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, 2003

                                       OR

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

                        For the transition period from to


                         Commission file number 0-24095

                           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, 2000, the Partnership  owned 22 Properties  directly
and three  Properties  indirectly  through  joint  venture  or tenancy in common
arrangements. 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. In June 2003, the Partnership sold its
Property in Destin,  Florida and used the  proceeds  to pay  liabilities  of the
Partnership, including distributions.

         As of December 31, 2003, the Partnership  owned 17 Properties  directly
and five  Properties  indirectly  through  joint  venture  or  tenancy in common
arrangements. The 17 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 taxes. 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 19 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  successive  five-year
renewal  options  subject to the same terms and conditions as the initial lease.
Lessees of 19 of the  Partnership's 22 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.

         In October 2003,  Chevy's,  Inc., a tenant of one of the  Partnership's
Properties, filed for Chapter 11 bankruptcy protection. The rental revenues from
this lease represented more than 10% of the Partnership's total rental revenues,
as described below. As of March 12, 2004, Chevy's, Inc. had neither rejected nor
affirmed the lease related to this Property. The lost revenues that would result
if the lease were to be  rejected  would have a material  adverse  effect on the
results of operations of the  Partnership  if the  Partnership  were not able to
re-lease or sell the Property in a timely manner.

         Effective  September 2003, the lease for the Property in Stow, Ohio was
amended to provide a rent  deferral for two years equal to 50% of monthly  rent.
Interest  only  payments  are due in quarterly  installments  at a rate of seven
percent per annum for the first 12 months and at a rate of ten percent per annum
for the next 12 months,  at which  time,  all accrued  and unpaid  interest  and
principal amounts are due. All other lease terms remained unchanged. As of March
12, 2004, the  Partnership  has continued to receive the reduced rental payments
relating  to the  Property.  The General  Partners do not believe  that the rent
deferrals  will have a material  adverse  effect on the results of operations of
the Partnership.

         In February  2004,  American  Hospitality  Concepts,  Inc.,  the parent
company of Ground  Round,  Inc.,  filed for  Chapter 11  bankruptcy  protection.
Ground Round,  Inc.  leases one Property from the  Partnership.  As of March 12,
2004,  Ground Round, Inc. had neither rejected nor affirmed the lease related to
this  Property.  The lost  revenues  that  would  result if the lease were to be
rejected  would  have an adverse  effect on the  results  of  operations  of the
Partnership if the Partnership is not able to re-lease or sell the Property in a
timely manner.

         In March 2004,  the  Partnership  entered  into an agreement to provide
temporary  and  partial  rent relief to a tenant who is  experiencing  liquidity
difficulties.  The  Partnership  anticipates  lowering rent over the next twelve
months on the one lease the tenant has with the  Partnership  will  provide  the
necessary  relief to the tenant.  Rental  payment  terms go back to the original
terms starting with the thirteenth  month.  The General  Partners do not believe
that this temporary decline in cash flows will have a material adverse effect on
the operating results of the Partnership.

Major Tenants

         During  2003,  five  lessees  of the  Partnership,  (i)  Golden  Corral
Corporation,  (ii) S&A  Properties  and Steak and Ale of Colorado,  Inc.  (under
common  control of  Metromedia  Restaurant  Group,  hereinafter  referred  to as
"Metromedia"),  (iii) Jack in the Box Inc., and Jack in the Box Eastern Division
L.P.  (affiliated  under  common  control of Jack in the Box Inc.)  (hereinafter
referred to as "Jack in the Box Inc."),  (iv) Carrols Corporation and Texas Taco
Cabana,  LP (which are affiliated  entities under common  control)  (hereinafter
referred to as Carrols Corp.), and (v) Chevy's, Inc., each contributed more than
ten percent of total rental revenues (including the Partnership's share of total
rental  revenues from joint  ventures and Properties  held as  tenants-in-common
with  affiliates).  As of December 31, 2003,  Golden Corral  Corporation was the
lessee  relating  to three  leases,  Metromedia  was the lessee  relating to two
leases,  Carrols Corp. was the lessee  relating to five leases,  Jack in the Box
Inc. was the lessee  relating to three  leases,  and Chevy's Inc. was the lessee
relating  to one  lease.  It is  anticipated  that based on the  minimum  rental
payments  required  by the  leases,  these five  lessees  will each  continue to
contribute  more  than ten  percent  of total  rental  revenues  (including  the
Partnership's  share of total rental revenues from joint ventures and Properties
held as tenants-in-common with affiliates) in 2004. In addition, four Restaurant
Chains,  Golden Corral Buffet and Grill ("Golden Corral"),  Bennigan's,  Jack in
the Box, and Chevy's,  each  accounted for more than ten percent of total rental
revenues  (including the Partnership's share of total rental revenues from joint
ventures and Properties held as tenants-in-common  with affiliates) during 2003.
In  2004,  it is  anticipated  that  these  four  Restaurant  Chains  will  each
contribute  more  than ten  percent  of total  rental  revenues  (including  the
Partnership's  share of total 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
will materially  adversely  affect the  Partnership's  operating  results if the
Partnership  is not able to re-lease or sell the  Properties in a timely manner.
As of December 31, 2003, no single tenant or group of affiliated  tenants leased
Properties with an aggregate carrying value in excess of 20% of the total assets
of the Partnership.

Joint Venture and Tenancy in Common Arrangements

         The  Partnership  has  entered  into the  following  joint  venture and
tenancy in common arrangements as of December 31, 2003:
<TABLE>
<CAPTION>

 <c>
         Entity Name             Year      Ownership               Partners                   Property

Columbus Joint Venture           1998       39.93 %     CNL Income Fund XII, Ltd. CNL    Columbus, OH
                              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. CNL    Homestead, PA
     Venture                                            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  entity  or  the  Property.   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 entity or the Property.

         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 or by an event of dissolution.
Events of dissolution  include the bankruptcy,  insolvency or termination of any
joint  venturer,  sale of the  Property  owned by the joint  venture  and mutual
agreement of the Partnership and its joint venture 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 or assign its 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.

         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.  (the  "Advisor"),  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.
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 has agreed to pay the Advisor an
annual fee of one percent of the sum of gross rental  revenues  from  Properties
wholly owned by the Partnership plus the Partnership's  allocable share of gross
revenues of joint ventures in which the Partnership is a co-venturer, but not in
excess of competitive fees for comparable services.

         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.

         During 2003,  CNL Capital  Management,  Inc.,  ("CCM"),  a wholly owned
subsidiary of CNL Financial  Group,  Inc.,  began  providing  certain  strategic
advisory  services  to  the  General  Partners  relative  to  the  Partnership's
business. CCM is not reimbursed for these services by the Partnership.  CCM also
began  providing  some  accounting  and  portfolio  management  services  to the
Partnership during 2003, through a subcontract with the Advisor.

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,  the officers  and  employees of CNL  Restaurant  Properties,  Inc.
(formerly  CNL  American  Properties  Fund,  Inc.),  the  parent  company of the
Advisor,  and the officers and employees of CCM 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.




<PAGE>


Item 2.  Properties

         As of December 31, 2003, the Partnership owned 22 Properties. Of the 22
Properties,  17 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.

Description of Properties

         Land. As of December 31, 2003, 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, 2003 by state.



               State                              Number of Properties

               Arizona                                      1
               California                                   1
               Colorado                                     1
               Florida                                      1
               Illinois                                     1
               Kentucky                                     1
               Minnesota                                    1
               New York                                     1
               North Carolina                               2
               Ohio                                         2
               Pennsylvania                                 1
               Tennessee                                    1
               Texas                                        7
               Virginia                                     1
                                                      --------------
               TOTAL PROPERTIES                            22
                                                      ==============

         Buildings.  Each of the Properties 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  2,100 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, 2003, 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, 2003, the aggregate cost of the Properties  owned by
the   Partnership   and  joint  ventures   (including  the  Properties  held  as
tenants-in-common)   for  federal  income  tax  purposes  was   $20,136,177  and
$7,337,654, respectively.

         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, 2003 by Restaurant Chain.


<PAGE>



                Restaurant Chain                      Number of Properties

                Arby's                                          2
                Bennigan's                                      2
                Burger King                                     1
                Chevy's Fresh Mex                               1
                Golden Corral                                   3
                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
                Other                                           1
                                                          --------------
                TOTAL PROPERTIES                               22
                                                          ==============

         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
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.

         The  following  is a schedule  of the  average  rent per  Property  and
occupancy rate for each of the years ended December 31:
<TABLE>
<CAPTION>

 <c>
                                     2003              2002              2001               2000               1999
                                 -------------     -------------    ---------------     --------------     -------------

  Rental Revenues (1)(2)            $ 2,498,961       $ 2,653,429      $ 2,564,402        $ 2,888,408       $ 3,141,240
  Properties (2)                             21                22               19                 20                23
  Average rent per
      property                      $   118,998        $  120,610        $ 134,969          $ 144,420         $ 136,576
  Occupancy rate                            95%               96%              83%                80%               96%
</TABLE>

(1)      Rental revenues include 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.

         The following is a schedule of lease expirations for leases in place as
of December 31, 2003 for the next ten years and thereafter.


