         $635,615 and  $197,466,  for the years ended  December 31, 2002,  2001,
         2000, and 1998, respectively, from provisions for write-down of assets.

(3)      Income from continuing  operations  includes gains on sale of assets of
         $429,072  and $46,300 for the years ended  December  31, 2001 and 1999,
         respectively,  and a loss on sale of  assets  of  $25,694  for the year
         ended December 31, 2002. Income from continuing  operations  includes a
         termination refund to the tenant of $84,873 for the year ended December
         31, 2000.


<PAGE>



(4)      Net income (loss) from discontinued  operations includes provisions for
         write-down of assets of $322,472,  $387,138, and $357,563 for the years
         ended December 31, 2002, 2001, and 2000, respectively.

(5)      Certain  items in the  prior  years'  financial  statements  have  been
         reclassified to conform to 2002 presentation.  These  reclassifications
         had no effect on net  income.  The  results of  operations  relating to
         Properties  that were either disposed of or were classified as held for
         sale as of December 31, 2002 are reported as  discontinued  operations.
         The results of operations  relating to Properties  that were identified
         for sale as of December 31, 2001 but sold  subsequently are reported as
         continuing operations.

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  of  tenancy  in  common
arrangements, both newly constructed and existing restaurant Properties, as well
as  land  upon  which  restaurants  were to be  constructed,  which  are  leased
primarily to operators of selected national and regional fast-food, family-style
and casual dining Restaurant Chains. The leases are generally triple-net leases,
with the lessees generally responsible for all repairs and maintenance, property
taxes, insurance and utilities. The leases of the Properties provide for minimum
base annual  rental  payments  (payable in monthly  installments)  ranging  from
approximately  $58,400 to  $259,900.  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.  As of December 31, 2002, the  Partnership  owned 18
Properties  directly and five  Properties  indirectly  through  joint venture or
tenancy in common  arrangements.  As of December 31, 2001, the Partnership owned
19 Properties  directly and four Properties  indirectly through joint venture or
tenancy in common  arrangements.  As of December 31, 2000, the Partnership owned
22 Properties  directly and three  Properties  indirectly  through joint venture
arrangements.

Capital Resources

         Cash  from  operating  activities  was  $2,080,057,   $1,684,911,   and
$2,310,051,  for the years ended December 31, 2002, 2001 and 2000, respectively.
The increase in cash from  operating  activities  during the year ended December
31, 2002,  and the decrease in cash from  operating  activities  during the year
ended December 31, 2001,  each as compared to the previous year, was primarily a
result of changes in income and expenses.

         Other sources and uses of cash included the following  during the years
ended December 31, 2002, 2001, and 2000.

         In June 2000,  the  Partnership  reinvested the net sales proceeds from
the  1999  sale  of the  Property  in  Atlanta,  Georgia  into a  joint  venture
arrangement,  TGIF Pittsburgh Joint Venture, with CNL Income Fund VII, Ltd., CNL
Income Fund XV, Ltd., and CNL Income Fund XVI, Ltd.,  each of which is a Florida
limited  partnership and an affiliate of the General Partners,  to own and lease
one  restaurant  Property.   As  of  December  31,  2000,  the  Partnership  had
contributed  approximately $1,001,600 to the joint venture. In January 2001, the
Partnership  sold a portion of its interest in TGIF Pittsburgh  Joint Venture to
CNL Income Fund VII, Ltd., for approximately  $500,000.  Because the Partnership
sold 50% of its interest in TGIF  Pittsburgh  Joint  Venture at its then current
carrying  value,  no gain or loss was  recognized.  As of December 31, 2002, the
Partnership  had a  remaining  investment  of  approximately  $501,500  in  TGIF
Pittsburgh  Joint Venture  representing a 19.78% interest in this joint venture.
The  Partnership  used  the  net  sales  proceeds  to  pay  liabilities  of  the
Partnership and to meet the Partnership's working capital needs.

         During 2001, the Partnership sold its Properties in Timonium, Maryland;
Henderson,  Nevada;  and Santa  Rosa,  California,  each to a third  party.  The
Partnership  received  total net sales  proceeds  of  approximately  $3,791,400,
resulting in a net gain of approximately $429,100. In July 2001, the Partnership
reinvested  the net sales  proceeds  from the sale of the Timonium and Henderson
Properties in a Property in Denver,  Colorado,  as  tenants-in-common,  with CNL
Income Fund VIII,  Ltd., a Florida  limited  partnership and an affiliate of the
General  Partners.  As of December 31, 2002,  the  Partnership  had  contributed
approximately  $1,766,400 for an 80.7% interest in the profits and losses of the
Property. In January 2002, the Partnership reinvested a portion of the net sales
proceeds  from the sale of the Santa Rosa  Property  in a Property  in  Houston,
Texas and  reinvested  the remaining net sales proceeds in a Property in Austin,
Texas,  as  tenants-in-common  with CNL Income Fund X, Ltd.,  a Florida  limited
partnership and an affiliate of the General  Partners.  As of December 31, 2002,
the Partnership had contributed approximately $205,700 for an 18.35% interest in
the profits and losses of the Property.  The Partnership acquired the Properties
in Austin and Houston,  Texas from CNL Funding  2001-A,  LP, a Delaware  limited
partnership and an affiliate of the General Partners. CNL Funding 2001-A, LP had
purchased and  temporarily  held title to the  Properties in order to facilitate
the acquisition of the Properties by the  Partnership.  The purchase prices paid
by the Partnership  represented the costs incurred by CNL Funding 2001-A,  LP to
acquire the Properties.

         In 2001,  the  Partnership  entered  into a  promissory  note  with the
corporate General Partner for a loan in the amount of $75,000 in connection with
the operations of the Partnership.  The loan was uncollateralized,  non-interest
bearing and due on demand.  As of December 31, 2001, the  Partnership had repaid
the  loan in full to the  corporate  General  Partner.  During  the  year  ended
December 31, 2002, the Partnership  entered into three promissory notes with the
corporate  General  Partner for loans in connection  with the  operations of the
Partnership.  The loans were  uncollateralized,  non-interest bearing and due on
demand.  As of December 31, 2002, the Partnership had repaid these loans in full
to the corporate General Partner.

         During 2002,  the  Partnership  sold its On the Border  Property in San
Antonio,  Texas and its  Boston  Market  Properties  in San  Antonio,  Texas and
Raleigh,  North  Carolina,  each to a third party.  As of December 31, 2001, the
Partnership  had identified the On the Border Property for sale. The Partnership
received total net sales proceeds of  approximately  $1,565,725,  resulting in a
loss on sale of assets of  approximately  $25,700  relating to the On the Border
Property in San Antonio, Texas and a loss on disposal of assets of approximately
$322,500 relating to the Boston Market Property in Raleigh,  North Carolina.  In
June 2002,  the  Partnership  reinvested the net sales proceeds from the sale of
the  Properties  in San  Antonio,  Texas in a Property in  Houston,  Texas at an
approximate  cost of $896,500.  The Partnership  acquired this Property from CNL
Funding  2001-A,  LP, a Delaware  limited  partnership  and an  affiliate of the
General  Partners.  CNL Funding 2001-A,  LP had purchased and  temporarily  held
title to the Property in order to facilitate the  acquisition of the Property by
the  Partnership.  The purchase price paid by the  Partnership  represented  the
costs incurred by CNL Funding 2001-A, LP to acquire the Property.

         None of the Properties owned or to be acquired by the  Partnership,  or
the joint  ventures  in which the  Partnership  owns an  interest,  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.

         Currently,  rental income from the Partnership's Properties is invested
in money market accounts or other short-term,  highly liquid investments such as
demand  deposit  accounts  at  commercial  banks,   money  market  accounts  and
certificates  of  deposit  with  less  than  a 90  day  maturity  date,  pending
reinvestment in additional  Properties,  paying  Partnership  expenses or making
distributions  to the  partners.  At December  31,  2002,  the  Partnership  had
$429,481  invested in such  short-term  investments,  as compared to $226,136 at
December 31, 2001. As of December 31, 2002, the average  interest rate earned on
the rental income  deposited in demand deposit  accounts at commercial banks was
approximately  one percent  annually.  The funds  remaining at December 31, 2002
will be used to pay distributions and other liabilities of the Partnership.

         In January 2003, the  Partnership  entered into a promissory  note with
the corporate General Partner for a loan in the amount of $200,000 in connection
with  the  operations  of  the  Partnership.   The  loan  was  uncollateralized,
non-interest  bearing and due on demand.  As of March 10, 2003, the  Partnership
had repaid the loan in full to the corporate General Partner.



<PAGE>


Short-Term Liquidity

         The Partnership's  investment strategy of acquiring Properties for cash
and leasing them generally  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 net cash
flow in excess of operating expenses.

         The Partnership's  short-term liquidity  requirements consist primarily
of the operating expenses of the Partnership.

         The General  Partners have the right,  but not the obligation,  to make
additional  capital  contributions  or  loans  if they  deem it  appropriate  in
connection with the operations of the Partnership.

         Due to low  operating  expenses  and  ongoing  cash flow,  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  generally 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 Partnership  generally  distributes cash from operations  remaining
after the payment of the operating  expenses of the  Partnership,  to the extent
that  the  General  Partners   determine  that  such  funds  are  available  for
distribution.  Based on current and anticipated future cash from operations, and
for the years ended December 31, 2002 and 2001 loans from the corporate  General
Partner,  the  Partnership  declared  distributions  to the Limited  Partners of
$2,800,000,  for each the years ended December 31, 2002,  2001,  and 2000.  This
represents distributions of $0.80 per Unit, for each of the years ended December
31, 2002, 2001 and 2000. No distributions  were made to the General Partners for
the years ended December 31, 2002,  2001, or 2000. No amounts  distributed or to
be  distributed  to the Limited  Partners for the years ended December 31, 2002,
2001 or 2000,  are required to be or have been treated by the  Partnership  as a
return of capital for purposes of calculating  the Limited  Partners'  return on
their adjusted  capital  contributions.  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.  If the General
Partners do not elect to make additional  capital  contributions or loans to the
Partnership, the Partnership may consider lowering the distribution rate

         During 2000, the General  Partners waived their right to receive future
distributions  from the Partnership,  including both  distributions of operating
cash flow and  distributions  of  liquidation  proceeds,  to the extent that the
cumulative amount of such distributions  would exceed the balance in the General
Partners'  capital  accounts as of December 31, 1999.  Accordingly,  the General
Partners were not  allocated any net income during the years ended  December 31,
2002, 2001 and 2000.

         As of December  31, 2002 and 2001,  the  Partnership  owed  $17,762 and
$20,273,  respectively, to related parties for operating expenses and accounting
and  administrative  services.  As  of  March  14,  2003,  the  Partnership  had
reimbursed  the  affiliates  for these  amounts.  Other  liabilities,  including
distributions  payable,  were  $756,883 at  December  31,  2002,  as compared to
$821,605 at December 31, 2001.  Liabilities  at December 31, 2002, to the extent
they exceed cash and cash  equivalents  at December 31, 2002,  will be paid from
anticipated  future cash from operations,  loans from the General  Partners,  or
from future General Partners contributions.

Long-Term Liquidity

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

Critical Accounting Policies

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

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

         Management  reviews the  Partnership's  Properties  and  investments in
unconsolidated  entities  periodically  for  impairment  at least once a year or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  The assessment is based on the carrying amount
of the  Property  or  investment  at the date it is  tested  for  recoverability
compared to the sum of the estimated  future cash flows  expected to result from
its operation and sale through the expected holding period.  If an impairment is
indicated, the asset is adjusted to its estimated fair value.

         When the Partnership makes the decision to sell or commits to a plan to
sell a  Property  within  one  year,  its  operating  results  are  reported  as
discontinued operations.

Results of Operations

Comparison of year ended December 31, 2002 to year ended December 31, 2001

         Total rental  revenues were  $2,284,024 for the year ended December 31,
2002 as compared to $2,465,514 for the same period of 2001. Rental revenues were
lower during 2002 partially  because the Partnership sold two Properties  during
2001. In July 2001, the  Partnership  reinvested the net sales proceeds from one
of the sales in a Property in Denver,  Colorado, as tenants-in-common,  with CNL
Income Fund VIII, Ltd. In January 2002, the Partnership  reinvested a portion of
the net sales  proceeds from the other sale in a Property in Austin,  Texas,  as
tenants-in-common,  with CNL Income Fund X, Ltd. Rental revenues are expected to
remain at reduced amounts while equity in earnings of joint ventures is expected
to increase  because the Partnership  reinvested the majority of these net sales
proceeds  in  two  Properties  with  affiliates  of  the  General  Partners,  as
tenants-in-common.

         The  Partnership  used the remaining net sales  proceeds along with the
net sales proceeds from the 2002 sales of the  Properties in San Antonio,  Texas
to acquire two Properties in Texas, one in San Antonio and the other in Houston.
The decrease in rental revenues  during 2002 was partially  offset by the rental
revenues from the two Properties acquired during 2002.

         Rental  revenues were lower during 2002, as compared to the same period
of 2001,  because the Partnership  stopped recording rental revenues relating to
the  Partnership's  Property in Stow,  Ohio because the tenant was  experiencing
financial difficulties. In addition, rental revenues remained at reduced amounts
during 2002 and 2001, because the Partnership  stopped recording rental revenues
when the lease relating to the Boston Market  Property in Minnetonka,  Minnesota
was rejected by the tenant in 1998 in  connection  with the tenant's  bankruptcy
proceedings,  as described  below.  The lost revenues  resulting  from these two
Properties  will continue to have an adverse effect on the results of operations
of the Partnership until the outstanding legal issues are resolved.