<PAGE>


<TABLE>
<CAPTION>

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

              2003                             --                   $   --                      --
              2004                             --                       --                      --
              2005                             --                       --                      --
              2006                             --                       --                      --
              2007                             --                       --                      --
              2008                             --                       --                      --
              2009                             --                       --                      --
              2010                             --                       --                      --
              2011                             --                       --                      --
              2012                              4                  762,097                  28.70%
              Thereafter                       17                1,892,852                  71.30%
                                        ----------            -------------           -------------
              Total (1)                        21              $ 2,654,949                 100.00%
                                        ==========            =============           =============
</TABLE>

         (1) Excludes one Property which was vacant at December 31, 2003.

         Leases  with Major  Tenants.  The terms of each of the leases  with the
Partnership's  major  tenants,  as of December 31, 2003 (See Item 1.  Business -
Major  Tenants),  are  substantially  the  same as  those  described  in Item 1.
Business - Description of Leases.

         Golden Corral Corporation leases three Golden Corral  restaurants.  The
initial  term of each  lease is 15 years  (expiring  in  2012)  and the  average
minimum base annual rent is approximately  $164,400 (ranging from  approximately
$156,700 to $178,200).

         Metromedia 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).   The  average  minimum  base  annual  rent  is
approximately $218,400 (ranging from approximately $200,200 to $236,600).

         Carrols Corp.  leases one Burger King  restaurant and three Taco Cabana
restaurants.  The initial term of each lease is 20 years (expiring  between 2016
and 2020) and the average  minimum  base annual rent is  approximately  $101,800
(ranging from approximately $92,100 to $114,000).

         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
$84,100 to $142,800).

         Chevy's,  Inc. leases one Chevy's  restaurant.  The initial term of the
lease is 15 years  (expiring  in  2012)  and the  minimum  base  annual  rent is
approximately $243,600. In October 2003, Chevy's, Inc. filed for bankruptcy,  as
described above.


Item 3.  Legal Proceedings

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


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

         Not applicable.


                                     PART II


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

(a)      As of March 12, 2004,  there were 1,553 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 2003,  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,
2003 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 2003 and 2002 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>

 <c>
                                            2003 (1)                                      2002(1)
                             ---------------------------------------    ---------------------------------------------
                               High          Low          Average            High           Low           Average
                             ----------   -----------   -------------    -------------   ----------    --------------

      First Quarter            $  7.50       $  7.50        $   7.50          $  6.57      $  6.00           $  6.36
      Second Quarter              7.44          7.15             7.30              (2 )          (2 )            (2)
      Third Quarter               7.78          7.78            7.78             6.43         6.43              6.43
      Fourth Quarter                (2 )          (2 )            (2 )           7.90         6.56              7.17
</TABLE>

(1)      A total of 11,050 and 5,986 Units were transferred  other than pursuant
         to  the  Plan  for  the  years  ended   December  31,  2003  and  2002,
         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, 2003 and 2002, 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 2003 and 2002, 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 the Limited
Partners for the years ended  December 31, 2003 and 2002,  are required to be or
have been  treated by the  Partnership  as a return of capital  for  purposes of
calculating   the   Limited   Partners'   return  on  their   adjusted   capital
contributions. 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.


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>

 <c>
                                          2003          2002           2001             2000            1999
                                      ------------- -------------  --------------  ---------------  -------------

    Year Ended December 31:
    Continuing Operations (5):
        Revenues                        $2,148,332    $2,124,730      $2,319,468      $ 2,465,290     $2,745,279
        Equity earnings of
           unconsolidated joint
           ventures                        308,312       308,632         197,013          112,863         61,656
        Income from continuing
           operations (1) (2)            1,844,417       600,465       1,454,872        1,115,165      2,191,377

    Discontinued Operations (5):
        Revenues                            82,119       164,302         164,802          442,972        385,436
        Income (loss) from and gain
           on disposal of
           discontinued
           operations (3) (4)              349,813      (223,395 )      (286,107 )          2,032        323,979

    Net income                           2,194,230       377,070       1,168,765        1,117,197      2,515,356

    Income (loss) per unit:
        Continuing operations             $   0.53      $   0.17        $   0.42        $    0.32       $   0.63
        Discontinued operations               0.10         (0.06 )         (0.09 )             --           0.09
                                      ------------- -------------  --------------  ---------------  -------------
                                          $   0.63      $   0.11        $   0.33        $    0.32       $   0.72
                                      ============= =============  ==============  ===============  =============

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

    Cash distributions declared
      per unit:                               0.80          0.80            0.80             0.80           0.80
          At December 31:
          Total assets                 $24,472,487   $25,021,532     $27,511,695     $ 29,112,352    $30,866,006
          Total partners' capital       23,641,117    24,246,887      26,669,817       28,301,052     29,983,855
</TABLE>

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

(2)      Income from  continuing  operations  includes gain 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.

(3)      Income  (loss)  from and gain on disposal  of  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.

(4)      Income  (loss)  from and gain on disposal  of  discontinued  operations
         includes gain on sale of $273,876 for the year ended December 31, 2003.

(5)      Certain items in the prior years' financial data have been reclassified
         to  conform  to the 2003  presentation.  This  reclassification  had no
         effect on net income. 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.  The results of
         operations  relating to Properties that were either identified for sale
         and disposed of  subsequent  to January 1, 2002 or were  classified  as
         held for sale as of  December  31, 2003 are  reported  as  discontinued
         operations for all periods presented.


<PAGE>


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

         The  Partnership  was  organized on February  10, 1995,  to acquire for
cash,   either   directly  or  through   joint  venture  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 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, 2003, the Partnership owned
17 Properties  directly and five Properties  indirectly through joint venture or
tenancy in common  arrangements.  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.

Capital Resources

         Cash  from  operating  activities  was  $2,275,423,   $2,080,057,   and
$1,684,911, for the years ended December 31, 2003, 2002, and 2001, respectively.
The increase in cash from  operating  activities  during the year ended December
31,  2003,  as compared  to the  previous  year,  was a result of changes in the
Partnership's  working capital,  such as the timing of transactions  relating to
the  collection of rents and the payment of expenses,  and changes in income and
expenses,  such as changes in rental  revenues  and  changes  in  operating  and
Property related expenses. The increase in cash from operating activities during
the year ended December 31, 2002, as compared to the previous year, was a result
of changes  in income and  expenses,  such as  changes  in rental  revenues  and
changes in operating and Property related expenses.

         Other sources and uses of cash included the following  during the years
ended December 31, 2003, 2002, and 2001.

         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. The Partnership has 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. The Partnership  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 at an  approximate  cost of
$1,194,100  and  reinvested  approximately  $205,700 of 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.  The  Partnership  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.


         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.  No gain or loss on  disposal of  discontinued
operations was recorded  relating to the sale of the Property in Raleigh,  North
Carolina  because the  Partnership  had recorded  provisions  for  write-down of
assets  relating  to  this  Property  in  previous  years.  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.
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.

         During 2003, the Partnership sold its Property in Destin, Florida, to a
third  party  and  received  net sales  proceeds  of  approximately  $1,742,800,
resulting  in a gain on disposal of  discontinued  operations  of  approximately
$273,900.  In connection  with the sale,  the  Partnership  incurred a deferred,
subordinated  real  estate  disposition  fee of  $54,000  which is payable to an
affiliate  of the  Partnership.  Payment of the real estate  disposition  fee is
subordinated  to the  receipt by the  Limited  Partners  of their  aggregate  8%
Return,  plus their  invested  capital  contributions.  The  Partnership  used a
portion  of these net sales  proceeds  to pay  liabilities  of the  Partnership,
including distributions to the Limited Partners.

         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 totaled $875,000,  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 the year ended
December 31, 2003, the  Partnership  entered into two promissory  notes with the
corporate  General  Partner for loans in connection  with the  operations of the
Partnership.  The loans totaled $650,000,  were  uncollateralized,  non-interest
bearing and due on demand.  As of December 31, 2003, the Partnership  repaid the
loans in full to the corporate General Partner.

         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.

         At December 31, 2003, the  Partnership  had $1,647,730 in cash and cash
equivalents, as compared to $429,481 at December 31, 2002. At December 31, 2003,
these  funds were held in demand  deposit  accounts  at  commercial  banks.  The
increase  in cash  was  primarily  a result  of the  Partnership  holding  sales
proceeds at December 31,  2003,  relating to the sale of the Property in Destin,
Florida. As of December 31, 2003, the average interest rate earned on the rental
income  deposited in demand deposit  accounts at commercial  banks was less than
one percent  annually.  The funds  remaining  at December  31,  2003,  after the
payment  of  distributions  and  other  liabilities  will be  used  to meet  the
Partnership's working capital needs.

         In February  2004,  American  Hospitality  Concepts,  Inc.,  the parent
company of Ground  Round,  Inc.,  filed for  Chapter 11  bankruptcy  protection.
Ground Round,  Inc.  leases one Property from the  Partnership.  As of March 12,
2004,  Ground Round, Inc. had neither rejected nor affirmed the lease related to
this  Property.  The lost  revenues  that  would  result if the lease were to be
rejected  would  have an adverse  effect on the  results  of  operations  of the
Partnership if the Partnership is not able to re-lease or sell the Property in a
timely manner.

         In March 2004,  the  Partnership  entered  into an agreement to provide
temporary  and  partial  rent relief to a tenant who is  experiencing  liquidity
difficulties.  The  Partnership  anticipates  lowering rent over the next twelve
months on the one lease the tenant has with the  Partnership  will  provide  the
necessary  relief to the tenant.  Rental  payment  terms go back to the original
terms starting with the thirteenth  month.  The General  Partners do not believe
that this temporary decline in cash flows will have a material adverse effect on
the operating results of the Partnership.

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,
loans from the corporate  General  Partner,  and for the year ended December 31,
2003, the net sales  proceeds from the sale of the Property in Destin,  Florida,
the Partnership  declared  distributions  to the Limited Partners of $2,800,000,
for each the years ended  December 31, 2003,  2002,  and 2001.  This  represents
distributions  of $0.80 per Unit, for each of the years ended December 31, 2003,
2002, and 2001. No distributions were made to the General Partners for the years
ended  December  31,  2003,  2002,  and 2001.  No amounts  distributed  or to be
distributed to the Limited Partners for the years ended December 31, 2003, 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.  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,
2003, 2002, and 2001.

         As of December  31, 2003 and 2002,  the  Partnership  owed  $10,833 and
$17,762,  respectively, to related parties for operating expenses and accounting
and  administrative  services and  management  fees.  As of March 12, 2004,  the
Partnership had reimbursed the affiliates for these amounts. In addition, during
the year ended December 31, 2003,  the  Partnership  incurred  $54,000 in a real
estate disposition fee due to an affiliate,  as a result of services provided in
connection with the sale of the Property in Destin, Florida, as described above.
The payment of this fee is deferred  until the Limited  Partners  have  received
their aggregate 8% Preferred Return plus their adjusted  capital  contributions.
Other liabilities,  including  distributions  payable, were $766,537 at December
31, 2003,  as compared to $756,883 at December 31,  2002.  The General  Partners
believe that the  Partnership  has  sufficient  cash on hand to meet its current
working capital needs.

Off-Balance Sheet Transactions

         The Partnership holds interests in various unconsolidated joint venture
and  tenancy  in common  arrangements  that are  accounted  for using the equity
method.  The  General  Partners  do not  believe  that any such  interest  would
constitute an off-balance sheet arrangement requiring any additional disclosures
under the provisions of the Sarbanes-Oxley Act of 2002.

Contractual Obligations, Contingent Liabilities, and Commitments

         The Partnership has no contractual obligations, contingent liabilities,
or commitments as of December 31, 2003.

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

         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 venture agreements 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 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.

         Effective  January  1,  2002,  the  Partnership  adopted  Statement  of
Financial  Accounting  Standards  No.  144  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets."  Accordingly,  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, 2003 to year ended December 31, 2002

         Rental revenues from continuing operations were $2,116,081 for the year
ended  December 31, 2003 as compared to $2,119,722  for the same period of 2002.
Rental revenues from  continuing  operations were slightly lower during the year
ended  December  31, 2003,  as compared to the same period of 2002,  because the
Partnership  stopped recording rental revenues relating to the Property in Stow,
Ohio when the tenant  experienced  financial  difficulties  during 2002.  During
2003, the  Partnership  began receiving  partial  payments of past due rents and
recognized  these  amounts as revenue.  In  September  2003,  the lease for this
Property  was amended to provide a rent  deferral  for two years equal to 50% of
monthly rent. Interest only payments are due in quarterly installments at a rate
of seven  percent per annum for the first 12 months and at a rate of ten percent
per annum for the next 12 months, at which time, all accrued and unpaid interest
and principal amounts are due. All other lease terms remained  unchanged.  As of
March 12, 2004,  the  Partnership  has  continued to receive the reduced  rental
payments  relating  to the  Property.  The  decrease  in  rental  revenues  from
continuing  operations  was  partially  offset  by the  rental  revenues  from a
Property acquired in June 2002.

         During the years ended December 31, 2003 and 2002, the  Partnership did
not record rental  revenues  relating to the Property in  Minnetonka,  Minnesota
because the tenant  rejected the lease in 1998 in  connection  with the tenant's
bankruptcy  proceedings.  The lost  revenues  resulting  from this Property will
continue to have an adverse  effect on the cash from  operations  and results of
operations  of the  Partnership  until the  Partnership  is able to resolve  the
outstanding issues relating to the Property in Minnetonka, Minnesota.

         The Partnership  earned $13,600 in contingent  rental income during the
year ended  December 31, 2003 based on reported  gross sales of the  restaurants
with  leases  that  require the payment of  contingent  rental  income.  No such
amounts were earned during the year ended December 31, 2002.

         The Partnership  earned  $308,312 in income  attributable to net income
earned by unconsolidated joint ventures during the year ended December 31, 2003,
as compared to $308,632 during the same period of 2002.  These amounts  remained
constant,  because there were no changes in the leased Property  portfolio owned
by the joint ventures and the tenancies in common.

         During  2003,   five  lessees  of  the   Partnership,   Golden   Corral
Corporation, Metromedia, Jack in the Box Inc., Carrols Corp., and Chevy's, Inc.,
each contributed  more than ten percent of total rental revenues  (including the
Partnership's  share of total rental revenues from joint ventures and Properties
held as  tenants-in-common  with  affiliates).  As of December 31, 2003,  Golden
Corral  Corporation was the lessee relating to three leases,  Metromedia was the
lessee  relating to two leases,  Carrols Corp.  was the lessee  relating to five
leases,  Jack in the Box Inc.  was the  lessee  relating  to three  leases,  and
Chevy's Inc. was the lessee relating to one lease. It is anticipated  that based
on the minimum rental payments  required by the leases,  these five lessees will
each  continue  to  contribute  more than ten percent of total  rental  revenues
(including the Partnership's  share of total rental revenues from joint ventures
and Properties held as tenants-in-common  with affiliates) in 2004. In addition,
four Restaurant Chains, Golden Corral, Bennigan's, Jack in the Box, and Chevy's,
each accounted for more than ten percent of total rental revenues (including the
Partnership's  share of total rental revenues from joint ventures and Properties
held  as  tenants-in-common  with  affiliates)  during  2003.  In  2004,  it  is
anticipated that these four Restaurant Chains will each contribute more than ten
percent of total rental  revenues  (including the  Partnership's  share of total
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  will  materially
adversely affect the  Partnership's  operating results if the Partnership is not
able to re-lease or sell the Properties in a timely manner.

         During the year ended December 31, 2003, the Partnership earned $18,651
in interest and other  income,  as compared to $5,008  during the same period of
2002.  Interest and other income was higher during 2003 because the  Partnership
collected  and  recognized  as  income   approximately   $5,000  relating  to  a
right-of-way taking for a parcel of land on the San Antonio, Texas Property.

         Operating expenses, including depreciation and amortization expense and
provision for  write-down of assets,  were $612,227 for the year ended  December
31,  2003 as  compared  to  $1,807,203  for the same  period of 2002.  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 and its  estimated  fair value.  Operating  expenses  were
lower during 2003, due to a decrease in property related expenses resulting from
the sale of vacant  Properties.  During 2002, 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 the year ended December 31, 2002,
the Partnership incurred  approximately  $46,200 in rent expense relating to the
ground lease of the Property. In addition, during 2003 and 2002, the Partnership
incurred  property related expenses such as insurance,  repairs and maintenance,
legal fees and real estate taxes  resulting from the vacant  Properties.  During
2002,  the  Partnership  sold three of its vacant  Properties  and did not incur
additional  expenses  relating  to these  Properties  once they were  sold.  The
Partnership  will continue to incur these  expenses  relating to the Property in
Minnetonka,  Minnesota  until the Partnership is able to resolve the outstanding
issues relating to the Property.

         In  addition,  operating  expenses  were  lower  during  the year ended
December  31, 2003 due to a decrease in the costs  incurred  for  administrative
expenses for  servicing the  Partnership  and its  Properties.  The decrease was
partially  offset  by  an  increase  in  depreciation  expense  related  to  the
acquisition of a Property in June 2002.

         As a result of the sale of the On the Border  Property in San  Antonio,
Texas, the Partnership  recognized a loss of approximately  $25,700,  during the
year ended  December 31, 2002.  Because this  Property was  identified  for sale
prior to the January 2002  implementation  of Statement of Financial  Accounting
Standards  No. 144  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets",  the results of  operations  relating to this Property were included as
Income from Continuing Operations in the accompanying financial statements.

         During the year ended December 31, 2002, the Partnership identified for
sale two  Properties  that were  classified  as  Discontinued  Operations in the
accompanying financial statements. Both Properties were vacant prior to 2002. In
March 2003, the Partnership identified for sale its Property in Destin, Florida.
The  Partnership  recognized a net rental loss  (property  related  expenses and
provision  for  write-down  of assets in excess of rental  revenues) of $223,395
during the year ended December 31, 2002,  relating to these Properties.  The net
rental loss was  primarily the result of the  Partnership  recording a provision
for write-down of assets of approximately $322,500 in anticipation of the August
2002  sale of the  Property  in  Raleigh,  North  Carolina.  The  tenant of this
Property  terminated  its lease and vacated the Property in 2000.  The provision
represented  the  difference  between the net carrying value of the Property and
its estimated fair value. The Partnership sold the Boston Market Property in San
Antonio,  Texas in May 2002. Because the Partnership had recorded provisions for
write-down of assets in previous years, no gain or loss was recorded during 2002
relating to the sale of this Property.  In June 2003, the  Partnership  sold the
Property  in Destin,  Florida and  recorded a gain on  disposal of  discontinued
operations of  approximately  $273,900.  The  Partnership  recognized net rental
income (rental  revenues less property  related  expenses) of $75,937 during the
year ended December 31, 2003, relating to this Property.