         For the year ended December 31, 2002, the  Partnership  earned $308,632
in net income from joint  ventures,  as compared to $197,013 for the same period
of 2001.  Net income earned by joint  ventures was higher during 2002 because in
July 2001 and January 2002, the  Partnership  reinvested the majority of the net
sales  proceeds from the 2001 sales of the  Properties in Henderson,  Nevada and
Santa  Rosa,  California,  in a Property in Denver,  Colorado  and a Property in
Austin, Texas, respectively,  each with an affiliate of the General Partners, as
tenants-in-common.

         During  2002,   four  lessees  of  the   Partnership,   Golden   Corral
Corporation,  Chevy's,  Inc., Jack in the Box Inc., Metromedia Restaurant Group,
each  contributed  more  than ten  percent  of the  Partnership's  total  rental
revenues  (including  the  Partnership's  share of rental  revenues  from  joint
ventures  and  Properties  held as  tenants-in-common  with  affiliates).  As of
December 31, 2002,  Golden Corral  Corporation  was the lessee  relating to four
leases,  Chevy's Inc. was the lessee relating to one lease, Jack in the Box Inc.
was the lessee relating to three leases, and Metromedia Restaurant Group was the
lessee  relating  to two  leases.  It is  anticipated  that based on the minimum
rental payments required by the leases, these four lessees will each continue to
contribute  more than ten percent of the  Partnership's  total  rental  revenues
(including the  Partnership's  share of rental  revenues from joint ventures and
Properties held as tenants-in-common with affiliates) in 2003. In addition, four
Restaurant Chains, Golden Corral, Chevy's, Jack in the Box, and Bennigan's, each
accounted for more than ten percent of the  Partnership's  total rental revenues
(including the  Partnership's  share of rental  revenues from joint ventures and
Properties held as  tenants-in-common  with affiliates) during 2002. In 2003, it
is anticipated that these four Restaurant  Chains will each contribute more than
ten percent of the  Partnership's  rental revenues  (including the Partnership's
share  of  rental   revenues  from  joint  ventures  and   Properties   held  as
tenants-in-common  with  affiliates) to which the  Partnership is entitled under
the terms of the leases.  Any failure of such lessees or Restaurant Chains could
materially  adversely affect the Partnership's  income if the Partnership is not
able to re-lease the Properties in a timely manner.

         During the year ended December 31, 2002, the Partnership  earned $5,008
in interest and other income,  as compared to $18,256  during the same period of
2001.  Interest  income was lower  higher  during 2002  because the  Partnership
reinvested  sales  proceeds  during 2002 that had been held in interest  bearing
bank accounts in 2001.

         Operating expenses, including depreciation and amortization expense and
provision for write-down of assets,  were $1,841,256 for the year ended December
31,  2002 as  compared  to  $1,493,383  for the same  period of 2001.  Operating
expenses  were higher during 2002 because the  Partnership  recorded a provision
for write-down of assets of approximately $1,052,700 relating to the Property in
Stow,  Ohio. The provision  represented the difference  between the net carrying
value of the Property at December  31, 2002 and its  estimated  fair value.  The
increase in operating expenses during 2002 was partially offset by a decrease in
the costs incurred for administrative expenses for servicing the Partnership and
its Properties and a decrease in state tax expenses.

         The  increase in  operating  expenses  during  2002 was also  partially
offset by lower Property expenses as a result of the sale of vacant  Properties.
During  2001,  the  Partnership  incurred  approximately  $85,400  pursuant to a
judgment  entered against the Partnership in a lawsuit  relating to the Property
in Minnetonka,  Minnesota.  The General Partners  appealed the judgment but lost
and are  considering  their options.  In addition,  during 2001, the Partnership
incurred  property  expenses such as insurance,  repairs and maintenance,  legal
fees and real estate taxes relating to the vacant Properties.  Between June 2001
and May 2002, the  Partnership  sold three of the vacant  Properties and did not
incur any  additional  expenses  relating  to these  Properties  after the sales
occurred.  However,  the  Partnership  will  continue  to incur  these  expenses
relating to the vacant  Property  until the  Property in  Minnetonka,  Minnesota
until the outstanding legal issues are resolved.

         During  2002 and  2001,  the  Partnership  incurred  certain  operating
expenses  relating to the On the Border  Property in San Antonio,  Texas because
the  Partnership  owned the building and leased the land. In 2000, the tenant of
this  Property  vacated  the  Property  and  ceased  restaurant  operations.  In
accordance with an agreement  executed in conjunction  with the execution of the
initial lease, the ground lessor, the tenant and the Partnership agreed that the
Partnership would be provided certain rights to help protect its interest in the
building in the event of a default by the tenant  under the terms of the initial
lease.  As a result of the  default by the tenant and in order to  preserve  its
interest  in the  building,  during  2002 and  2001,  the  Partnership  incurred
approximately  $46,200 and $135,900,  respectively,  in rent expense relating to
the ground lease of the  Property.  In addition,  during 2001,  the  Partnership
recorded a  provision  for  write-down  of assets of  $321,239  relating to this
Property.  The provision  represented  the  difference  between the net carrying
value of the Property at December 31, 2001 and its estimated fair value.  In May
2002, the  Partnership  sold this Property,  and recorded an additional  loss of
approximately $25,700. This Property had been identified for sale as of December
31, 2001

         During 2001, the  Partnership  recognized  total gains of $429,072 as a
result of the sales of three Properties. No Properties were sold during 2000.

         Effective  January  1,  2002,  the  Partnership  adopted  Statement  of
Financial  Accounting  Standards  No.  144  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets." This statement requires that a long-lived asset
be tested  for  recoverability  whenever  events  or  changes  in  circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived  asset is not recoverable if it exceeds the sum of the undiscounted
cash flows  expected  to result  from the use and  eventual  disposition  of the
asset.  The assessment is based on the carrying  amount of the asset at the date
it is tested for  recoverability.  An  impairment  loss is  recognized  when the
carrying  amount of a long-lived  asset exceeds its fair value. If an impairment
is recognized,  the adjusted  carrying  amount of a long-lived  asset is its new
cost basis.  The  statement  also  requires  that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a  discontinued  operation if the disposal  activity was
initiated subsequent to the adoption of the Standard.

         During the year ended December 31, 2002, the Partnership identified and
sold two vacant  Properties  that met the  criteria  of this  standard  and were
classified as Discontinued  Operations in the accompanying financial statements.
The  Partnership  sold the Boston Market  Properties  in San Antonio,  Texas and
Raleigh,  North  Carolina,  and  received  net sales  proceeds of  approximately
$1,095,400.  No  gains  or  losses  were  recorded  on  the  sales  because  the
Partnership  had recorded a provision  for  write-down of assets of $322,472 for
the  Property in Raleigh,  North  Carolina  during prior  quarters of 2002.  The
Partnership  had also recorded  provisions  for write-down of assets in previous
years,  including  approximately  $387,100  and  $36,900  during the years ended
December  31,  2001 and 2000,  respectively,  relating  to the  Property  in San
Antonio,  Texas and  approximately  $320,600  during the year ended December 31,
2000, relating to the Property in Raleigh, North Carolina. The financial results
for  these   Properties  are  reflected  as   Discontinued   Operations  in  the
accompanying  financial statements.  The majority of the proceeds from the sales
were reinvested in income producing Properties.

Comparison of year ended December 31, 2001 to year ended December 31, 2000

         Total rental  revenues were  $2,465,514 for the year ended December 31,
2001 as compared to $2,593,820 for the same period of 2000. Rental revenues were
lower during the year ended December 31, 2001, as compared to the same period of
2000,  because the tenants of two Boston Market  Properties filed for bankruptcy
in 1998. During 1998, one of these tenants in bankruptcy  rejected its lease and
ceased making rental payments to the Partnership for this lease. The Partnership
continued  receiving rental payments relating to the lease that was not rejected
until June 2000,  at which time the other  tenant  rejected the lease and ceased
making rental  payments.  In June 2001, the  Partnership  sold this Property and
reinvested  the net  sales  proceeds  in a  Property  in  Denver,  Colorado,  as
tenants-in-common,  with CNL Income Fund VIII,  Ltd. The Property in Minnetonka,
Minnesota is still vacant,  as described above.  Rental revenues were also lower
during  2001  because the tenant of the On the Border  Property in San  Antonio,
Texas  defaulted  under  the  terms of its  lease,  vacated  the  Property,  and
discontinued  rental payments,  as described above. In May 2002, the Partnership
sold this Property.

         For the year ended December 31, 2001, the  Partnership  earned $197,013
in net income from joint  ventures,  as compared to $112,863 for the same period
of 2000.  Net income earned by joint  ventures was higher during 2001 because in
July 2001,  the  Partnership  reinvested  the majority of the net sales proceeds
from the 2001 sale of the Property in Henderson, Nevada in a Property in Denver,
Colorado, as described above.

         During the year ended December 31, 2001, the Partnership earned $18,256
in interest and other income,  as compared to $35,772  during the same period of
2000.  Interest income was lower during 2001 because the Partnership  reinvested
in  Properties  sales  proceeds  that it was  holding in interest  bearing  bank
accounts.

         Operating expenses, including depreciation and amortization expense and
provision for write-down of assets,  were $1,493,383 for the year ended December
31,  2001 as  compared  to  $1,412,188  for the same  period of 2000.  Operating
expenses  were higher during 2001 because the  Partnership  recorded a provision
for  write-down  of assets of  $321,239  and  $635,615  during  the years  ended
December 31, 2001 and 2000, respectively, relating to the Boston Market Property
in Timonium,  Maryland and the On the Border Property in San Antonio, Texas. The
provisions  represented  the  difference  between the net carrying value of each
Property and its estimated fair value.  In June 2001, the  Partnership  sold the
Timonium,  Maryland  Property  and in May  2002,  the  Partnership  sold the San
Antonio, Texas Property, as described above. Operating expenses were also higher
during 2001 because the Partnership incurred approximately $85,400 pursuant to a
judgment  entered against the Partnership in a lawsuit  relating to the Property
in Minnetonka, Minnesota, as described above. During the year ended December 31,
2001 and 2000,  the  Partnership  incurred  approximately  $135,900 and $31,400,
respectively,  in rent expense relating to the ground lease of the On the Border
Property in San Antonio,  Texas. The Partnership sold this Property in May 2002.
In addition,  the Partnership  incurred expenses such as insurance,  repairs and
maintenance, legal fees and real estate taxes relating to the vacant Properties.

         Operating  expenses were also higher during 2001, due to an increase in
the costs incurred for administrative expenses for servicing the Partnership and
its  Properties.  The increase in operating  expenses during 2001, was partially
offset by a decrease in the amount of transaction costs the Partnership incurred
relating to the  General  Partners  retaining  financial  and legal  advisors to
assist them in evaluating and  negotiating  the proposed and  terminated  Merger
with APF.

         The lease termination  refund to tenant of $84,873 during 2000, was due
to lease  termination  negotiations  related to the 1999 sale of the Property in
Atlanta, Georgia.

         The  restaurant  industry  has been  relatively  resilient  during this
volatile time with steady performance during 2002. However, the industry remains
in a state of cautious optimism.  Restaurant  operators expect their business to
be better in 2003,  according to a nationwide  survey  conducted by the National
Restaurant  Association,   but  are  concerned  by  the  budget  deficits  being
experienced  by many states and the  potential  of new taxes on the  industry to
alleviate the situation.

         The  Partnership's  leases  are  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.
Inflation, overall, has had a minimal effect on the results of operations of the
Partnership.   Continued  inflation  may  cause  capital   appreciation  of  the
Partnership's Properties.  Inflation and changing prices, however, also may have
an  adverse  impact on the sales of the  restaurants  and on  potential  capital
appreciation of the Properties.

         In January  2003,  FASB issued FASB  Interpretation  No. 46 ("FIN 46"),
"Consolidation  of Variable  Interest  Entities"  to expand upon and  strengthen
existing  accounting  guidance that  addresses when a company should include the
assets,   liabilities   and  activities  of  another  entity  in  its  financial
statements.  To improve financial  reporting by companies involved with variable
interest  entities (more  commonly  referred to as  special-purpose  entities or
off-balance sheet  structures),  FIN 46 requires that a variable interest entity
be considered by a company if that company is subject to a majority risk of loss
from the variable interest entity's activities or entitled to receive a majority
of the entity's  residual returns or both. Prior to FIN 46, a company  generally
included  another entity in its  consolidated  financial  statements  only if it
controlled  the entity  through  voting  interests.  Consolidation  of  variable
interests  entities will provide more complete  information about the resources,
obligations,   risks  and  opportunities  of  the  consolidated   company.   The
consolidation  requirements  of FIN 46 apply  immediately  to variable  interest
entities  created  after  January 31, 2003,  and to older  entities in the first
fiscal year or interim period beginning after June 15, 2003. Management believes
adoption  of this  standard  may result in either  consolidation  or  additional
disclosure  requirements with respect to the Partnership's  unconsolidated joint
ventures  or  Properties  held  with  affiliates  of  the  General  Partners  as
tenants-in-common,  which are currently  accounted for under the equity  method.
However,  such  consolidation  is  not  expected  to  significantly  impact  the
Partnership's results of operations.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.


Item 8.  Financial Statements and Supplementary Data


<PAGE>




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

                                    CONTENTS









                                                                       Page

Report of Independent Certified Public Accountants                      18

Financial Statements:

     Balance Sheets                                                     19

     Statements of Income                                               20

     Statements of Partners' Capital                                    21

     Statements of Cash Flows                                        22-23

     Notes to Financial Statements                                   24-37





<PAGE>








               Report of Independent Certified Public Accountants





To the Partners
CNL Income Fund XVIII, Ltd.