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

         Rental revenues from continuing operations were $2,119,722 for the year
ended  December 31, 2002 as compared to $2,301,212  for the same period of 2001.
Rental  revenues from  continuing  operations  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 from continuing
operations 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  from  continuing  operations  during 2002 was
partially offset by the rental revenues from the two Properties  acquired during
2002.

         Rental revenues from continuing  operations remained at reduced amounts
during 2002 and 2001, because the Partnership  stopped recording rental revenues
relating to the Property in Stow,  Ohio and stopped  recording  rental  revenues
relating to the Property in Minnetonka, Minnesota, as described above.

         The Partnership  earned  $308,632 in income  attributable to net income
earned by unconsolidated joint ventures during the year ended December 31, 2002,
as  compared  to  $197,013  for the same  period of 2001.  Net income  earned by
unconsolidated  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 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 and other  income was lower 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 $1,807,203 for the year ended December
31,  2002 as  compared  to  $1,490,681  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 and its estimated fair value.

         The increase in operating  expenses during 2002 was partially offset by
lower Property expenses as a result of fewer 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 other 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 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,  as described
above. 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 approximately  $321,200  relating to this Property.  The
provision  represented  the  difference  between the net  carrying  value of the
Property 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.

         The  increase in  operating  expenses  during  2002 was also  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.

         During 2001, the Partnership  recognized  total gains of  approximately
$429,100  as a result  of the  sales  of  three  Properties.  During  2002,  the
Partnership  recognized a loss of approximately  $25,700 relating to the sale of
the On the Border  Property in San Antonio,  Texas.  Because  this  Property was
identified  for sale prior to the January  2002  implementation  of Statement of
Financial  Accounting  Standards  No.  144  "Accounting  for the  Impairment  or
Disposal  of  Long-Lived  Assets",  the results of  operations  relating to this
Property were included as Income from Continuing  Operations in the accompanying
financial statements.

         During the year ended December 31, 2002, the Partnership identified for
sale two  Properties  that were  classified  as  Discontinued  Operations in the
accompanying financial statements. Both Properties were vacant prior to 2002. In
addition,  in March 2003,  the  Partnership  identified for sale its Property in
Destin,  Florida. The Partnership recognized a net rental loss (Property related
expenses and provision for write-down of assets in excess of rental revenues) of
$223,395  and  $286,107  during  the years  ended  December  31,  2002 and 2001,
respectively,  relating to these Properties. The net rental loss during 2002 was
primarily the result of the Partnership  recording a provision for write-down of
assets of approximately  $322,500 in anticipation of the August 2002 sale of the
Property in Raleigh,  North Carolina. The tenant of this Property terminated its
lease and  vacated  the  Property  in 2000.  The net rental loss during 2001 was
primarily the result of the Partnership  recording a provision for write-down of
assets of approximately  $387,100  relating to the Boston Market Property in San
Antonio,  Texas.  The tenant of this Property  filed for bankruptcy and rejected
the lease  related to this  Property in 2000.  The  provisions  represented  the
difference  between the net carrying  value of each  Property and its  estimated
fair value.  The  Partnership  sold the Boston  Market  Property in San Antonio,
Texas  in  May  2002.  Because  the  Partnership  had  recorded  provisions  for
write-down of assets in previous years, no gain or loss was recorded during 2002
relating to the sale of this Property.  In June 2003, the  Partnership  sold the
Property in Destin, Florida, as described above.

         The General Partners continuously  evaluate strategic  alternatives for
the  Partnership,  including  alternatives  to provide  liquidity to the Limited
Partners.

         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,  the Financial  Accounting  Standards  Board  ("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, FIN 46 requires
that a variable  interest entity be consolidated by a company if that company is
subject  to a  majority  risk  of  loss  from  the  variable  interest  entity's
activities or entitled to receive a majority of the entity's residual returns or
both.  Prior to FIN 46, a  company  generally  included  another  entity  in its
consolidated  financial  statements  only if it  controlled  the entity  through
voting interests.  In December 2003, the FASB issued FASB Interpretation No. 46R
("FIN 46R"), to clarify some of the provisions of FIN 46. Under FIN 46R, special
effective date provisions apply to entities that have fully or partially applied
FIN 46  prior  to  issuance  of FIN 46R.  Otherwise,  application  of FIN 46R is
required in  financial  statements  of public  entities  that have  interests in
structures that are commonly referred to as special-purpose entities for periods
ending after December 15, 2003. Application by public entities, other than small
business issuers,  for all other types of variable interest entities is required
in financial statements for periods ending after March 15, 2004. The Partnership
did not fully or partially  apply FIN 46 prior to the issuance of FIN 46R. Also,
the Partnership  does not have interests in structures  commonly  referred to as
special-purpose entities.  Therefore,  application of FIN 46R is required in the
Partnership's  financial statements for periods ending after March 15, 2004. The
General  Partners  believe  adoption  of this  standard  may  result  in  either
consolidation  or  additional  disclosure   requirements  of  the  Partnership's
unconsolidated  joint  ventures,  which are  currently  accounted  for under the
equity method.  However,  such  consolidation  is not expected to  significantly
impact the Partnership's results of operations.


Item 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                  19

Financial Statements:

     Balance Sheets                                                 20

     Statements of Income                                           21

     Statements of Partners' Capital                                22

     Statements of Cash Flows                                    23-24

     Notes to Financial Statements                               25-37





<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,  2003 and 2002,  and the results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2003 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  Standards  No.  144
"Accounting for the Impairment or Disposal of Long-Lived Assets."



/s/PricewaterhouseCoopers LLP


Orlando, Florida
March 24, 2004




<PAGE>



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

                                 BALANCE SHEETS

<TABLE>
<CAPTION>

 <c>
                                                                                         December 31,
                                                                                 2003                    2002
                                                                          -------------------      ------------------
                            ASSETS

  Real estate properties with operating leases, net                             $  17,105,426           $  17,453,524
  Net investment in direct financing leases                                        2,025,517               2,064,258
  Real estate held for sale                                                               --               1,420,626
  Investment in joint ventures                                                     3,163,278               3,185,337
  Cash and cash equivalents                                                        1,647,730                 429,481
  Receivables, less allowance for doubtful accounts of
       $260,198 and $104,228, respectively                                            18,003                     945
  Accrued rental income                                                              502,127                 456,857
  Other assets                                                                        10,406                  10,504
                                                                          -------------------      ------------------

                                                                               $  24,472,487           $  25,021,532
                                                                          ===================      ==================

               LIABILITIES AND PARTNERS' CAPITAL

  Accounts payable and accrued expenses                                          $     4,941             $     4,178
  Real estate taxes payable                                                           13,600                  12,204
  Distributions payable                                                              700,000                 700,000
  Due to related parties                                                              64,833                  17,762
  Rents paid in advance                                                               43,687                  35,840
  Deferred rental income                                                               4,309                   4,661
                                                                          -------------------      ------------------
           Total liabilities                                                         831,370                 774,645


  Partners' capital                                                               23,641,117              24,246,887
                                                                          -------------------      ------------------

                                                                               $  24,472,487           $  25,021,532
                                                                          ===================      ==================
</TABLE>
           See accompanying notes to condensed financial statements.



<PAGE>


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

                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>

 <c>
                                                                                Year Ended December 31,
                                                                      2003                2002               2001
                                                                ------------------   ---------------    ---------------

Revenues:
     Rental income from operating leases                             $  1,932,547      $  1,899,302     $    1,902,763
     Earned income from direct financing leases                           183,534           220,420            398,449
     Contingent rental income                                              13,600                --                 --
     Interest and other income                                             18,651             5,008             18,256
                                                                ------------------   ---------------    ---------------
                                                                        2,148,332         2,124,730          2,319,468
                                                                ------------------   ---------------    ---------------
Expenses:
     General operating and administrative                                 174,183           205,786            271,529
     Property related                                                      52,744           171,374            520,560
     Management fees to related party                                      25,335            25,379             24,943
     State and other taxes                                                  8,653             8,477             22,252
     Depreciation and amortization                                        351,312           343,452            330,158
     Provisions for write-down of assets                                       --         1,052,735            321,239
                                                                ------------------   ---------------    ---------------
                                                                          612,227         1,807,203          1,490,681
                                                                ------------------   ---------------    ---------------

Income before gain (loss) on sale of assets
     and equity in earnings of  unconsolidated
     joint ventures                                                     1,536,105           317,527            828,787

Gain (loss) on sale of assets                                                  --           (25,694  )         429,072

Equity in earnings of unconsolidated joint ventures                       308,312           308,632            197,013
                                                                ------------------   ---------------    ---------------