In our opinion,  the accompanying  balance sheets and the related  statements of
income,  of partners'  capital and of cash flows present fairly, in all material
respects,  the  financial  position of CNL Income  Fund  XVIII,  Ltd. (a Florida
limited  partnership)  at  December  31,  2002 and 2001,  and the results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2002 in conformity with accounting principles generally accepted in
the United  States of  America.  In  addition,  in our  opinion,  the  financial
statement  schedules  listed in the index appearing under item 15(a)(2)  present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial  statements.  These financial  statements
and financial  statement  schedules are the  responsibility of the Partnership's
management;  our  responsibility  is to express  an  opinion on these  financial
statements and financial  statement  schedules based on our audits. We conducted
our audits of these statements in accordance with auditing  standards  generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

As  described in Note 1 to the  financial  statements,  on January 1, 2002,  the
Partnership   adopted  Statement  of  Financial   Accounting  Standard  No.  144
"Accounting for the Impairment or Disposal of Long-Lived Assets."


/s/ PricewaterhouseCoopers LLP

Orlando, Florida
January 31, 2003




<PAGE>

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

                                 BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                 2002                    2001
                                                                          -------------------      ------------------

 <c>
                            ASSETS

  Real estate properties with operating leases, net                             $  18,874,150          $  17,494,535
  Net investment in direct financing leases                                        2,064,258               3,145,098
  Real estate held for sale                                                               --               1,423,054
  Investment in joint ventures                                                     3,185,337               3,011,159
  Cash and cash equivalents                                                          429,481                 226,136
  Restricted cash                                                                         --               1,662,201
  Receivables, less allowance for doubtful accounts of
       $104,228 and $75,201,respectively                                                 945                  19,767
  Accrued rental income                                                              456,857                 513,016
  Other assets                                                                        10,504                  16,729
                                                                          -------------------      ------------------

                                                                               $  25,021,532           $  27,511,695
                                                                          ===================      ==================

               LIABILITIES AND PARTNERS' CAPITAL

  Accounts payable                                                               $     4,178             $    92,368
  Real estate taxes payable                                                           12,204                  12,817
  Distributions payable                                                              700,000                 700,000
  Due to related parties                                                              17,762                  20,273
  Rents paid in advance                                                               35,840                  11,441
  Deferred rental income                                                               4,661                   4,979
                                                                          -------------------      ------------------
           Total liabilities                                                         774,645                 841,878


  Partners' capital                                                               24,246,887              26,669,817
                                                                          -------------------      ------------------

                                                                               $  25,021,532           $  27,511,695
                                                                          ===================      ==================


</TABLE>
                See accompanying notes to financial statements.

<PAGE>


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

                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                                Year Ended December 31,
                                                                      2002                2001               2000
                                                                ------------------   ---------------    ---------------

 <c>
Revenues:
     Rental income from operating leases                            $   2,063,604    $    2,067,065        $ 2,148,472
     Earned income from direct financing leases                           220,420           398,449            445,348
     Interest and other income                                              5,008            18,256             35,772
                                                                ------------------   ---------------    ---------------
                                                                        2,289,032         2,483,770          2,629,592
                                                                ------------------   ---------------    ---------------
Expenses:
     General operating and administrative                                 199,341           269,358            145,191
     Property expenses                                                    177,799           491,360            188,620
     Management fees to related party                                      25,379            24,943             27,875
     State and other taxes                                                  8,477            22,252             17,604
     Depreciation and amortization                                        377,525           364,231            369,751
     Provisions for write-down of assets                                1,052,735           321,239            635,615
     Transaction costs                                                         --                --             27,532
                                                                ------------------   ---------------    ---------------
                                                                        1,841,256         1,493,383          1,412,188
                                                                ------------------   ---------------    ---------------

Income Before Gain (Loss) on Sale of Assets, Termination
     Refund to Tenant, and Equity in Earnings of Joint
     Ventures                                                             447,776           990,387          1,217,404

Gain (Loss) on Sale of Assets                                             (25,694  )        429,072                 --

Termination Refund to Tenant                                                   --                --            (84,873  )

Equity in Earnings of Joint Ventures                                      308,632           197,013            112,863
                                                                ------------------   ---------------    ---------------

Income from Continuing Operations                                         730,714         1,616,472          1,245,394

Discontinued Operations (Note 8):

     Loss from discontinued operations                                   (353,644 )        (447,707  )        (128,197  )
                                                                ------------------   ---------------    ---------------

Net Income                                                           $    377,070      $  1,168,765       $  1,117,197
                                                                ==================   ===============    ===============

Income (Loss) Per Limited Partner Unit
     Continuing Operations                                            $      0.21      $       0.46        $      0.36
     Discontinued Operations                                                (0.10  )          (0.13  )           (0.04  )
                                                                ------------------   ---------------    ---------------

     Total                                                            $      0.11      $       0.33        $     0.32
                                                                ==================   ===============    ===============

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

</TABLE>
                See accompanying notes to financial statements.
<PAGE>



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

                         STATEMENTS OF PARTNERS' CAPITAL

                  Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>

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

 <c>
Balance, December 31, 1999             $     1,000     $    (6,319 )  $  35,000,000    $ (6,826,493 ) $  6,005,667   $ (4,190,000 )

    Contributions from limited partners
    Distributions to limited partners
       ($0.80 per limited partner unit)         --              --               --      (2,800,000 )           --             --
    Net income                                  --              --               --              --      1,117,197             --
                                       ------------   -------------   -------------- ---------------  -------------  -------------

Balance, December 31, 2000                   1,000          (6,319 )     35,000,000      (9,626,493 )    7,122,864     (4,190,000 )

    Contributions from limited partners
    Distributions to limited partners
       ($0.80 per limited partner unit)         --              --               --      (2,800,000 )           --             --
    Net income                                  --              --               --              --      1,168,765             --
                                       ------------   -------------   -------------- ---------------  -------------  -------------

Balance, December 31, 2001                   1,000          (6,319 )     35,000,000     (12,426,493 )    8,291,629     (4,190,000 )

    Contributions from limited partners
    Distributions to limited partners
       ($0.80 per limited partner unit)         --              --               --      (2,800,000 )           --             --
    Net income                                  --              --               --              --        377,070             --
                                       ------------   -------------   -------------- ---------------  -------------  -------------

Balance, December 31, 2002             $     1,000     $    (6,319 )  $  35,000,000   $ (15,226,493 ) $  8,668,699   $ (4,190,000 )
                                       ============   =============   ============== ===============  =============  =============





      Total
  -----------

   $29,983,855



    (2,800,000 )
     1,117,197
  -------------

    28,301,052



    (2,800,000 )
     1,168,765
  -------------

    26,669,817



    (2,800,000 )
       377,070
  -------------

   $24,246,887
  =============


</TABLE>
                See accompanying notes to financial statements.







<PAGE>


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

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                              Year Ended December 31,
                                                                    2002                2001                2000
                                                               ---------------     ----------------    ---------------

 <c>
Cash Flows from Operating Activities:

      Net income                                               $      377,070         $  1,168,765       $  1,117,197
                                                               ---------------     ----------------    ---------------
Adjustments to reconcile net income to net cash provided by operating
      activities:
         Depreciation                                                 379,016              376,679            395,565
         Amortization of investment in direct
             financing leases                                          29,295               41,450             70,178
         Amortization                                                   3,221                3,220              1,610
         Provision for doubtful accounts                                   --                   --             (2,973 )
         Equity in earnings of joint ventures net
             of distributions                                          46,210                6,425            (15,599 )
         Provision for write-down of assets                         1,375,207              708,377            993,178
         Loss (Gain) on sale of assets                                 26,189             (429,072 )               --
         Decrease (increase) in receivables                             9,204              (11,003 )           32,552
         Increase in accrued rental income                           (104,347 )           (218,691 )         (196,435 )
         Decrease (increase) in other assets                            6,225                6,983            (14,371 )
         Increase (decrease) in accounts payable and
             real estate taxes payable                                (88,803 )             61,038            (40,947 )
         Increase (decrease) in due to related parties                 (2,511 )            (32,908 )           16,444
         Increase (decrease) in rents paid in advance                  24,399                3,967             (6,495 )
         Increase in deferred rental income                              (318 )               (319 )          (39,853 )
                                                               ---------------     ----------------    ---------------
                Total adjustments                                   1,702,987              516,146          1,192,854
                                                               ---------------     ----------------    ---------------

Net Cash Provided by operating activities                           2,080,057            1,684,911          2,310,051
                                                               ---------------     ----------------    ---------------

Cash Flows from Investing Activities:
         Decrease (Increase) in restricted cash                     1,663,401           (1,663,401 )          688,997
         Additions to real estate properties on
             operating leases                                      (2,090,604 )                 --                 --
         Proceeds from sale of assets                               1,565,681            4,291,443                 --
         Investment in joint ventures                                (215,191 )         (1,766,420 )       (1,001,558 )
                                                               ---------------     ----------------    ---------------
             Net cash provided by (used in) investing
                activities                                            923,287              861,622           (312,561 )
                                                               ---------------     ----------------    ---------------

Cash Flows from Financing Activities:
         Proceeds from loans from corporate general partner           875,000               75,000                 --
         Repayment of loans from corporate general  partner          (875,000 )            (75,000 )               --
         Distributions to limited partners                         (2,800,000 )         (2,800,000 )       (2,800,000 )
                                                               ---------------     ----------------    ---------------
             Net cash used in financing activities                 (2,800,000 )         (2,800,000 )       (2,800,000 )
                                                               ---------------     ----------------    ---------------

Net Increase (Decrease) in Cash and Cash Equivalents                  203,344             (253,467 )         (802,510 )

Cash and Cash Equivalents at Beginning of Year                        226,136              479,603          1,282,113
                                                               ---------------     ----------------    ---------------

Cash and Cash Equivalents at End of Year                          $   429,480          $   226,136        $   479,603
                                                               ===============     ================    ===============

</TABLE>
                See accompanying notes to financial statements.
<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>

                                                                              Year Ended December 31,
                                                                    2002                2001                2000
                                                               ---------------     ----------------    ---------------

 <c>
Supplemental Schedule of Non-Cash Financing Activities:

      Distributions declared and unpaid at December 31            $   700,000          $   700,000        $   700,000
                                                               ===============     ================    ===============

</TABLE>
                See accompanying notes to financial statements.

<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2002, 2001, and 2000


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  was  authorized  to sell a
         maximum  of  3,500,000  units   ($35,000,000)  of  limited  partnership
         interest.   A  total  of  3,500,000  units   ($35,000,000)  of  limited
         partnership interest had been sold as of December 31, 1998.

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

         Real  Estate  and  Lease  Accounting  -  The  Partnership  records  the
         acquisition of real estate  properties at cost,  including  acquisition
         and closing costs.  Real estate  properties are leased to third parties
         generally  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.  During
         the years  ended  December  31,  2002,  2001,  and 2000,  tenants  paid
         directly  to real estate  taxing  authorities  approximately  $382,200,
         $364,000,  and  $338,600,   respectively,   in  real  estate  taxes  in
         accordance  with  the  terms  of  their  triple  net  leases  with  the
         Partnership.

         The leases of the  Partnership  provide for base minimum  annual rental
         payments payable in monthly installments.  In addition,  certain leases
         provide for  contingent  rental  revenues  based on the tenants'  gross
         sales in  excess  of a  specified  threshold.  The  partnership  defers
         recognition  of  the  contingent  rental  revenues  until  the  defined
         thresholds  are met.  The  leases  are  accounted  for using the direct
         financing or operating methods. Such methods are described below:

                  Direct  financing  method - 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).  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.  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.

                  Operating  method - Real estate property 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

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


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

                  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.

         The leases have initial terms of 15 to 20 years and the majority of the
         leases  provide for minimum and contingent  rentals.  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.

         When  the  properties  are  sold,  the  related  cost  and  accumulated
         depreciation  for operating  leases and the net  investment  for direct
         financing leases,  plus any accrued rental income, are removed from the
         accounts and gains or losses from sales are  reflected  in income.  The
         general  partners of the Partnership  review  properties for impairment
         whenever events or changes in circumstances  indicate that the carrying
         amount of the assets may not be  recoverable  through  operations.  The
         general partners  determine whether an impairment in value has occurred
         by comparing the estimated future  undiscounted  cash flows,  including
         the  residual  value of the  property,  with the  carrying  cost of the
         individual  property.  If an impairment  is  indicated,  the assets are
         adjusted to the fair value.

         When the  collection  of amounts  recorded as rental or other income is
         considered  to be  doubtful,  a  provision  is  made  to  increase  the
         allowance for doubtful accounts. If amounts are subsequently determined
         to be  uncollectible,  the  corresponding  receivable and allowance for
         doubtful accounts are decreased accordingly.

         Investment  in  Joint  Ventures  -  The  Partnership's  investments  in
         Columbus  Joint  Venture,   CNL  Portsmouth   Joint  Venture  and  TGIF
         Pittsburgh  Joint Venture and the  properties  in Denver,  Colorado and
         Austin,  Texas,  for which each property is held as  tenants-in-common,
         are  accounted  for using the equity  method  since each joint  venture
         agreement  requires  the consent of all  partners on all key  decisions
         affecting the operations of the underlying property.

         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.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


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

         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 represent a reduction
         of  Partnership  equity and a reduction in the basis of each  partner's
         investment.

         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 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.

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

         Reclassification   -  Certain  items  in  the  prior  years'  financial
         statements  have been  reclassified  to conform  to 2002  presentation,
         including a change in  presentation of the statement of cash flows from
         the  direct to the  indirect  method.  These  reclassifications  had no
         effect on total partners' capital, net income or cash flows.

         Statement  of  Financial  Accounting  Standards  No. 144 ("FAS  144") -
         Effective  January  1,  2002,  the  Partnership  adopted  Statement  of
         Financial  Accounting  Standards No. 144 "Accounting for the Impairment
         or Disposal of  Long-Lived  Assets."  This  statement  requires  that a
         long-lived  asset be  tested  for  recoverability  whenever  events  or
         changes in  circumstances  indicate that its carrying amount may not be
         recoverable.   The  carrying  amount  of  a  long-lived  asset  is  not
         recoverable  if it  exceeds  the  sum of the  undiscounted  cash  flows
         expected to result from the use and eventual  disposition of the asset.
         The assessment is based on the carrying amount of the asset at the date
         it is tested for recoverability.  An impairment loss is recognized when
         the carrying amount of a long-lived asset exceeds its fair value. If an
         impairment is recognized,  the adjusted carrying amount of a long-lived
         asset is its new cost  basis.  The  statement  also  requires  that the
         results of  operations of a component of an entity that either has been
         disposed  of or is  classified  as  held  for  sale  be  reported  as a
         discontinued   operation  if  the  disposal   activity  was   initiated
         subsequent to the adoption of the Standard.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


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

         FASB  Interpretation  No. 46 ("FIN 46") - In January 2003,  FASB issued
         FASB  Interpretation  No. 46 ("FIN  46"),  "Consolidation  of  Variable
         Interest  Entities" to expand upon and strengthen  existing  accounting
         guidance  that  addresses  when a company  should  include  the assets,
         liabilities   and   activities  of  another  entity  in  its  financial
         statements.  To improve financial  reporting by companies involved with
         variable    interest   entities   (more   commonly   referred   to   as
         special-purpose  entities  or  off-balance  sheet  structures),  FIN 46
         requires that a variable  interest entity be considered by a company if
         that  company is subject to a majority  risk of loss from the  variable
         interest  entity's  activities or entitled to receive a majority of the
         entity's residual returns or both. Prior to FIN 46, a company generally
         included another entity in its consolidated  financial  statements only
         if it controlled the entity through voting interests.  Consolidation of
         variable  interests  entities  will provide more  complete  information
         about  the  resources,  obligations,  risks  and  opportunities  of the
         consolidated  company.  The consolidation  requirements of FIN 46 apply
         immediately  to variable  interest  entities  created after January 31,
         2003,  and to older entities in the first fiscal year or interim period
         beginning  after June 15, 2003.  Management  believes  adoption of this
         standard may result in either  consolidation  or additional  disclosure
         requirements  with respect to the  Partnership's  unconsolidated  joint
         ventures or properties held with affiliates of the general  partners as
         tenants-in-common,  which are currently  accounted for under the equity
         method.  However,  such  consolidation is not expected to significantly
         impact the Partnership's results of operations.

2.       Real Estate Properties with Operating Leases:
         --------------------------------------------

         Real estate properties with operating leases consisted of the following
         at December 31:
<TABLE>
<CAPTION>

                                                                    2002                  2001
                                                             --------------------   ------------------

 <c>
                 Land                                              $   9,247,191        $   8,637,251
                 Buildings                                            11,382,933           10,277,152
                                                             --------------------   ------------------
                                                                      20,630,124           18,914,403
                 Less accumulated depreciation                        (1,755,974 )         (1,419,868 )
                                                             --------------------   ------------------

                                                                  $   18,874,150        $  17,494,535
                                                             ====================   ==================
</TABLE>

         During 2001, the Partnership sold its properties in Timonium, Maryland;
         Henderson,  Nevada; and Santa Rosa, California,  each to a third party.
         In  previous  years,  the  Partnership  had  recorded a  provision  for
         write-down of assets relating to the Timonium,  Maryland property.  The
         Partnership   received  total  net  sales  proceeds  of   approximately
         $3,791,400,  resulting in a net gain of approximately $429,100. In July
         2001,  the  Partnership  reinvested  the majority of the sales proceeds
         from the Timonium  and  Henderson  properties  in a property in Denver,
         Colorado,  as  tenants-in-common,  with CNL Income Fund VIII,  Ltd., an
         affiliate of the general  partners.  In January 2002,  the  Partnership
         reinvested a portion of the sales proceeds from the Santa Rosa property
         in a Austin, Texas property, with CNL Income Fund X, Ltd., an affiliate
         of the general  partners.  The  remaining  net sales  proceeds from the
         Santa Rosa property  were used to acquire a property in Houston,  Texas
         at an approximate  cost of $1,194,100.  The Partnership  acquired these
         two properties from CNL Funding 2001-A, LP, an affiliate of the general
         partners.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


2.       Real Estate Properties with Operating Leases - Continued:
         --------------------------------------------------------

         During the year ended  December 31, 2001,  the  Partnership  recorded a
         provision for write-down of assets of approximately  $321,200  relating
         to the On the Border property in San Antonio, Texas. The tenant of this
         property  defaulted under the terms of its lease,  vacated the property
         and  ceased  restaurant  operations.   The  provision  represented  the
         difference  between the net carrying  value of the property at December
         31, 2001 and its estimated  fair value.  In May 2002,  the  Partnership
         sold this property to a third party and received net sales  proceeds of
         approximately   $470,300,   resulting   in  an   additional   loss   of
         approximately  $25,700.  As of December 31, 2001, the  Partnership  had
         identified  this  property  for sale.  In June  2002,  the  Partnership
         reinvested  the net sales  proceeds  from  this  sale,  along  with the
         proceeds  from the sale of the Boston  Market  property in San Antonio,
         Texas,  in another  property in San Antonio,  Texas,  at an approximate
         cost of $896,500.  The  Partnership  acquired  this  property  from CNL
         Funding 2001-A, LP, an affiliate of the general partners.

         During the year ended  December 31, 2002,  the  Partnership  recorded a
         provision for write-down of assets of approximately  $428,200  relating
         to the property in Stow, Ohio. The provision represented the difference
         between the net carrying value of the property at December 31, 2002 and
         its estimated fair value.

         The following is a schedule of the future  minimum lease payments to be
         received on the noncancellable operating leases at December 31, 2002:

                   2003                         $     2,091,437
                   2004                               2,101,449
                   2005                               2,101,449
                   2006                               2,101,449
                   2007                               2,147,822
                   Thereafter                        16,826,795
                                                ----------------

                                                   $ 27,370,401
                                                ================

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

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

                                                       2002                  2001
                                                 -----------------     -----------------

 <c>
                   Minimum lease payments
                        receivable                   $  4,152,883          $  5,823,294
                   Estimated residual values            1,054,369             1,205,840
                   Less unearned income                (3,142,994 )          (3,884,036 )
                                                 -----------------     -----------------

                   Net investment in direct
                        financing leases             $  2,064,258          $  3,145,098
                                                 =================     =================
</TABLE>

         In December  2001,  the  Partnership  sold its  property in Santa Rosa,
         California  for  which  building  portion  was  classified  as a direct
         financing  lease.  In connection  with the sale,  the gross  investment
         (minimum lease payments  receivable and the estimated  residual  value)
         and  unearned  income  relating  to the assets  classified  as a direct
         financing lease, were removed from the accounts.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


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

         During the year ended  December 31, 2002,  the  Partnership  recorded a
         provision for write-down of assets of approximately  $624,600  relating
         to the property in Stow, Ohio. The provision represented the difference
         between the net carrying value of the property at December 31, 2002 and
         its estimated fair value.

         The  following  is a schedule of future  minimum  lease  payments to be
         received on direct financing leases at December 31, 2002:

                      2003                                     $   314,868
                      2004                                         314,868
                      2005                                         314,868
                      2006                                         314,868
                      2007                                         321,472
                      Thereafter                                 2,571,939
                                                           ----------------

                                                              $  4,152,883
                                                           ================

4.       Investment in Joint Ventures:
         ----------------------------

         The  Partnership  has a 39.93% and a 57.2%  interest in the profits and
         losses of Columbus  Joint  Venture and CNL  Portsmouth  Joint  Venture,
         respectively.  The remaining interests in these joint ventures are held
         by affiliates of the Partnership which have the same general partners.

         As of December 31, 2000, the Partnership  owned a 39.5% interest in the
         profits and losses of TGIF Pittsburgh  Joint Venture.  In January 2001,
         the Partnership sold a portion of its interest in this joint venture to
         CNL Income Fund VII,  Ltd.,  for  approximately  $500,000.  Because the
         Partnership  sold 50% of its interest in TGIF Pittsburgh  Joint Venture
         at its current  carrying value,  no gain or loss was recognized.  As of
         December 31, 2002, the Partnership  had a remaining  19.78% interest in
         this joint venture.  The remaining  interests in this joint venture are
         held by  affiliates  of the  Partnership  which  have the same  general
         partners.

         In July 2001, the Partnership reinvested the sales proceeds it received
         from the 2001 sale of property in Henderson,  Nevada,  in a property in
         Denver,  Colorado,  as  tenants-in-common,  with CNL Income  Fund VIII,
         Ltd., an affiliate of the general  partners.  The  Partnership  and CNL
         Income  Fund  VIII,  Ltd.  entered  into  an  agreement   whereby  each
         co-venturer  will share in the  profits  and losses of the  property in
         proportion to its applicable percentage interest in the property. As of
         December  31,  2002,  the  Partnership  had  contributed  approximately
         $1,766,400  for an 80.7%  interest  in the  profits  and  losses of the
         property.

         In January 2002, the Partnership  reinvested a portion of the net sales
         proceeds from the 2001 sale of the property in Santa Rosa,  California,
         in a property in Austin, Texas, as  tenants-in-common,  with CNL Income
         Fund X, Ltd.,  an affiliate of the general  partners.  The  Partnership
         acquired this property from CNL Funding 2001-A, LP, an affiliate of the
         general  partners.  The Partnership and CNL Income Fund X, Ltd. entered
         into an agreement  whereby each  co-venturer  will share in the profits
         and losses of the property in proportion to its  applicable  percentage
         interest in the property.  As of December 31, 2002, the Partnership had
         contributed  approximately  $205,700  for an  18.35%  interest  in this
         property.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


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

         As of December 31, 2002,  Columbus Joint Venture,  CNL Portsmouth Joint
         Venture,  and TFIG  Pittsburgh  Joint Venture each owned and leased one
         property to  operators of fast-food  or  family-style  restaurants.  In
         addition, as of December 31, 2002, the Partnership had entered into two
         separate tenancy-in-common arrangements, in each case with an affiliate
         of the general partners, each of which owned and leased one property to
         operators of  fast-food  or  family-style  restaurants.  The  following
         presents the combined,  condensed financial information for these joint
         ventures and tenancy in common arrangements at:
<TABLE>
<CAPTION>

                                                                   December 31,                     December 31,
                                                                       2002                             2001
                                                                  ----------------                 ----------------

 <c>
         Real estate properties on operating
             leases, net                                          $     6,729,458                     $  5,731,159
         Net investment in direct financing
             lease                                                        308,883                          313,339
         Cash                                                               5,795                           22,034
         Accrued rental income                                            212,472                          125,874
         Accounts receivable                                                   --                            8,368
         Other assets                                                         122                            1,116
         Liabilities                                                       11,583                           12,335
         Partners' Capital                                              7,245,147                        6,189,555

                                                                               Year Ended December 31,
                                                                   ------------------------------------------------
                                                                        2002            2001             2000
                                                                   ---------------  -------------   ---------------

         Revenues                                                  $      827,363    $   580,528      $    306,267
         Expenses                                                        (138,076 )      (95,310 )         (49,302 )
                                                                   ---------------  -------------   ---------------
         Net Income                                                $     689,287     $   485,218      $    256,965
                                                                   ===============  =============   ===============
</TABLE>


         The Partnership  recognized  income of $308,632,  $197,013 and $112,863
         during the years ended December 31, 2002, 2001 and 2000,  respectively,
         from these joint ventures and tenancy in common arrangements.

5.       Restricted Cash:
         ---------------

         As of December 31, 2001, the net sales proceeds of $1,664,829  from the
         sale of the  property in Santa  Rosa,  California,  less  miscellaneous
         escrow  fees of $2,628  were being held in an  interest-bearing  escrow
         account  pending the release of funds by the escrow agent to acquire an
         additional  property.  These funds were released by the escrow agent in
         2002 and were  used to  acquire a  property  in  Houston,  Texas and an
         interest in a property in Austin,  Texas, with CNL Income Fund X, Ltd.,
         an affiliate of the general partners.

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

         From inception through December 31, 1999,  generally,  distributions of
         net cash flow, as defined in the limited  partnership  agreement of the
         Partnership,  were made 95% to the limited partners and five percent to
         the  general  partners.  However,  for any  particular  year,  the five
         percent of net cash flow to be distributed to the general  partners was
         subordinated  to receipt  by the  limited  partners  in that year of an
         eight percent

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


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

         noncumulative, noncompounded return on their aggregate invested capital
         contributions (the "Limited Partners' 8% Return").

         From the inception  through  December 31, 1999,  generally,  net income
         (determined   without  regard  to  any  depreciation  and  amortization
         deductions  and  gains  and  losses  from the sale of  properties)  was
         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% to the limited partners
         and  one  percent  to  the  general   partners.   All   deductions  for
         depreciation  and  amortization  were  allocated  99%  to  the  limited
         partners and one percent to the general partners.

         Net sales  proceeds from the sale of a property not in  liquidation  of
         the  Partnership  generally  were  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  then  received 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 were  distributed  95% to the limited
         partners and five percent to the general partners.

         Any  gain  from  the  sale  of a  property  not in  liquidation  of the
         Partnership was, in general,  allocated in the same manner as net sales
         proceeds are distributable. Any loss was allocated first, on a pro rata
         basis to the partners with positive balances in their capital accounts;
         and  thereafter,  95% to the limited  partners  and five percent to the
         general partners.

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

         Effective  January 1, 2000, the general  partners waived their right to
         receive  future  distributions  from the  Partnership,  including  both
         distributions  of operating cash flow and  distributions of liquidation
         proceeds,   to  the  extent   that  the   cumulative   amount  of  such
         distributions would exceed the balance in the general partners' capital
         account as of December  31,  1999.  Accordingly,  for years  commencing
         January  1,  2000 and  after,  the  Partnership's  net  income  will be
         allocated entirely among the limited partners.  However,  if losses are
         allocated to the general  partners in a year, an amount of income equal
         to the sum of such losses may be  allocated  to the general  partner in
         succeeding years. Accordingly,  the general partners were not allocated
         any net income  during the years ended  December  31, 2002,  2001,  and
         2000.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


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

         During each of the years ended  December 31, 2002,  2001 and 2000,  the
         Partnership   declared   distributions   to  the  limited  partners  of
         $2,800,000.  No distributions have been made to the general partners to
         date.