Income from continuing operations                                       1,844,417           600,465          1,454,872
                                                                ------------------   ---------------    ---------------

Discontinued operations
     Income (loss) from discontinued operations                            75,937          (223,395 )         (286,107  )
     Gain on disposal of discontinued operations                          273,876                --                 --
                                                                ------------------   ---------------    ---------------
                                                                          349,813          (223,395  )        (286,107  )
                                                                ------------------   ---------------    ---------------

Net income                                                          $   2,194,230       $   377,070       $  1,168,765
                                                                ==================   ===============    ===============

Income (loss) per limited partner unit
     Continuing operations                                            $      0.53        $     0.17     $         0.42
     Discontinued operations                                                 0.10             (0.06  )           (0.09  )
                                                                ------------------   ---------------    ---------------
                                                                      $      0.63        $     0.11          $    0.33
                                                                ------------------   ---------------    ---------------

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, 2003, 2002 and 2001
<TABLE>
<CAPTION>

 <c>

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

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

    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

    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

    Distributions to limited partners
       ($0.80 per limited partner unit)              --                  --                  --        (2,800,000 )              --
    Net income                                       --                  --                  --                --         2,194,230
                                        ----------------   -----------------   -----------------   ---------------   ---------------

Balance, December 31, 2003                  $     1,000         $    (6,319 )     $  35,000,000     $ (18,026,493 )   $  10,862,929
                                        ================   =================   =================   ===============   ===============

</TABLE>
                See accompanying notes to financial statements.

<PAGE>



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

     $ (4,190,000 )   $28,301,052


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

       (4,190,000 )    26,669,817


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

       (4,190,000 )    24,246,887


               --      (2,800,000 )
               --       2,194,230
   ---------------   -------------

     $ (4,190,000 )   $23,641,117
   ===============   =============





<page>


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

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

 <c>
                                                                              Year Ended December 31,
                                                                    2003                2002                2001
                                                               ---------------     ----------------    ---------------

Cash Flows from Operating Activities:

Net income                                                       $  2,194,230      $      377,070         $  1,168,765
                                                               ---------------     ----------------    ---------------
Adjustments to reconcile net income to net cash
   provided by operating activities:
      Depreciation                                                    353,774              379,016            376,679
      Amortization of investment in direct
         financing leases                                              38,741               29,296             41,450
      Amortization                                                      3,216                3,221              3,220
      Equity in earnings of unconsolidated joint
         ventures net of distributions                                 18,843               46,210              6,425
      Provision for write-down of assets                                   --            1,375,207            708,377
      Loss (gain) on sale of assets                                  (273,876 )             25,694           (429,072 )
      Decrease (increase) in receivables                              (17,058 )              9,699            (11,003 )
      Increase in accrued rental income                               (45,270 )           (104,347 )         (218,691 )
      Decrease in other assets                                             98                6,225              6,983
      Increase (decrease) in accounts payable
         and accrued expenses and real
         estate taxes payable                                           2,159              (88,803 )           61,038
      Decrease in due to related parties                               (6,929 )             (2,511 )          (32,908 )
      Increase in rents paid in advance                                 7,847               24,399              3,967
      Decrease in deferred rental income                                 (352 )               (318 )             (319 )
                                                               ---------------     ----------------    ---------------
             Total adjustments                                         81,193            1,702,988            516,146
                                                               ---------------     ----------------    ---------------

Net cash provided by operating activities                           2,275,423            2,080,058          1,684,911
                                                               ---------------     ----------------    ---------------

Cash Flows from Investing Activities:
      Decrease (increase) in restricted cash                               --            1,663,401         (1,663,401 )
      Additions to real estate properties with
         operating leases                                                  --           (2,090,604 )               --
      Proceeds from sale of assets                                  1,742,826            1,565,681          4,291,443
      Investment in joint ventures                                         --             (215,191 )       (1,766,420 )
                                                               ---------------     ----------------    ---------------
             Net cash provided by investing activities              1,742,826              923,287            861,622
                                                               ---------------     ----------------    ---------------

Cash Flows from Financing Activities:
      Proceeds from loans from corporate general partner              650,000              875,000             75,000
      Repayment of loans from corporate general  partner             (650,000 )           (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                1,218,249              203,345           (253,467 )

Cash and cash equivalents at beginning of year                        429,481              226,136            479,603
                                                               ---------------     ----------------    ---------------

Cash and cash equivalents at end of year                         $  1,647,730          $   429,481        $   226,136
                                                               ===============     ================    ===============

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


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

                      STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>

 <c>
                                                                              Year Ended December 31,
                                                                    2003                2002                2001
                                                               ---------------     ----------------    ---------------

Supplemental Schedule of Non-Cash Investing
   and Financing Activities:

      Deferred real estate disposition fee incurred
         and unpaid at the end of year                            $    54,000            $      --          $      --
                                                               ===============     ================    ===============

      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, 2003, 2002, and 2001


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.

         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, 2003, 2002, and 2001, tenants paid, or are
         expected  to  pay,   directly  to  real   estate   taxing   authorities
         approximately  $367,900,  $382,200,  and  $364,000,   respectively,  in
         estimated  real  estate  taxes in  accordance  with the  terms of their
         leases.

         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 operating or
         the direct financing methods.

               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 so as to produce a constant periodic rent over the lease
               term commencing on the date the property is placed in service.

               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.



<PAGE>



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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


1.       Significant Accounting Policies - Continued

         Accrued  rental  income  represents  the  aggregate  amount  of  income
         recognized  on a  straight-line  basis in  excess of  scheduled  rental
         payments to date. 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 or  deferred  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.

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

         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.





<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


1.       Significant Accounting Policies - Continued

         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 2003  presentation.
         These  reclassifications  had no effect on total partners' capital, net
         income or cash flows.

         Statement of Financial Accounting Standards No. 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 estimated  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

                  Years Ended December 31, 2003, 2002, and 2001


1.       Significant Accounting Policies - Continued

         FASB Interpretation No. 46 - In January 2003, the Financial  Accounting
         Standards Board ("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,  FIN 46 requires
         that a variable  interest  entity be  consolidated by a company if that
         company  is  subject  to a  majority  risk of loss  from  the  variable
         interest  entity's  activities or entitled to receive a majority of the
         entity's residual returns or both. Prior to FIN 46, a company generally
         included another entity in its consolidated  financial  statements only
         if it controlled the entity through voting interests. In December 2003,
         the FASB issued FASB  Interpretation  No. 46R ("FIN  46R"),  to clarify
         some of the provisions of FIN 46. Under FIN 46R, special effective date
         provisions  apply to entities that have fully or partially  applied FIN
         46 prior to issuance of FIN 46R.  Otherwise,  application of FIN 46R is
         required in financial statements of public entities that have interests
         in structures that are commonly referred to as special-purpose entities
         for periods  ending  after  December 15,  2003.  Application  by public
         entities,  other than small  business  issuers,  for all other types of
         variable  interest  entities is required in  financial  statements  for
         periods ending after March 15, 2004. The  Partnership  did not fully or
         partially  apply FIN 46 prior to the  issuance  of FIN 46R.  Also,  the
         Partnership does not have interests in structures  commonly referred to
         as  special-purpose  entities.  Therefore,  application  of FIN  46R is
         required in the Partnership's  financial  statements for periods ending
         after March 15, 2004.  The General  Partners  believe  adoption of this
         standard may result in either  consolidation  or additional  disclosure
         requirements of the Partnership's  unconsolidated joint ventures, which
         are currently  accounted  for under the equity  method.  However,  such
         consolidation is not expected to significantly impact the Partnership's
         results of operations.

2.       Real Estate Properties with Operating Leases

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

 <c>
                                                                    2003                  2002
                                                             --------------------   ------------------

                 Land                                             $    8,681,837        $   8,681,837
                 Buildings                                            10,360,737           10,360,737
                                                             --------------------   ------------------
                                                                      19,042,574           19,042,574
                 Less accumulated depreciation                        (1,937,148 )         (1,589,050 )
                                                             --------------------   ------------------

                                                                  $   17,105,426        $  17,453,524
                                                             ====================   ==================
</TABLE>

         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,  with CNL  Income  Fund X, Ltd.,  an
         affiliate of the general  partners.  The remaining  net sales  proceeds
         from the Santa Rosa  property  were used in  January  2002 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

                  Years Ended December 31, 2003, 2002, and 2001


2.       Real Estate Properties with Operating Leases - Continued

         In May 2002,  the  Partnership  sold the On the Border  property in San
         Antonio,  Texas to a third  party and  received  net sales  proceeds of
         approximately  $470,300,  resulting in a loss of approximately $25,700.
         The  Partnership  has  recorded  provisions  for  write-down  of assets
         relating to this property in previous  years.  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.

         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 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, 2003:

                   2004                               $     1,937,147
                   2005                                     1,937,147
                   2006                                     1,937,147
                   2007                                     1,983,520
                   2008                                     2,034,538
                   Thereafter                              13,943,364
                                                      ----------------

                                                         $ 23,772,863
                                                      ================

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>

 <c>
                                                                             2003                  2002
                                                                       -----------------     -----------------

                   Minimum lease payments
                        receivable                                         $  3,838,016          $  4,152,883
                   Estimated residual values                                  1,054,369             1,054,369
                   Less unearned income                                      (2,866,868 )          (3,142,994 )
                                                                       -----------------     -----------------

                   Net investment in direct
                        financing leases                                   $  2,025,517          $  2,064,258
                                                                       =================     =================
</TABLE>

         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 and its estimated  fair
         value.