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

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

                                                                   2002             2001              2000
                                                               --------------   --------------   ---------------

 <c>
             Net income for financial reporting purposes          $  377,070      $ 1,168,765       $ 1,117,197

             Effect of timing differences relating to
                depreciation                                          39,094           (2,398 )           2,804

             Effect of timing differences relating to
                amortization                                          (2,744 )         (5,249 )          (7,088 )

             Effect of timing differences relating to equity
                in earnings of joint venture                         (28,678 )        (20,397 )         (16,905 )

             Provision for write-down of assets                    1,375,207          708,377           993,178

             Direct financing leases recorded as operating
                leases for tax reporting purposes                     29,295           41,450            70,178

             Deduction of transaction costs for tax
                reporting purposes                                        --               --           (89,716 )

             Effect of timing differences relating to
                provision for doubtful accounts                       29,027          (48,792 )         112,821

             Effect of timing differences relating to
                gains/losses on sales of red estate properties    (1,373,802 )       (742,359 )              --

             Accrued rental income                                   (96,988 )       (169,007 )        (196,435 )

             Legal settlement charge on appeal                       (85,410 )         85,410                --

             Deferred rental income                                   (7,677 )        (50,166 )         (39,853 )

             Rents paid in advance                                    24,399            3,967            (6,495 )

             Other                                                        --              165                --
                                                               --------------   --------------   ---------------

             Net income for federal income tax purposes           $  278,793       $  969,766       $ 1,939,686
                                                               ==============   ==============   ===============

</TABLE>

<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


8.       Discontinued Operations:

         During 2002, the Partnership entered into two separate agreements, each
         with a third party to sell the Boston Market properties in San Antonio,
         Texas  and  Raleigh,  North  Carolina.  In May  and  August  2002,  the
         Partnership  sold these  properties  and received net sales proceeds of
         approximately $1,095,400. No gains on losses were recorded on the sales
         because the  Partnership  had recorded a provision  for  write-down  of
         assets of $322,472  during  prior  quarters of 2002 for the property in
         Raleigh,  North Carolina.  The Partnership had also recorded provisions
         for  write-down of assets in previous  years,  including  approximately
         $387,100 and $36,900  during the years ended  December  31,  2001,  and
         2000, respectively,  relating to the property in San Antonio, Texas and
         approximately  $320,600  during  the  year  ended  December  31,  2000,
         relating to the  property in Raleigh,  North  Carolina.  The  financial
         results for these  properties are reflected as Discontinued  Operations
         in the accompanying financial statements.

         The  operating  results of the  discontinued  operations  for the above
         properties are as follows:
<TABLE>
<CAPTION>

                                                                    Year Ended December 31,
                                                              2002            2001            2000
                                                         ---------------  -------------  ---------------

 <c>
               Rental revenues                                  $    --    $       500      $   178,670
               Lease termination income                              --             --          100,000
               Expenses                                         (31,172 )      (61,069 )        (49,304 )
               Provision for write-down of assets              (322,472 )     (387,138 )       (357,563 )
                                                         ---------------  -------------  ---------------
               Loss from discontinued operations             $ (353,644 )  $  (447,707 )    $  (128,197 )
                                                         ===============  =============  ===============
</TABLE>

9.       Related Party Transactions:
         --------------------------

         One of the individual general partners, James M. Seneff, Jr., is one of
         the principal  shareholders of CNL Holdings,  Inc. The other individual
         general partner, Robert A. Bourne, serves as President and Treasurer of
         CNL Financial  Group,  Inc., a wholly owned subsidiary of CNL Holdings,
         Inc. CNL APF  Partners,  LP, a wholly owned  subsidiary of CNL American
         Properties Fund, Inc. ("APF") served as the Partnership's advisor until
         January 1, 2002,  when it assigned its rights and  obligations  under a
         management  agreement to RAI Restaurants,  Inc.  (formerly known as CNL
         Restaurants  XVIII,  Inc.). RAI Restaurants,  Inc. ("the Advisor") is a
         wholly owned  subsidiary of APF. The  individual  general  partners are
         stockholders and directors of APF.

         The Advisor provides services  pursuant to a management  agreement with
         the Partnership.  In connection  therewith , the Partnership  agreed to
         pay the Advisor an annual  management  fee of one percent of the sum of
         gross revenues from properties  wholly owned by the Partnership and the
         Partnership's  allocable  share of gross revenues from joint  ventures.
         Any  portion  of the  management  fee  not  paid  is  deferred  without
         interest.  For the years ended  December 31, 2002,  2001 and 2000,  the
         Partnership incurred $25,379, $24,943, and $27,875,  respectively,  for
         such management fees.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


9.       Related Party Transactions - Continued:
         --------------------------------------

         The Advisor is also  entitle to receive a deferred,  subordinated  real
         estate  disposition fee, payable upon the sale of properties,  based on
         the lesser of one-half of a competitive real estate commission or three
         percent of the sales price if the Advisor provides a substantial amount
         of  services in  connection  with the sale.  However,  if the net sales
         proceeds are reinvested in a replacement  property, no such real estate
         disposition  fees will be incurred until such  replacement  property is
         sold and the net sales  proceeds  are  distributed.  The payment of the
         real estate  disposition  fee is subordinated to receipt by the limited
         partners of their  aggregate  Limited  Partners' 8% Return,  plus their
         invested capital contributions.  No deferred,  subordinated real estate
         disposition fees have been incurred since inception.

         During the years ended  December 31, 2002,  2001, and 2000, the Advisor
         and its  affiliates  provided  various  administrative  services to the
         Partnership,  including services related to accounting;  financial, tax
         and regulatory  compliance and  reporting;  lease and loan  compliance;
         limited  partners  distributions  and  reporting;   due  diligence  and
         marketing; and investor relations (including administrative services in
         connection with selling units of limited partnership interest). For the
         years ended December 31, 2002, 2001, and 2000, the Partnership incurred
         $142,170, $207,702, and $92,444, respectively, for such expenses.

         During 2002, the Partnership acquired a property in Houston, Texas, and
         a property  in San  Antonio,  Texas  from CNL  Funding  2001-A,  LP. In
         addition,  in January 2002, the Partnership and CNL Income Fund X, Ltd,
         as  tenants-in-common,  acquired a property in Austin,  Texas, from CNL
         Funding  2001-A,  LP. CNL Funding  2001-A,  LP is an  affiliate  of the
         general partners.  CNL Funding 2001-A, LP had purchased and temporarily
         held title to the properties in order to facilitate the  acquisition of
         the  properties  by the  Partnership.  The  purchase  price paid by the
         Partnership represented the costs incurred by CNL Funding 2001-A, LP to
         acquire the properties.

         The  amounts  due to related  parties at  December  31,  2002 and 2001,
         totaled $17,762 and $20,273, respectively.

10.      Concentration of Credit Risk:
         ----------------------------

         The  following   schedule  presents  rental  revenues   (including  the
         Partnership's   share  of  rental  revenues  from  joint  ventures  and
         properties held with  affiliates as tenants-in  common) from individual
         lessees,  each  representing more than ten percent of the Partnership's
         rental revenues for each of the years ended December 31:
<TABLE>
<CAPTION>

                                                             2002                2001                2000
                                                        ----------------    ----------------    ---------------

 <c>
               Golden Corral Corporation                     $  657,612           $ 657,612          $ 657,612
               Metromedia Restaurant
                    Group  (S&A Properties
                    Corporation and Steak
                    and Ale of Colorado,
                    Inc.)                                       450,090             332,616                N/A
               Jack in the Box Inc.                             385,436             492,127            509,456
               Chevy's, Inc.                                    268,786                 N/A                N/A
               IHOP Properties, Inc.                                N/A             280,171                N/A

</TABLE>


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


10.      Concentration of Credit Risk - Continued:
         ----------------------------------------

         In addition, the following schedule presents rental revenues (including
         the  Partnership's  share of rental  revenues  from joint  ventures and
         properties held with affiliates as  tenants-in-common)  from individual
         restaurant  chains,  each  representing  more than ten  percent  of the
         Partnership's rental revenues for each of the years ended December 31:

<TABLE>
<CAPTION>
                                           2002                2001                 2000
                                      ----------------    ----------------     ---------------

 <c>
              Golden Corral                $  657,612           $ 657,612           $ 657,612
              Bennigan's                      450,090             332,616                 N/A
              Jack in the Box                 385,436             492,127             509,456
              Chevy's                         268,786                 N/A                 N/A
              IHOP                                N/A             280,171                 N/A
</TABLE>

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

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

11.      Litigation Settlement:
         ---------------------

         In July 1998,  DJD  Partners  VII, LLC filed a lawsuit  against  Finest
         Foodservice,  LLC and the  Partnership,  alleging a breach of  contract
         that was originally entered into by Finest  Foodservice,  LLC and later
         assigned to the  Partnership,  in connection with the construction of a
         Boston  Market  property in  Minnetonka,  Minnesota.  In October  1998,
         Finest  Foodservice,  LLC, the former tenant of the site in Minnetonka,
         Minnesota,  filed for  bankruptcy  and rejected its lease,  causing the
         obligations  of  the  contract  to  become  the  responsibility  of the
         Partnership.  In May 2001,  the  District  Court  awarded a judgment of
         approximately $85,400 to DJD Partners VII, LLC against the Partnership,
         as a result of the breach of contract by Finest  Foodservice,  LLC. The
         Partnership accrued this amount as a general and administrative expense
         during the year ended  December 31, 2001. A motion for  reconsideration
         and a new trial was filed and denied.  The Partnership and DJD Partners
         VII,  LLC  have  certain  unresolved  legal  issues  relating  to  this
         property.  Among other  things,  DJD Partners VII, LLC claims to have a
         right to repurchase the property for an unlimited  duration,  which may
         prevent the Partnership from selling or re-leasing the property.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


12.      Selected Quarterly Financial Data:
         ---------------------------------

         The following table presents  selected  unaudited  quarterly  financial
         data for each full quarter during the years ended December 31, 2002 and
         2001.

<TABLE>
<CAPTION>
                    2002 Quarter               First          Second          Third         Fourth           Year
          --------------------------------- ------------   --------------  ------------  -------------   -------------
 <S> <c>
          Continuing Operations (1):
               Revenues                       $ 589,354       $  558,658     $ 587,711      $ 553,309      $2,289,032
               Equity in earnings of joint
                 ventures                        77,766           78,055        77,652         75,159         308,632
               Income (Loss) from
                 continuing operations (2)      432,534          433,637       498,426       (633,883 )       730,714

          Discontinued Operations (1):

               Revenues                              --               --            --             --              --
               Loss from discontinued
                 Operations                      (7,077 )       (338,074 )      (7,363 )       (1,130 )      (353,644 )

          Net Income (Loss)                     425,457           95,563       491,063       (635,013 )       377,070

          Net  Income (Loss) per limited partner unit:

          Continuing operations                $   0.12        $    0.12      $   0.14      $   (0.17 )      $   0.21
          Discontinued operations                    --            (0.09 )          --          (0.01 )         (0.10 )
                                            ------------   --------------  ------------  -------------   -------------

                   Total                       $   0.12        $    0.03      $   0.14      $   (0.18 )      $   0.11
                                            ============   ==============  ============  =============   =============

</TABLE>



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


12.      Selected Quarterly Financial Data - Continued:
         ---------------------------------------------

<TABLE>
<CAPTION>
                  2001 Quarter                First           Second          Third         Fourth           Year
         --------------------------------  -------------   --------------  ------------  -------------   -------------
<S> <C>

         Continuing Operations (1):
              Revenues                        $ 625,609       $  628,536     $ 641,070      $ 588,555      $2,483,770
              Equity  in   earnings   of
                  joint ventures                 29,039           28,542        65,191         74,241         197,013
              Income from continuing
                operations                      220,292          183,177       501,801        711,202       1,616,472

         Discontinued Operations (1):
              Revenues                               --               --            --            500             500
              Loss from discontinued
                operations                      (16,420 )       (404,401 )     (24,180 )       (2,706 )      (447,707 )

         Net Income (Loss)                      203,872         (221,224 )     477,621        708,496       1,168,765

         Net Income (Loss) per limited partner unit:

              Continuing operations            $   0.06        $    0.05      $   0.15       $   0.19        $   0.45
              Discontinued operations                --            (0.11 )       (0.01 )           --           (0.12 )
                                           -------------   --------------  ------------  -------------   -------------
                Total                          $   0.06        $   (0.06 )    $   0.14       $   0.19        $   0.33
                                           =============   ==============  ============  =============   =============
</TABLE>

(1)      Certain items in the quarterly financial data have been reclassified to
         conform to the 2002 presentation. These reclassifications had no effect
         on net income.  The results of operations  relating to properties  that
         were  either  disposed  of or were  classified  as held  for sale as of
         December  31, 2002 are  reported  as  discontinued  operations  for all
         periods  presented.  The results of  operations  relating to properties
         that  were  identified  for  sale as of  December  31,  2001  but  sold
         subsequently are reported as continuing operations.

(2)      In December 2002, the  Partnership  recorded a provision for write-down
         of assets of approximately $1,052,700 relating to the property in Stow,
         Ohio. The tenant of this property  experienced  financial  difficulties
         and  during  the  fourth  quarter of 2002  stopped  paying  rents.  The
         provision  represented the difference between the net carrying value of
         the property at December 31, 2002 and its estimated fair value.

13.      Subsequent Event:
         ----------------

         In January 2003, the  Partnership  entered into a promissory  note with
         the Corporate  General  Partner for a loan in the amount of $200,000 in
         connection  with  the  operations  of  the  Partnership.  The  loan  is
         uncollateralized,  non-interest  bearing and due on demand. As of March
         10, 2003, the  Partnership  had repaid the entire loan to the Corporate
         General Partner.



<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 American Properties Fund, Inc. ("APF"), CNL Fund
Advisors, Inc., CNL Financial Group, Inc. and their affiliates, all of which are
affiliates of the General Partners.

         James M. Seneff, Jr., age 56. 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
co-venturer in over 100 real estate  ventures.  These ventures have involved the
financing,  acquisition,   construction,  and  leasing  of  restaurants,  office
buildings,  apartment  complexes,  hotels, and other real estate. Mr. Seneff has
served as Director  and  Chairman of the Board of APF, a public,  unlisted  real
estate  investment  trust,  since 1994.  Mr.  Seneff  served as Chief  Executive
Officer  of APF from 1994  through  August  1999,  and has  served  as  co-Chief
Executive  Officer of APF since  December 2000. Mr. Seneff served as Chairman of
the Board and Chief Executive Officer of CNL Fund Advisors,  Inc.,  formerly the
Partnership's advisor, until it merged with a wholly-owned  subsidiary of APF in
September  1999, and in June 2000, was re-elected to those positions of CNL Fund
Advisors, Inc. Mr. Seneff is a principal stockholder of CNL Holdings,  Inc., the
parent  company of CNL  Financial  Group,  Inc.  (formerly CNL Group,  Inc.),  a
diversified real estate company,  and has served as a Director,  Chairman of the
Board and  Chief  Executive  Officer  of CNL  Financial  Group,  Inc.  since its
formation in 1980.  CNL  Financial  Group,  Inc. is the parent  company,  either
directly or indirectly through subsidiaries,  of CNL Real Estate Services, Inc.,
CNL Capital Markets,  Inc., CNL Investment Company and CNL Securities Corp., all
of which are engaged in the  business of real estate  finance.  Mr.  Seneff also
serves as a Director,  Chairman of the Board and Chief Executive  Officer of CNL
Hospitality  Properties,  Inc., a public, unlisted real estate investment trust,
as well as, CNL  Hospitality  Corp.,  its advisor.  In addition,  he serves as a
Director,  Chairman of the Board and Chief  Executive  Officer of CNL Retirement
Properties,  Inc.,  a public,  unlisted  real  estate  investment  trust and its
advisor,  CNL  Retirement  Corp.  Since  1992,  Mr.  Seneff has also served as a
Director,  Chairman of the Board and Chief  Executive  Officer of Commercial Net
Lease Realty,  Inc., a public real estate investment trust that is listed on the
New York Stock Exchange.  Mr. Seneff has also served as a Director,  Chairman of
the Board and Chief Executive  Officer of CNL Securities  Corp.  since 1979; CNL
Investment  Company  since  1990;  and  CNL  Institutional  Advisors,   Inc.,  a
registered investment advisor for pension plans, since 1990. Mr. Seneff formerly
served  as a  Director  of First  Union  National  Bank of  Florida,  N.A.,  and
currently  serves as the  Chairman  of the Board of CNL  Bank,  an  independent,
state-chartered  commercial  bank. 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. Mr. Seneff received his degree in Business Administration from
Florida State University in 1968.

         Robert A.  Bourne,  age 55. Mr.  Bourne has  participated  as a general
partner  or  co-venturer  in over  100  real  estate  ventures  involved  in the
financing,  acquisition,   construction,  and  leasing  of  restaurants,  office
buildings,  apartment complexes,  hotels, and other real estate. Mr. Bourne is a
Director  of APF.  Mr.  Bourne  served as  President  of APF from  1994  through
February  1999. He also served as Treasurer  from  February 1999 through  August
1999  and from May  1994  through  December  1994.  He also  served  in  various
executive  positions  with CNL Fund  Advisors,  Inc.  prior to its merger with a
wholly-owned subsidiary of APF including,  President from 1994 through September
1997, and Director from 1994 through August 1999. Mr. Bourne serves as President
and  Treasurer of CNL  Financial  Group,  Inc.;  Director,  Vice Chairman of the
Board, and Treasurer , and from 1997 until June 2002 served as President, of CNL
Hospitality  Properties,  Inc., a public, unlisted real estate investment trust;
as well as, Director,  Vice Chairman of the Board, and Treasurer,  and from 1997
until June 2002 served as President,  of CNL Hospitality Corp., its advisor.  In
addition,  Mr.  Bourne  serves as  Director,  Vice  Chairman  of the Board,  and
Treasurer,  and from 1997 until June 2002 served as President, of CNL Retirement
Properties, Inc., a public, unlisted real estate investment trust; as well as, a
Director,  Vice Chairman of the Board,  and Treasurer,  and from 1997 until June
2002 served as President,  of its advisor,  CNL Retirement Corp. Mr. Bourne also
serves as a Director of CNL Bank. He has served as a Director  since 1992,  Vice
Chairman of the Board since February 1996, Secretary and Treasurer from February
1996 through  1997,  and  President  from July 1992 through  February  1996,  of
Commercial Net Lease Realty,  Inc., a public real estate investment trust listed
on the New York Stock  Exchange.  Mr. Bourne also serves as Director,  President
and Treasurer for various affiliates of CNL Financial Group, Inc. including, CNL
Investment Company, CNL Securities Corp. and CNL Institutional Advisors, Inc., a
registered  investment advisor for pension plans. Mr. Bourne began his career as
a certified public  accountant  employed by Coopers & Lybrand,  Certified Public
Accountants,  from 1971  through  1978,  where he attained  the  position of Tax
Manager in 1975.  Mr. Bourne  graduated  from Florida  State  University in 1970
where he received a B.A. in Accounting, with honors.

         Curtis B.  McWilliams,  age 47. Mr.  McWilliams  has served as Co-Chief
Executive  Officer of APF since  December  2000 and  previously  served as Chief
Executive  Officer from  September  1999  through  December  2000.  Prior to the
acquisition of CNL Fund Advisors,  Inc., Mr.  McWilliams  served as President of
APF from  February  1999 until  September  1999.  From February 1998 to February
1999, he served as Executive  Vice President of APF. Mr.  McWilliams  joined CNL
Financial  Group,  Inc. in April 1997 and served as an Executive  Vice President
from October 1997 until September 1999. In addition,  Mr.  McWilliams  served as
President  of CNL Fund  Advisors,  Inc.  and CNL  Financial  Services,  Inc.,  a
corporation  engaged in the business of real estate  financing,  from April 1997
until the  acquisition of such entities by  wholly-owned  subsidiaries of APF in
September  1999.  From  September  1983 through March 1997,  Mr.  McWilliams was
employed by Merrill  Lynch & Co. The  majority of his career at Merrill  Lynch &
Co.  was in the  Investment  Banking  division  where he  served  as a  Managing
Director.  Mr.  McWilliams  received  a  B.S.E.  in  Chemical  Engineering  from
Princeton University in 1977 and a Master of Business Administration degree with
a concentration in finance from the University of Chicago in 1983.

         Steven  D.  Shackelford,  age  39.  Mr.  Shackelford  was  promoted  to
Executive Vice President of APF in June 2000. He served as Senior Vice President
from September 1999 until his promotion in June 2000. Mr. Shackelford has served
as Chief  Financial  Officer  since January 1997 and has served as Secretary and
Treasurer of APF since September 1999. He also served as Chief Financial Officer
of CNL Fund Advisors,  Inc. from September  1996 to September  1999.  From March
1995 to July 1996, Mr.  Shackelford  was a senior manager in the national office
of Price  Waterhouse LLP 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 was a  manager  in the  Paris,  France  office of Price
Waterhouse, serving several multi-national clients. Mr. Shackelford was an audit
staff and  senior  from  1986 to 1992 in the  Orlando,  Florida  office of Price
Waterhouse.  Mr.  Shackelford  received a Bachelor of Arts degree in Accounting,
with honors, and a Master of Business  Administration  degree from Florida State
University and is a certified public accountant.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section  16(a) of the Exchange Act requires the General  Partners,  the
officers of the  corporate  General  Partner,  and persons who own more than ten
percent  of  a  registered  class  of  the   Partnership's   equity   securities
(collectively,  the  "Reporting  Persons"),  to file  reports of  ownership  and
changes in  ownership  on Forms 3, 4 and 5 with the SEC.  Reporting  Persons are
required by SEC regulation to furnish the  Partnership  with copies of all Forms
3, 4 and 5 that they file.

         Based  solely on the  General  Partners'  review of the  copies of such
forms the  Partnership  has  received and written  representations  from certain
Reporting  Persons  that they  were not  required  to file  Forms 5 for the last
fiscal year, the General  Partners  believe that all Reporting  Persons complied
with all filing  requirements  applicable  to them with respect to  transactions
during fiscal 2002.


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.


<PAGE>


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         As of March 10,  2003,  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 10, 2003,  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
---------------------------------            -------------------------    --------------------------     -----------------

 <c>
           General Partnership Interests           James M. Seneff, Jr.                                         45%
                                                   Robert A. Bourne                                             45%
                                                   CNL Realty Corporation                                       10%
                                                                                                             ----------
                                                                                                               100%
                                                                                                             ==========

           Limited Partnership Interest            Robert A. Bourne             1,250 Units                   0.04%
                                                                                                             ----------
                                                                                                              0.04%
                                                                                                             ==========
</TABLE>

         Neither the General  Partners,  nor any of their  affiliates,  owns any
interest in the Registrant, except as noted above.

         The Partnership does not have any equity compensation plans.


<PAGE>



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, 2002,  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
         and Recipient                         Method of Computation                  Ended December 31, 2002
---------------------------------      --------------------------------------      ------------------------------

 <c>
Reimbursement  to affiliates for       Operating  expenses are reimbursed at       Accounting                and
operating expenses                     the  lower  of  cost  or  90%  of the       administra-tive     services:
                                       prevailing  rate at which  comparable       $142,170
                                       services  could have been obtained in
                                       the     same     geographic     area.
                                       Affiliates  of the  General  Partners
                                       from  time  to  time  incur   certain
                                       operating  expenses  on behalf of the
                                       Partnership     for     which     the
                                       Partnership       reimburses      the
                                       affiliates without interest.

Annual    management    fee   to       One  percent  of  the  sum  of  gross       $25,379
affiliates                             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
                                       competitive 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 the
                                       affiliates. 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 the affiliates shall determine.


</TABLE>


<PAGE>

<TABLE>
<CAPTION>



                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2002
---------------------------------      --------------------------------------      ------------------------------

 <c>
Deferred,    subordinated   real       A deferred,  subordinated real estate       $-0-
estate  disposition  fee payable       disposition  fee,  payable  upon sale
to the affiliates                      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 the Affiliates 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,       A deferred,  subordinated share equal       $-0-
subordinated       share      of       to  five   percent   of   Partnership
Partnership net cash flow              distributions   of  net  cash   flow,
                                       subordinated   to   certain   minimum
                                       returns to the Limited Partners.

General   Partners'    deferred,       A deferred,  subordinated share equal       $-0-
subordinated       share      of       to  five   percent   of   Partnership
Partnership  net sales  proceeds       distributions   of  such  net   sales
from  a  sale  or  sales  not in       proceeds,   subordinated  to  certain
liquidation of the Partnership         minimum   returns   to  the   Limited
                                       Partners.

General   Partners'   share   of       Distributions  of net sales  proceeds       $-0-
Partnership  net sales  proceeds       from   a    sale    or    sales    of
from  a   sale   or   sales   in       substantially      all     of     the
liquidation of the Partnership         Partnership's    assets    will    be
                                       distributed in the following order or
                                       priority: (i) first, to pay all debts and
                                       liabilities of the Partnership and to
                                       establish reserves; (ii) second, to
                                       Partners with positive capital account
                                       balances, determined after the allocation
                                       of net income, net loss, gain and loss,
                                       in proportion to such balances, up to
                                       amounts sufficient to reduce such
                                       balances to zero; and (iii) thereafter,
                                       95% to the Limited Partners and 5% to the
                                       General Partners.
</TABLE>

During  2002,  the  Partnership  acquired a Property  in Houston,  Texas,  and a
Property in San Antonio,  Texas from CNL Funding  2001-A,  LP. In  addition,  in
January 2002, the Partnership and CNL Income Fund X, Ltd, as  tenants-in-common,
acquired a Property in Austin,  Texas, from CNL Funding 2001-A,  LP. CNL Funding
2001-A, LP is an affiliate of the General  Partners.  CNL Funding 2001-A, LP had
purchased and  temporarily  held title to the  Properties in order to facilitate
the  acquisition of the  Properties by the  Partnership  and the affiliate.  The
purchase price paid by the Partnership  and the affiliate  represented the costs
incurred by CNL Funding 2001-A, LP to acquire the Properties.


Item 14.  Controls and Procedures

         The  General  Partners  maintain  a  set  of  disclosure  controls  and
procedures  designed to ensure that information  required to be disclosed in the
Partnership's  filings  under the  Securities  Exchange Act of 1934 is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Securities and Exchange  Commission's  rules and forms. The principal  executive
and  financial  officers of the  corporate  General  Partner have  evaluated the
Partnership's  disclosure  controls and  procedures  within 90 days prior to the
filing  of this  Annual  Report  on Form  10-K and  have  determined  that  such
disclosure controls and procedures are effective.

         Subsequent to the above evaluation,  there were no significant  changes
in internal  controls or other  factors  that could  significantly  affect these
controls,   including  any   corrective   actions  with  regard  to  significant
deficiencies and material weaknesses.


<PAGE>


                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

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

         1.  Financial Statements
<TABLE>
<CAPTION>

 <c>
                  Report of Independent Certified Public Accountants

                  Balance Sheets at December 31, 2002 and 2001

                  Statements of Income for the years ended December 31, 2002, 2001, and 2000

                  Statements of Partners' Capital for the years ended December 31, 2002, 2001, and 2000

                  Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000

                  Notes to Financial Statements

         2.  Financial Statement Schedules

                  Schedule II - Valuation and Qualifying Accounts for the years
                  ended December 31, 2002, 2001, and 2000

                  Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002

                  Notes to Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002

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

         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.
                        33-90998-01, 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.  (Filed  as  Exhibit  3.2  to
                        Registrant's  Registration  Statement on Form S-11,  No.
                        33-90998-01 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.)