<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


3.       Net Investment in Direct Financing Leases - Continued

         The  following  is a schedule of future  minimum  lease  payments to be
         received on direct financing leases at December 31, 2003:

                      2004                                 $   314,868
                      2005                                     314,868
                      2006                                     314,868
                      2007                                     321,472
                      2008                                     330,717
                      Thereafter                             2,241,223
                                                       ----------------

                                                          $  3,838,016
                                                       ================

4.       Investment in Joint Ventures

         The  Partnership  has a 39.93%,  a 57.2%,  and a 19.78% interest in the
         profits and losses of Columbus  Joint  Venture,  CNL  Portsmouth  Joint
         Venture, and TGIF Pittsburgh Joint Venture,  respectively. In addition,
         the  Partnership  has  an  80.7%  interest  in a  property  in  Denver,
         Colorado, as tenants-in-common.  The remaining interests in these joint
         ventures  and the  property  held as  tenants  in  common  are  held by
         affiliates of the Partnership which have the same general partners.

         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. 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.  The
         Partnership  contributed  approximately $205,700 for an 18.35% interest
         in this property.

         As of December 31, 2003,  Columbus Joint Venture,  CNL Portsmouth Joint
         Venture, and TGIF Pittsburgh Joint Venture each owned one property.  In
         addition, as of December 31, 2003, 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  one  property.  The
         following presents the combined,  condensed  financial  information for
         these joint ventures and tenancy in common arrangements at:
<TABLE>
<CAPTION>

 <c>
                                                                  December 31,                    December 31,
                                                                      2003                            2002
                                                                 ---------------                 ----------------

        Real    estate    properties    with
            operating leases, net                                  $  6,595,118                    $   6,729,458
        Net investment in direct financing
            lease                                                       303,930                          308,883
        Cash                                                             25,780                            5,795
        Accrued rental income                                           298,005                          212,472
        Other assets                                                         --                              122
        Liabilities                                                      30,627                           11,583
        Partners' Capital                                             7,192,206                        7,245,147
</TABLE>



<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


4.       Investment in Joint Ventures - Continued

<TABLE>
<CAPTION>

 <c>
                                                         Year Ended December 31,
                                                 2003            2002             2001
                                            --------------- --------------- -----------------

          Revenues                              $  829,433      $  827,363        $  580,528
          Expenses                                (138,791 )      (138,076 )         (95,310 )
                                            --------------- --------------- -----------------

          Net Income                            $  690,642      $  689,287        $  485,218
                                            =============== =============== =================
</TABLE>

         The Partnership  recognized income of $308,312,  $308,632, and $197,013
         during the years ended December 31, 2003, 2002 and 2001,  respectively,
         from these joint ventures and tenancy in common arrangements.

5.       Receivables

         During the year ended  December 31, 2003,  the  Partnership  accepted a
         promissory  note from the former tenant of the property in Stow,  Ohio,
         in  the  amount  of  $224,623  representing  real  estate  taxes  to be
         reimbursed to the  Partnership  and past due rental and other  amounts,
         which had been included in receivables for financial statement purposes
         and for which the Partnership had established an allowance for doubtful
         accounts in previous years. Interest only payments are due in quarterly
         installments  at a rate of seven  percent  per  annum  for the first 12
         months and at a rate of ten  percent  per annum for the next 12 months,
         at which time,  all accrued and unpaid  interest and principal  amounts
         are  due.  Due to the  uncertainty  of  collection  of  the  note,  the
         Partnership  established  an  allowance  for doubtful  accounts.  As of
         December 31, 2003,  the balance in the allowance for doubtful  accounts
         relating  to this  promissory  note  was  $218,520,  including  accrued
         interest of $1,398, which is equal to the total balance.

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  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.



<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


6.       Allocations and Distributions - Continued

         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, 2003,  2002,  and
         2001.

         During each of the years ended  December 31, 2003,  2002, and 2001, the
         Partnership   declared   distributions   to  the  limited  partners  of
         $2,800,000.  No distributions have been made to the general partners to
         date.






<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001

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>

 <c>
                                                                   2003             2002              2001
                                                               --------------   --------------   ---------------

             Net income for financial reporting purposes        $  2,194,230       $  377,070       $ 1,168,765

             Effect of timing differences relating to
                depreciation                                          44,244           39,094            (2,398 )

             Effect of timing differences relating to
                amortization                                          (2,748 )         (2,744 )          (5,249 )

             Effect of timing differences relating to equity
                in earnings of unconsolidated  joint venture         (12,152 )        (28,678 )         (20,397 )

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

             Direct financing leases recorded as operating
                leases for tax reporting purposes                     38,741           29,295            41,450

             Effect of timing differences relating to
                provision for doubtful accounts                      155,970           29,027           (48,792 )

             Effect of timing differences relating to
                gains/losses on sales of real estate
                properties                                           (36,309 )     (1,373,802 )        (742,359 )

             Accrued rental income                                   (37,914 )        (96,988 )        (169,007 )

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

             Deferred rental income                                   (7,708 )         (7,677 )         (50,166 )

             Rents paid in advance                                     7,847           24,399             3,967

             Other                                                      (316 )             --               165
                                                               --------------   --------------   ---------------

             Net income for federal income tax purposes         $  2,343,885       $  278,793        $  969,766
                                                               ==============   ==============   ===============
</TABLE>

8.       Discontinued Operations

         During 2002,  the  Partnership  identified  and sold the Boston  Market
         properties  in San  Antonio,  Texas and  Raleigh,  North  Carolina  and
         received net sales  proceeds of  approximately  $1,095,400.  No gain or
         loss was recorded on the sales because the  Partnership  had recorded a
         provision for  write-down of assets of  approximately  $322,500  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 during the year ended
         December 31, 2001,  relating to the property in San Antonio,  Texas. In
         addition, during 2003, the Partnership identified and sold its property
         in Destin,  Florida and  received net sales  proceeds of  approximately
         $1,742,800,  resulting in a gain on disposal of discontinued operations
         of approximately  $273,900.  The financial results for these properties
         are reflected as Discontinued  Operations in the accompanying financial
         statements.


<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


8.       Discontinued Operations - Continued

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

 <c>
                                                                    Year Ended December 31,
                                                              2003            2002            2001
                                                         ---------------  -------------  ---------------

               Rental revenues                               $   82,119     $  164,302       $  164,802
               Expenses                                          (6,182 )      (65,225 )        (63,771 )
               Provision for write-down of assets                    --       (322,472 )       (387,138 )
                                                         ---------------  -------------  ---------------
               Income (loss) from discontinued
                   operations                                $   75,937     $ (223,395 )    $  (286,107 )
                                                         ===============  =============  ===============
</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 Restaurant
         Properties,  Inc. (formerly CNL American  Properties Fund, Inc.) 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.  (the  "Advisor").  The  Advisor  is a wholly  owned
         subsidiary  of  CNL  Restaurant   Properties,   Inc.  ("CNL-RP").   The
         individual general partners are stockholders and directors of CNL-RP.

         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, 2003,  2002, and 2001, the
         Partnership incurred $25,335, $25,379, and $24,943,  respectively,  for
         such management fees.

         The Advisor is also entitled 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.  During the year ended  December  31,
         2003, the  Partnership  incurred a deferred,  subordinated  real estate
         disposition fee of $54,000 as a result of the Partnership's sale of the
         property in Destin, Florida.

         During  the  years  ended  December  31,  2003,  2002,  and  2001,  the
         Partnership's affiliates provided various accounting and 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, 2003,  2002, and 2001, the
         Partnership incurred $105,377,  $142,170,  and $207,702,  respectively,
         for such services.


<PAGE>


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

                         NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


9.       Related Party Transactions - Continued

         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,  2003 and 2002
         totaled $64,833 and $17,762, respectively.

10.      Concentration of Credit Risk

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

 <c>
                                                             2003                2002                2001
                                                        ----------------    ----------------    ---------------

               Golden Corral Corporation                    $   587,773          $  657,612          $ 657,612
               Metromedia Restaurant
                    Group  (S&A Properties
                    Corporation and Steak
                    and Ale of Colorado,
                    Inc.)                                       450,924             450,090            332,616
               Jack in the Box Inc.                             384,779             385,436            492,127
               Carrols Corp. and Texas Taco
                    Cabana, LP (under common
                    control of Carrols Corp.)                   325,990                 N/A                N/A
               Chevy's, Inc.                                    261,885             268,786                N/A
               IHOP Properties, Inc.                                N/A                 N/A            280,171
</TABLE>

         In addition,  the following  schedule  presents  total rental  revenues
         (including the Partnership's  share of total 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 total rental revenues for each of the years ended December 31:
<TABLE>
<CAPTION>

 <c>
                                                            2003                2002                 2001
                                                       ----------------    ----------------     ---------------

              Golden Corral Buffet and Grill                $  587,773          $  657,612           $ 657,612
              Bennigan's                                       450,924             450,090             332,616
              Jack in the Box                                  384,779             385,436             492,127
              Chevy's                                          261,885             268,786                 N/A
              IHOP                                                 N/A                 N/A             280,171
</TABLE>



<PAGE>


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

                         NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


10.      Concentration of Credit Risk - Continued

         In October 2003, Chevy's, Inc., a tenant of the Partnership,  filed for
         Chapter 11 bankruptcy  protection.  Chevy's,  Inc.  leases one property
         from the Partnership.  As of March 12, 2004, Chevy's,  Inc. had neither
         rejected nor affirmed the lease related to this property.