<PAGE>



               **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.)

               **5.1    Opinion of Baker & Hostetler  as to the  legality of the
                        securities  being  registered  by CNL Income Fund XVIII,
                        Ltd. (Filed as Exhibit 5.2 to Amendment No. Three to the
                        Registrant's  Registration  Statements on Form S-11, No.
                        33-90998, incorporated herein by reference.)

               **8.1    Opinion of Baker & Hostetler  regarding certain material
                        tax issues  relating  to CNL  Income  Fund  XVIII,  Ltd.
                        (Filed as  Exhibit  8.1 to  Amendment  No.  Three to the
                        Registrant's  Registration  Statement on Form S-11,  No.
                        33-90998, incorporated herein by reference.)

               **8.2    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.)

               **8.3    Amended Opinion of Baker & Hostetler  regarding  certain
                        material issues relating to CNL Income Fund XVIII,  Ltd.
                        (Filed as Exhibit 8.5 to  Post-Effective  Amendment  No.
                        Four 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   Assignment  of  Management   Agreement   from  CNL  Fund
                        Advisors,  Inc.  to CNL  APF  Partners,  LP.  (Filed  as
                        Exhibit 10.2 to Form 10-Q filed with the  Securities and
                        Exchange  Commission on August 9, 2001, and incorporated
                        herein by reference.)

               **10.3   Assignment of Management  Agreement from CNL Income Fund
                        Advisors,  Inc. to CNL Fund Advisors,  Inc. (Included as
                        Exhibit 10.3 to Form 10-K filed with the  Securities and
                        Exchange  Commission on April 1, 1996, and  incorporated
                        herein by reference.)

               **10.4   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.)

               **10.5   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.)

               **10.6   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.)

               **10.7   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.)

               **10.8   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.)

               **10.9   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.)

               **10.10  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.)

               **10.11  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.)

               **10.12  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.)

               **10.13  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.)

               **10.14  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.)

               **10.15  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.)

                 99.1   Certification  of Chief  Executive  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)

                 99.2   Certification  of Chief  Financial  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)

         (b)      The Registrant  filed no reports on Form 8-K during the period
                  October 1, 2002 through December 31, 2002.

         (c)      Not Applicable.

         (d)      Other Financial Information

                  The   Partnership  is  required  to  file  audited   financial
                  information of one of its tenants (Golden Corral  Corporation)
                  as a  result  of this  tenant  leasing  more  than  20% of the
                  Partnership's  total  assets for the year ended  December  31,
                  2002.  Golden Corral  Corporation is a privately-held  company
                  and  its  financial   information  is  not  available  to  the
                  Partnership to include in this filing.  The  Partnership  will
                  file this financial  information  under cover of a Form 10-K/A
                  as soon as it is available.

                  **previously filed




<PAGE>





                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 28th day of
March, 2003.

                                            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 28, 2003
------------------------------------    (Principal   Financial  and  Accounting
Robert A. Bourne                         Officer)


/s/ James M. Seneff, Jr.                 Chief  Executive  Officer and  Director            March 28, 2003
------------------------------------    (Principal Executive Officer)
James M. Seneff, Jr.
</TABLE>



<PAGE>


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                          OF CORPORATE GENERAL PARTNER

                 PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


         I, James M.  Seneff,  Jr.,  the Chief  Executive  Officer of CNL Realty
Corporation,  the corporate  general partner of CNL Income Fund XVIII, Ltd. (the
"registrant"), certify that:

         1. I have reviewed this annual report on Form 10-K of the registrant;

         2. Based on my  knowledge,  this  annual  report  does not  contain any
            untrue statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such  statements  were made, not misleading with respect
            to the period covered by this annual report;

         3. Based on my knowledge, the financial statements, and other financial
            information  included in this annual  report,  fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the  registrant as of, and for, the periods  presented
            in this annual report;

         4. The registrant's  other certifying officer and I are responsible for
            establishing and maintaining  disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant
            and have:

                a. designed such  disclosure  controls and  procedures to ensure
                   that  material   information   relating  to  the  registrant,
                   including its consolidated subsidiaries,  is made known to us
                   by others  within  those  entities,  particularly  during the
                   period in which this annual report is being prepared;

                b. evaluated the  effectiveness of the  registrant's  disclosure
                   controls and  procedures as of a date within 90 days prior to
                   the  filing  date  of this  annual  report  (the  "Evaluation
                   Date"); and

                c. presented  in this annual  report our  conclusions  about the
                   effectiveness of the disclosure controls and procedures based
                   on our evaluation as of the Evaluation Date;

         5. The  registrant's  other  certifying  officer and I have  disclosed,
            based on our most recent  evaluation,  to the registrant's  auditors
            and the audit  committee  of  registrant's  board of  directors  (or
            persons  performing the equivalent  functions):

                a. all  significant  deficiencies  in the design or operation of
                   internal   controls   which   could   adversely   affect  the
                   registrant's ability to record, process, summarize and report
                   financial  data  and  have  identified  for the  registrant's
                   auditors any material weaknesses in internal controls; and

                b. any fraud, whether or not material,  that involves management
                   or  other  employees  who  have  a  significant  role  in the
                   registrant's internal controls; and

         6. The registrant's  other  certifying  officer and I have indicated in
            this quarterly report whether or not there were significant  changes
            in internal  controls or in other  factors that could  significantly
            affect internal  controls  subsequent to the date of our most recent
            evaluation,   including  any  corrective   actions  with  regard  to
            significant deficiencies and material weaknesses.

Date:  March 28, 2003


/s/ James M. Seneff, Jr.
---------------------------
James M. Seneff, Jr.
Chief Executive Officer


<PAGE>


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                          OF CORPORATE GENERAL PARTNER

                 PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

         I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation,
the corporate general partner of CNL Income Fund XVIII, Ltd. (the  "registrant")
certify that:

         1. I have reviewed this annual report on Form 10-K of the registrant;

         2. Based on my  knowledge,  this  annual  report  does not  contain any
            untrue statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such  statements  were made, not misleading with respect
            to the period covered by this annual report;

         3. Based on my knowledge, the financial statements, and other financial
            information  included in this annual  report,  fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the  registrant as of, and for, the periods  presented
            in this annual report;

         4. The registrant's  other certifying officer and I are responsible for
            establishing and maintaining  disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant
            and have:

a.                    designed such disclosure controls and procedures to ensure
                      that material information relating to the registrant,
                      including its consolidated subsidiaries, is made known to
                      us by others within those entities, particularly during
                      the period in which this annual report is being prepared;

                b. evaluated the  effectiveness of the  registrant's  disclosure
                   controls and  procedures as of a date within 90 days prior to
                   the  filing  date  of this  annual  report  (the  "Evaluation
                   Date"); and

                c. presented  in this annual  report our  conclusions  about the
                   effectiveness of the disclosure controls and procedures based
                   on our evaluation as of the Evaluation Date;

         5. The  registrant's  other  certifying  officer and I have  disclosed,
            based on our most recent  evaluation,  to the registrant's  auditors
            and the audit  committee  of  registrant's  board of  directors  (or
            persons performing the equivalent functions):

                a. all  significant  deficiencies  in the design or operation of
                   internal   controls   which   could   adversely   affect  the
                   registrant's ability to record, process, summarize and report
                   financial  data  and  have  identified  for the  registrant's
                   auditors any material weaknesses in internal controls; and

                b. any fraud, whether or not material,  that involves management
                   or  other  employees  who  have  a  significant  role  in the
                   registrant's internal controls; and

         6. The registrant's  other  certifying  officer and I have indicated in
            this annual report whether or not there were significant  changes in
            internal  controls  or in other  factors  that  could  significantly
            affect internal  controls  subsequent to the date of our most recent
            evaluation,   including  any  corrective   actions  with  regard  to
            significant deficiencies and material weaknesses.


Date:  March 28, 2003


/s/ Robert A. Bourne
---------------------------
Robert A. Bourne
President and Treasurer


<PAGE>


                                  EXHIBIT INDEX


Exhibit Number

(a)      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.
                   33-90998-01, 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. (Filed as Exhibit 3.2 to Registrant's
                   Registration  Statement  on Form S-11,  No.  33-90998-01  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.)

          **5.1    Opinion  of  Baker  &  Hostetler  as to the  legality  of the
                   securities  being  registered by CNL Income Fund XVIII,  Ltd.
                   (Filed  as  Exhibit  5.2  to  Amendment   No.  Three  to  the
                   Registrant's   Registration  Statements  on  Form  S-11,  No.
                   33-90998, incorporated herein by reference.)

          **8.1    Opinion of Baker & Hostetler  regarding  certain material tax
                   issues  relating  to CNL Income Fund  XVIII,  Ltd.  (Filed as
                   Exhibit  8.1 to  Amendment  No.  Three  to  the  Registrant's
                   Registration   Statement   on  Form   S-11,   No.   33-90998,
                   incorporated herein by reference.)

          **8.2    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.)

          **8.3    Amended  Opinion  of  Baker  &  Hostetler  regarding  certain
                   material  issues  relating  to CNL Income  Fund  XVIII,  Ltd.
                   (Filed as Exhibit 8.5 to Post-Effective Amendment No. Four 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.)


<PAGE>



          **10.2   Assignment of Management  Agreement  from CNL Fund  Advisors,
                   Inc. to CNL APF Partners,  LP. (Filed as Exhibit 10.2 to Form
                   10-Q filed with the  Securities  and Exchange  Commission  on
                   August 9, 2001, and incorporated herein by reference.)

          **10.3   Assignment of Management Agreement from CNL APF Partners,  LP
                   to CNL Restaurants  XVIII, Inc.  (Included as Exhibit 10.3 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 13, 2002, and incorporated herein by reference.)

          **10.4   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.)

          **10.5   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.)

          **10.6   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.)

          **10.7   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.)

          **10.8   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.)

          **10.9   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.)

          **10.10  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.)

          **10.11  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.)

          **10.12  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.)

          **10.13  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.)

          **10.14  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.)


<PAGE>




          **10.15  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.)

            99.1   Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)

            99.2   Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)

**previously filed


<PAGE>


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

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                  Years Ended December 31, 2002, 2001, and 2000

<TABLE>
<CAPTION>

                                                      Additions                           Deductions
                                          ----------------------------------      ----------------------------
                                                                                                          Collected
                                                                                                          or Deter-
                                   Balance at       Charged to       Charged to           Deemed          mined to       Balance
                                    Beginning       Costs and           Other           Uncollec-          be Col-       at End
  Year          Description          of Year         Expenses         Accounts            tible           lectible       of Year
----------    -----------------   --------------  ---------------  ----------------    -------------     ------------  ------------

 <c>
  2000        Allowance for
                  doubtful
                  accounts (a)        $  11,172          $    --        $  131,350 (b)    $  18,529 (c)       $   --     $ 123,993
                                  ==============  ===============  ================    =============     ============  ============

  2001        Allowance for
                  doubtful
                  accounts (a)        $ 123,993          $    --         $     696 (b)    $  49,488 (c)       $   --      $ 75,201
                                  ==============  ===============  ================    =============     ============  ============

  2002        Allowance for
                  doubtful
                  accounts (a)        $  75,201         $    --         $  104,228 (b)    $  75,201 (c)      $    --     $ 104,228
                                  ==============  ===============  ================    =============     ============  ============
</TABLE>


              (a)    Deducted from receivables on the balance sheet.

              (b)    Reduction of rental and other income.

              (c)    Amounts written off as uncollectible.



<page>

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

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2002
<TABLE>
<CAPTION>

 <c>
                                                                       Costs Capitalized
                                                                       Subsequent To
                                                Initial Cost           Acquisition
                                      ----------------------  ------------------
                         Encum-                   Buildings anImprove-   Carrying
                        brances         Land       Improvementsments     Costs
                        ---------     ----------  ---------------------  -------
Properties the Partnership
  has Invested in Under
  Operating Leases:

    Arby's Restaurant:
      Lexington, North Caro-ina (m)    $210,977           -   $426,982        -

    Bennigan's Restaurant:
      Sunrise, Florida     -          1,147,704     925,086          -        -

    Boston Market Restaurants:
      Minnetonka, Minnesota-(i)         574,766           -     25,792 (h)    -

    Burger King Restaurant:
      Kinston, North Caroli-a           262,498     663,421          -        -

    Chevy's Fresh Mex Restaurant:
      Mesa, Arizona        -          1,029,236   1,598,376          -        -

    Golden Corral Family
      Steakhouse Restaurants:
          Houston, Texas   -            889,003           -    844,282        -
          Galveston, Texas -            687,946           -    836,386        -
          Elizabethtown, Ke-tucky       488,945           -   1,045,207       -
          Destin, Florida  -            565,354           -   1,022,196       -

    Ground Round Restaurant:
      Rochester, New York  -            525,891     582,882          -        -

    Jack in the Box Restaurants:
      Centerville, Texas   -            261,913           -    543,079        -
      Echo Park, California-            674,648           -    659,359        -
      Houston, Texas       -            778,707           -    589,840        -

    NI's Interational Buffet
      Restaurant:
          Stow, Ohio (l)   -            489,799           -          -        -

    Taco Cabana Restaurants:
      Houston, Texas (n)   -            524,910     669,154          -        -
      San Antonio, Texas (n-            352,699     543,841          -        -

    Wendy's Restaurant:
      Sparta, Tennessee    -            221,537           -    432,842        -
                                      ----------  ----------  ---------  -------

                                      $9,686,533  $4,982,760  $6,425,965      -
                                      ==========  ==========  =========  =======





                                                                       Costs Capitalized
                                                                       Subsequent To
                                                Initial Cost           Acquisition
                                      ----------------------  ------------------
                         Encum-                   Buildings anImprove-   Carrying
                        brances         Land       Improvementsments     Costs
                        ---------     ----------  ---------------------  -------
Properties the Partnership
    Invested in Under
    Direct Financing Leases:

    IHOP Restaurants:
        Bridgeview, Illinoi-            354,227   1,151,199          -        -

    NI's Interational Buffet
      Restaurant:
            Stow, Ohio (l) -                  -   1,280,986          -        -
                                                              ---------  -------
                                      ----------  ----------

                                       $354,227   $2,432,185         -        -
                                      ==========  ==========  =========  =======

Property of Joint Venture
    in Which the Partnership
    has a 39.93% Interest
    in Under an Operating Lease:

    Arby's Restaurant:
      Columbus, Ohio       -           $407,096           -   $498,684        -
                                      ==========  ==========  =========  =======

Property of Joint Venture
    in Which the Partnership
    has a 57.20% Interest
    in Under an Operating Lease:

    Taco Bell Restaurant:
      Portsmouth, Virginia -           $254,046           -          -        -
                                      ==========  ==========  =========  =======

Property of Joint Venture
    in Which the Partnership
    has a 19.78% Interest
    in Under an Operating Lease:

    T.G.I.Friday's Restaurant:
      Homestead, Pennsylvan-a         $1,036,296  $1,499,296         -        -
                                      ==========  ==========  =========  =======

Property in Which the Partnertship
    has a 80.70% Interest
    as Tenant-in-Common
    and has Invested
    in Under an Operating Lease:

    Bennigan's
      Denver, Colorado     -           $802,413   $1,398,252         -        -
                                      ==========  ==========  =========  =======

Property in Which the Partnertship
    has a 18.35% Interest
    as Tenant-in-Common
    and has Invested
    in Under an Operating Lease:

    Taco Cabana Restaurant:
      Austin, Texas (o)    -           $486,896    $633,951          -        -
                                      ==========  ==========  =========  =======

Property of Joint Venture
    in Which the Partnership
    has a 57.20% Interest
    in Under a Direct Financing Lease:

    Taco Bell Restaurant
      Portsmouth, Virginia -                  -    $323,725          -        -
                                      ==========  ==========  =========  =======






                                                                   Life on Which
               Net Amount at Which                                 Depreciation in
              Carried at Close of Period (c)     Date              Latest Income
-------------------------------------
              Buildings and           Accumulatedof Con-  Date     Statement is
   Land       Improvements  Total     DepreciatiostructioAcquired   Computed
------------  ----------------------- ----------------------------------------





   $210,977     $426,982    $637,959    $11,314  1997    07/97        (m)


  1,147,704      925,086   2,072,790    140,030  1982    06/98        (b)


    403,092            -     403,092          -  1997    04/97


    262,498      663,421     925,919    132,884  1994    12/96        (b)


  1,029,236    1,598,376   2,627,612    266,503  1994    12/97        (b)



    889,003      844,282   1,733,285    161,802  1997    12/96        (b)
    687,946      836,386   1,524,332    156,633  1997    01/97        (b)
    488,945    1,045,207   1,534,152    181,014  1997    05/97        (b)
    565,354    1,022,196   1,587,550    166,924  1997    09/97        (b)


    525,891      582,882   1,108,773    100,990  1981    10/97        (b)


    261,913      543,079     804,992    103,157  1997    01/97        (b)
    674,648      659,359   1,334,007    121,110  1997    01/97        (b)
    778,707      589,840   1,368,547    103,648  1997    05/97        (b)



    222,131           (f)    222,131          -  1997    04/97        (d)


    524,910     $669,154   1,194,064     22,305  1990     1/02        (b)
    352,699     $543,841     896,540     10,575  1994     6/02        (b)


    221,537      432,842     654,379     77,085  1997    04/97        (b)
------------  ----------- ----------- -----------

 $9,247,191   $11,382,933 $20,630,124 $1,755,974
============  =========== =========== ==========










                                                                   Life on Which
              Net Cost Basis at Which                              Depreciation in
              Carried at Close of Period (c)     Date              Latest Income
-------------------------------------
              Buildings and           Accumulatedof Con-  Date     Statement is
   Land       Improvements  Total     DepreciatiostructioAcquired   Computed
------------  ----------------------- ----------------------------------------





         (f)          (f)         (f)        (e) 1972    07/97        (e)



          -      656,426     656,426         (d) 1997    04/97        (d)









   $407,096     $498,684    $905,780    $67,184  1998    08/98        (b)
============  =========== =========== ==========







   $254,046           (g)   $254,046         (d) 1997    02/99        (d)
============              ===========







 $1,036,296   $1,499,296  $2,535,592   $129,244  2000    06/00        (b)
============  =========== =========== ==========








   $802,413   $1,398,252  $2,200,665    $69,912  2001    07/01        (b)
============  =========== =========== ==========








   $486,896     $633,951  $1,120,847    $21,132  1997     1/02        (b)
============  =========== =========== ==========







          -           (g)         (g)        (d) 1997    02/99        (d)
============  =========== =========== ==========

</TABLE>


<PAGE>

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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2002


(a)      Transactions in real estate and accumulated depreciation are summarized
         below.  The  balances  in 1999,  2000,  and 2001 have been  adjusted to
         reflect  the   reclassification   of   properties   accounted   for  as
         discontinued operations.

<TABLE>
<CAPTION>
                                                                                              Accumulated
                                                                              Cost            Depreciation
                                                                         ----------------   -------------------

 <c>
            Properties the Partnership has Invested in Under
              Operating Leases:

                 Balance, December 31, 1999                                 $ 21,212,139         $   823,497
                 Reclassified from net investment in direct
                   financing lease (j)                                           855,436                  --
                 Provision for write-down of assets (k)                         (280,372 )                --
                 Depreciation expense                                                 --             368,141
                                                                         ----------------   -----------------

                 Balance, December 31, 2000                                   21,787,203           1,191,638
                 Provision for write-down of assets (j)                         (321,239 )                --
                 Disposition                                                  (2,551,561 )          (132,780 )
                 Depreciation expense                                                 --             361,010
                                                                         ----------------   -----------------

                 Balance, December 31, 2001                                   18,914,403           1,419,868
                 Acquisitions (n)                                              2,090,604                  --
                 Reclassified from net investment in direct
                   financing lease (m)                                           426,982                  --
                 Provision for write-down of assets (l)                         (267,668 )                --
                 Disposition                                                    (534,197 )           (38,198 )
                 Depreciation expense                                                 --             374,304
                                                                         ----------------   -----------------

                 Balance, December 31, 2002                                 $ 20,630,124        $  1,755,974
                                                                         ================   =================

            Property of Joint Venture in Which the Partnership has a 39.93%
              Interest and has Invested in Under an Operating Lease:

                 Balance, December 31, 1999                                  $   905,780    $         17,315
                 Depreciation expense                                                 --              16,623
                                                                         ----------------   -----------------

                 Balance, December 31, 2000                                      905,780              33,938
                 Depreciation expense                                                 --              16,623
                                                                         ----------------   -----------------

                 Balance, December 31, 2001                                      905,780              50,561
                 Depreciation expense                                                 --              16,623
                                                                         ----------------   -----------------

                 Balance, December 31, 2002                                  $   905,780          $   67,184
                                                                         ================   =================


</TABLE>

<PAGE>




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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2002

<TABLE>
<CAPTION>

                                                                                              Accumulated
                                                                              Cost            Depreciation
                                                                         ----------------   -------------------

 <c>
            Property of Joint Venture in Which the Partnership has a 57.20%
              Interest and has Invested in Under an Operating Lease:

                 Balance, December 31, 1999                                  $   254,046            $     --
                 Depreciation expense (d)                                             --                  --
                                                                         ----------------   -----------------

                 Balance, December 31, 2000                                      254,046                  --
                 Depreciation expense (d)                                             --                  --
                                                                         ----------------   -----------------

                 Balance, December 31, 2001                                      254,046                  --
                 Depreciation expense (d)                                             --                  --
                                                                         ----------------   -----------------

                 Balance, December 31, 2002                                  $   254,046            $     --
                                                                         ================   =================

            Property of Joint Venture in Which the Partnership has a 19.78%
              Interest and has Invested in Under an Operating Lease:

                 Balance, December 31, 1999                                     $     --            $     --
                 Acquisition                                                   2,535,592                  --
                 Depreciation expense                                                 --              29,290
                                                                         ----------------   -----------------

                 Balance, December 31, 2000                                    2,535,592              29,290
                 Depreciation expense                                                 --              49,977
                                                                         ----------------   -----------------

                 Balance, December 31, 2001                                    2,535,592              79,267
                 Depreciation expense                                                 --              49,977
                                                                         ----------------   -----------------

                 Balance, December 31, 2002                                 $  2,535,592    $        129,244
                                                                         ================   =================

            Property in Which the Partnership has an 80.70% Interest as
                 Tenants-in Common and has Invested Under an Operating Lease:

                 Balance, December 31, 2000                                     $     --            $     --
                 Acquisition                                                   2,188,873                  --
                 Depreciation expense                                                 --              23,304
                                                                         ----------------   -----------------
                 Balance, December 31, 2001                                    2,188,873              23,304
                 Acquisition                                                      11,792                  --
                 Depreciation expense                                                 --              46,609
                                                                        ----------------   -----------------

                 Balance, December 31, 2002                                 $  2,200,665         $    69,913
                                                                         ================   =================


</TABLE>

<PAGE>



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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2002


<TABLE>
<CAPTION>

                                                                                              Accumulated
                                                                              Cost            Depreciation
                                                                         ----------------   -----------------

 <c>

            Property in Which the Partnership has an 18.35% Interest as
                 Tenants-in Common and has Invested Under an Operating Lease:

                 Balance, December 31, 2001                                     $     --            $     --
                 Acquisitions                                                  1,120,847                  --
                 Depreciation expense (o)                                             --              21,131
                                                                         ----------------   -----------------

                 Balance, December 31, 2002                                 $  1,120,847          $   21,131
                                                                         ================   =================
</TABLE>


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

(c)      As of December 31, 2002, the aggregate cost of the Properties  owned by
         the  Partnership and the joint ventures for federal income tax purposes
         was  $21,723,728 and  $7,337,654,  respectively.  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)      For financial reporting purposes,  the portion of the lease relating to
         the building has been recorded as a direct financing lease. Accordingly
         costs relating to this component of this lease are not shown.

(h)      Amount represents site improvements and is included in total land value
         for this Property.

(i)      For  financial  reporting  purposes,  the  undepreciated  cost  of  the
         Property in Minnetonka,  Minnesota,  was written down to net realizable
         value  due to an  anticipated  impairment  in  value.  The  Partnership
         recognized  the  impairment by recording a provision for  write-down of
         assets in the amount of $197,466 at December  31,  1998.  The tenant of
         this Property  declared  bankruptcy  and rejected the lease relating to
         this Property.  The impairment  represented the difference  between the
         Property's  net carrying  value at December 31, 1998, and its estimated
         fair value. The cost of the Property  presented on this schedule is the
         net amount at which the Property was carried,  including  the provision
         for write-down of assets. No additional impairments have been recorded.


<PAGE>



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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2002


(j)      For financial reporting  purposes,  during 2000, the undepreciated cost
         of the  Property in San  Antonio,  Texas,  was written down to its fair
         value due to an impairment in value.  The  Partnership  recognized  the
         impairment  by recording a provision  for  write-down  of assets in the
         amount of $299,849 at December  31, 2000.  The tenant of this  Property
         vacated the Property and ceased restaurant  operations,  resulting in a
         reclassification  of the building  portion of the lease to an operating
         lease. The building was recorded at net book value and depreciated over
         its remaining  estimated life of approximately 27.1 years. During 2001,
         the  Partnership  recognized an additional  provision for write-down of
         assets of $321,239.  The total  impairment  represented  the difference
         between the Property's net carrying value and its estimated fair value.
         The Property was sold in during 2002.

(k)      For  financial  reporting  purposes,  the  undepreciated  cost  of  the
         Property in  Timonium,  Maryland,  was written  down to net  realizable
         value due to an impairment in value.  The  Partnership  recognized  the
         impairment  by recording a provision  for  write-down  of assets in the
         amount of $280,372 at December 31, 2000. The impairment represented the
         difference  between the  Property's  net carrying value at December 31,
         2000 and its estimated fair value. The Property was sold during 2001.

(l)      For  financial  reporting  purposes,  the  undepreciated  cost  of  the
         Property in Stow, Ohio, was written down to net realizable value due to
         an impairment in value.  The  Partnership  recognized the impairment by
         recording  a  provision  for  write-down  of  assets  in the  amount of
         approximately $892,200 at December 31, 2002. The impairment represented
         the  difference  between the  Property's net carrying value at December
         31,  2002  and its  estimated  fair  value.  The  cost of the  Property
         presented on this  schedule is the net amount at which the Property was
         carried at December 31, 2002, including the provision for write-down of
         assets.

(m)      Effective May 2002, the lease for this Property was amended,  resulting
         in the  reclassification  of the  building  portion  of the lease to an
         operating  lease.  The  building was recorded at the net book value and
         depreciated over its remaining life of approximately 25.16 years.

(n)      During the year ended December 31, 2002, the Partnership purchased real
         estate  Properties  from CNL Funding  2001-A,  LP, an  affiliate of the
         General Partners, for an aggregate cost of approximately $2,090,600.

(o)      During  the year ended  December  31,  2002,  the  Partnership,  and an
         affiliate as  tenant-in-common,  purchased a real estate  property from
         CNL Funding 2001-A,  LP, an affiliate of the General  Partners,  for an
         aggregate cost of approximately $1,120,800.


<page>


                                 EXHIBIT 99.1

<PAGE>







                                  EXHIBIT 99.2