         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 will  significantly  impact the operating results of
         the  Partnership  if  the  Partnership  is not  able  to  re-lease  the
         properties in a timely manner.

11.      Selected Quarterly Financial Data

         The following table presents  selected  unaudited  quarterly  financial
         data for each full quarter during the years ended December 31, 2003 and
         2002.
<TABLE>
<CAPTION>

 <c>
                    2003 Quarter               First          Second          Third         Fourth           Year
          --------------------------------- ------------   --------------  ------------  -------------   -------------

          Continuing Operations (1):
               Revenues                       $ 527,398       $  528,604     $ 540,939      $ 551,391      $2,148,332
               Equity in earnings of
                  unconsolidated joint
                  ventures                       77,726           77,586        75,560         77,440         308,312
               Income from
                 continuing operations          434,004          462,391       467,912        480,110       1,844,417

          Discontinued Operations (1):
               Revenues                          41,075           41,044            --             --          82,119
               Income from and gain on
                 disposal of discontinued
                 operations                      35,237          314,576            --             --         349,813

          Net income                            469,241          776,967       467,912        480,110       2,194,230

          Income per limited partner unit:

          Continuing operations                $   0.12        $    0.13      $   0.13       $   0.15        $   0.53
          Discontinued operations                  0.01             0.09            --             --            0.10
                                            ------------   --------------  ------------  -------------   -------------
                                               $   0.13        $    0.22      $   0.13       $   0.15        $   0.63
                                            ============   ==============  ============  =============   =============
</TABLE>



<PAGE>


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

                         NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2003, 2002, and 2001


11.      Selected Quarterly Financial Data - Continued
<TABLE>
<CAPTION>

 <C>
                    2002 Quarter               First          Second          Third         Fourth           Year
          --------------------------------- ------------   --------------  ------------  -------------   -------------

          Continuing Operations (1):
               Revenues                       $ 548,278       $  517,584     $ 546,635      $ 512,233      $2,124,730
               Equity in earnings of
                  unconsolidated joint
                  ventures                       77,766           78,055        77,652         75,159         308,632
               Income (loss) from
                 continuing operations (2)      399,977          401,081       465,849       (666,442 )       600,465

          Discontinued Operations (1):
               Revenues                          41,075           41,075        41,076         41,076         164,302
               Income (loss) from
                 discontinued operations         25,480         (305,518 )      25,214         31,429        (223,395 )

          Net income (loss)                     425,457           95,563       491,063       (635,013 )       377,070

          Income (loss) per limited partner
             unit:

          Continuing operations                $   0.11        $    0.12      $   0.13      $   (0.19 )      $   0.17
          Discontinued operations                  0.01            (0.09 )        0.01           0.01           (0.06 )
                                            ------------   --------------  ------------  -------------   -------------
                                               $   0.12        $    0.03      $   0.14      $   (0.18 )      $   0.11
                                            ============   ==============  ============  =============   =============
</TABLE>


(1)      Certain items in the quarterly financial data have been reclassified to
         conform to the 2003 presentation.  This  reclassification had no effect
         on net income.  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.  The  results of  operations
         relating  to  properties  that  were  either  identified  for  sale and
         disposed of  subsequent  to January 1, 2002 or were  classified as held
         for  sale  as  of  December  31,  2003  are  reported  as  discontinued
         operations for all periods presented.

(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.

12.      Subsequent Event

         In February  2004,  American  Hospitality  Concepts,  Inc.,  the parent
         company  of  Ground  Round,  Inc.,  filed  for  Chapter  11  bankruptcy
         protection.   Ground   Round,   Inc.   leases  one  property  from  the
         Partnership.  As of March 12,  2004,  Ground  Round,  Inc.  had neither
         rejected nor affirmed the lease related to this property.



<PAGE>


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

         None.


Item 9A. Controls and Procedures

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

         There was no change in internal  control over financial  reporting that
occurred during the most recent fiscal quarter that has materially affected,  or
is  reasonably  likely to materially  affect,  internal  control over  financial
reporting.


                                    PART III


Item 10. Director 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-RP,  CCM, CNL Financial  Group,  Inc. and their
affiliates, all of which are affiliates of the General Partners.

         James M. Seneff, Jr., age 57. 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 CNL-RP, a public,  unlisted real
estate investment trust since 1994. Mr. Seneff served as Chief Executive Officer
of CNL-RP from 1994 through August 1999 and as Co-Chief  Executive  Officer from
December 2000 through September 2003. Mr. Seneff served as Chairman of the Board
and  Chief  Executive  Officer  of  CNL  Fund  Advisors,   Inc.,   formerly  the
Partnership's  advisor,  from  its  inception  in 1990  until it  merged  with a
wholly-owned  subsidiary  of CNL-RP in  September  1999,  and in June 2000,  was
re-elected  to those  positions of CNL Fund  Advisors,  Inc. CNL Fund  Advisors,
Inc.,  formerly CNL  Institutional  Advisors,  Inc., is a registered  investment
advisor. Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the parent
company of CNL Financial 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 1973. CNL Financial Group, Inc. is and 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 and Chairman of the Board of CNL
Hospitality  Properties,  Inc., a public, unlisted real estate investment trust;
and served as Chief Executive Officer of CNL Hospitality  Properties,  Inc. from
its inception in 1997 until 2003 and served as Co-Chief  Executive  Officer from
February 2003 until May 1, 2003.  Mr. Seneff has served as Chairman of the Board
of CNL Hospitality Corp., the advisor to CNL Hospitality Properties, Inc., since
its inception in 1997.  Mr. Seneff also served as Chief  Executive  Officer from
its inception in 1997 through  February 2003,  and currently  serves as Co-Chief
Executive Officer of CNL Hospitality Corp. Mr. Seneff has served as Director and
Chairman  of the Board of CNL  Retirement  Corp.  since 1997 and served as Chief
Executive Officer of CNL Retirement Corp. from 1997 through 2003. CNL Retirement
Corp. is the advisor to CNL Retirement Properties, Inc., a public, unlisted real
estate  investment trust. Mr. Seneff has also served as Director and Chairman of
the Board of Commercial Net Lease Realty,  Inc., a public real estate investment
trust  that is listed on the New York Stock  Exchange,  since 1992 and served as
Chief Executive  Officer of Commercial Net Lease Realty,  Inc. from 1992 through
February 2004. Mr. Seneff has served as a Director,  Chairman of the Board,  and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979; CNL
Investment  Company  since  1990;  and  CNL  Institutional  Advisors,   Inc.,  a
registered  investment  advisor for pension  plans,  since 1990.  Mr. Seneff has
served as Chairman of the Board and Chief  Executive  Officer of CNL  Commercial
Finance,  Inc.  since 2000.  Mr.  Seneff also serves as Chairman of the Board of
CNLBank, 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 the
Florida  state  retirement  plan.  Mr.  Seneff  received  his degree in Business
Administration from Florida State University in 1968.

         Robert A.  Bourne,  age 56. 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 has
served as a Director and Vice  Chairman of the Board of CNL-RP  since 1994.  Mr.
Bourne also served as President of CNL-RP from 1994  through  February  1999 and
served as Treasurer  from  February  1999 through  August 1999 and from May 1994
through December 1994. Mr. Bourne served in various executive positions with CNL
Fund Advisors, Inc. prior to its merger with a wholly-owned subsidiary of CNL-RP
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. Mr. Bourne serves as Director,  Vice Chairman of the Board
and  Treasurer  and from  1997  until  June  2002  served  as  President  of CNL
Hospitality  Properties,  Inc. and as Director,  President  and Treasurer of CNL
Hospitality  Corp.  Mr.  Bourne  also serves as Director  and  Treasurer  of CNL
Retirement  Properties,  Inc.  and as Director and  Treasurer of CNL  Retirement
Corp. Mr. Bourne serves as a Director of CNLBank.  Mr. Bourne has also 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. Mr. Bourne 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. 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 48. Mr. McWilliams has served as President of
CNL-RP since May 2001 and as Chief  Executive  Officer of CNL-RP since September
2003.  Mr.  McWilliams  served as  Co-Chief  Executive  Officer  of CNL-RP  from
December 2000 through  September 2003 and served as Chief Executive Officer from
September 1999 through  December 2000. Mr.  McWilliams  also served as President
and Chief  Executive  Officer of CNL  Franchise  Network  Corp.,  a wholly owned
subsidiary  of CNL-RP  since  August 2002 and served as President of CNL-RP from
February 1999 until  September  1999 and as Executive  Vice  President of CNL-RP
from 1997 through  February  1999.  Mr.  McWilliams  served as an Executive Vice
President of CNL  Financial  Group,  Inc. from the time he joined the company in
April 1997 until September 1999. 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  CNL-RP 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  40.  Mr.  Shackelford  was  promoted  to
Executive  Vice  President  and Chief  Operating  Officer of CNL-RP in September
2003. Mr.  Shackelford has also served as Chief Financial  Officer since January
1997.  He served as Senior Vice  President  of CNL-RP from  January 1997 through
July 2000, when he was promoted to Executive Vice President. Mr. Shackelford has
also served as Secretary and Treasurer of CNL-RP 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.

         Thomas Arasi, age 46. Mr. Arasi has served as President of CCM since it
was formed in July 2003 to provide  strategic  advisory  services to the General
Partners. He has served in various consulting capacities to CNL Hospitality Corp
and other CNL affiliates  since January 2003. Since November 2001 he has been an
independent  consultant  working  for a  variety  of  operating  and  investment
companies  in the  hospitality  industry.  Until  October  2001,  Mr.  Arasi was
President & Chief Executive  Officer,  and a member of the Board of Directors of
Lodgian,  Inc., a New York Stock  Exchange  traded  company,  one of the largest
independent hotel  owner/operators in North America, with hotel properties under
most brand names  including  Marriott,  Courtyard by Marriott,  Fairfield Inn by
Marriott,  Crowne  Plaza,  Holiday Inn,  Hilton,  and  Radisson.  From June 1997
through  November 2000,  Mr. Arasi was a member of the Management  Committee and
held  several top  operating  positions  with Bass Hotels & Resorts,  one of the
leading international owners, operators and franchisors of hotels, most recently
serving as President, Bass Hotels & Resort--The Americas. Mr. Arasi was formerly
President of Tishman  Hotel  Corporation,  Vice  President of Salomon  Brothers,
Inc.,  in New York,  Tokyo and Los Angeles  and held  positions  with  Sheraton,
Westin and HVS  International.  Mr. Arasi  graduated from Cornell  University in
January  1981,  where he received a  Bachelor's  degree in Hotel and  Restaurant
Administration.

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 2003.

Code of Business Conduct

         The  Partnership  does not have  employees  and,  accordingly,  has not
adopted a code of business  conduct  applicable  exclusively to the Partnership.
However,  employees of the General Partners or their  affiliates,  including the
individual  General Partners,  are bound by the Code of Business Conduct adopted
November 11, 2003 by CNL Holdings, Inc. Separately, the employees of the Advisor
are bound by the similar  Code of  Business  Conduct  adopted by CNL  Restaurant
Properties,  Inc. Each of these codes of business conduct will be made available
to any person who writes the Partnership requesting a copy.

Audit Committee Financial Expert

         Due to its organization as a limited partnership,  the Partnership does
not  have  an  audit   committee  that  is  responsible   for   supervising  the
Partnership's  relationship with its independent auditors.  For the Partnership,
this role is performed by the General Partners. Based on his previous service as
the principal  financial officer of companies with businesses similar to that of
the  Partnership,  Robert  A.  Bourne,  one of the  General  Partners,  has  the
requisite  experience to be considered an "audit committee  financial expert" as
defined  in  the  rules  under  the  Securities  Exchange  Act of  1934,  if the
Partnership  had an audit  committee.  As a General  Partner,  Mr. Bourne is not
independent of the Partnership.


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 and
          Related Stockholder Matters

         As of March 12,  2004,  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 12, 2004,  the beneficial
ownership interests of the General Partners in the Registrant.

<TABLE>
<CAPTION>
<S> <C>
                                                                            Amount and Nature of
         Title of Class                          Name of Partner            Beneficial Ownership         Percent of Class
---------------------------------            -------------------------    --------------------------     -----------------

General Partnership Interests                James M. Seneff, Jr.                                             45%
                                             Robert A. Bourne                                                 45%
                                             CNL Realty Corporation                                           10%
                                                                                                         ---------------
                                                                                                             100%
                                                                                                         ===============
</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, 2003,  exclusive of any  distributions  to which the General
Partners or their affiliates may be entitled in the event they purchase Units.
<TABLE>
<CAPTION>

 <c>
                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2003
---------------------------------      --------------------------------------      ------------------------------

Reimbursement  to affiliates for       Operating  expenses are reimbursed at       Accounting   and
operating expenses                     the  lower  of  cost  or  90%  of the       administrative     services:
                                       prevailing  rate at which  comparable       $105,377
                                       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       $25,335
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.




<PAGE>



                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2003
---------------------------------      --------------------------------------      ------------------------------

Deferred,    subordinated   real       A deferred,  subordinated real estate       $54,000
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>

<PAGE>



Item 14.  Principal Accountant Fees and Services

         The  following  table  outlines  the only fees paid or  accrued  by the
Partnership  for the audit  and other  services  provided  by the  Partnership's
independent  certified public accountants,  PricewaterhouseCoopers  LLP, for the
years ended December 31:


                                            2003                   2002
                                     -------------------    -------------------

Audit Fees (1)                             $     14,012           $     12,200
Tax Fees (2)                                      3,621                  6,139
                                     -------------------    -------------------

     Total                                 $     17,633           $     18,339
                                     ===================    ===================



(1)      Audit  services  of  PricewaterhouseCoopers   LLP  for  2003  and  2002
         consisted  of  the  examination  of  the  financial  statements  of the
         Partnership and quarterly review of financial statements.

(2)      Tax Fees relates to tax consulting and compliance services.

         Each of the  non-audit  services  described  above was  approved by the
General  Partners.  Due  to  its  organization  as a  limited  partnership,  the
Partnership does not have an audit committee.






<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

            Report of Independent Certified Public Accountants

            Balance Sheets at December 31, 2003 and 2002

            Statements  of Income for the years ended  December 31, 2003,  2002,
            and 2001

            Statements  of  Partners'  Capital for the years ended  December 31,
            2003, 2002, and 2001

            Statements  of Cash Flows for the years  ended  December  31,  2003,
            2002, and 2001

            Notes to Financial Statements

    2.  Financial Statement Schedules

            Schedule II - Valuation and Qualifying  Accounts for the years ended
            December 31, 2003, 2002, and 2001

            Schedule III - Real Estate and Accumulated  Depreciation at December
            31, 2003

            Notes to Schedule III - Real Estate and Accumulated  Depreciation at
            December 31, 2003

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

    3.  Exhibits

            **3.1  Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income  Fund  XVIII,  Ltd.  (Filed  as  Exhibit  3.2  to  the
                   Registrant's   Registration   Statement  on  Form  S-11,  No.
                   33-90998-01, 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.)

            **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.)

              31.1 Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

              31.2 Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

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

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

(b) The  Registrant  filed no reports  on Form 8-K during the period  October 1,
    2003 through December 31, 2003.



**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 22nd day of
March, 2004.

                                             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>

 <c>
               Signature                                  Title                                  Date



/s/ Robert A. Bourne                     President,   Treasurer   and   Director            March 22, 2004
------------------------------------     (Principal Financial and Accounting
Robert A. Bourne                         (Officer)


/s/ James M. Seneff, Jr.                 Chief  Executive  Officer and  Director            March 22, 2004
------------------------------------     (Principal Executive Officer)
James M. Seneff, Jr.
</TABLE>






<PAGE>


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

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                  Years Ended December 31, 2003, 2002, and 2001

<TABLE>
<CAPTION>

 <c>
                                                             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
----------    -----------------   --------------  ---------------  ----------------    -------------     ------------  ------------

  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
                                  ==============  ===============  ================    =============     ============  ============

  2003        Allowance for
                  doubtful
                  accounts (a)        $ 104,228         $     --        $  187,036 (b)      $    -- (c)     $ 31,066     $ 260,198
                                  ==============  ===============  ================    =============     ============  ============
</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, 2003
<TABLE>
<CAPTION>

 <c>

                                                                      Costs Capitalized
                                                                        Subsequent To           Net Amount at Which
                                                   Initial Cost          Acquisition         Carried at Close of Period (c)
                                            -----------------------  --------------------- ---------------------------------------
                              Encum-                  Buildings and  Improve-    Carrying                 Buildings and
                             brances          Land     Improvements   ments      Costs      Land        Improvements     Total
                            -----------     ---------  ------------  ----------- --------  ----------   ------------  ------------
Properties the Partnership
  has Invested in Under
  Operating Leases:

     Arby's Restaurant:
       Lexington, North Carolina-           $210,977             -     $426,982         -      $210,977       $426,982      $637,959

     Bennigan's Restaurant:
       Sunrise, Florida         -          1,147,704       925,086            -         -     1,147,704        925,086     2,072,790

     Boston Market Restaurants:
       Minnetonka, Minnesota (i)-            574,766             -       25,792 (h)     -       403,092              -       403,092

     Burger King Restaurant:
       Kinston, North Carolina  -            262,498       663,421            -         -       262,498        663,421       925,919

     Chevy's Fresh Mex Restaurant:
       Mesa, Arizona            -          1,029,236     1,598,376            -         -     1,029,236      1,598,376     2,627,612

     Golden Corral Buffet
       and Grill Restaurants:
           Houston, Texas       -            889,003             -      844,282         -       889,003        844,282     1,733,285
           Galveston, Texas     -            687,946             -      836,386         -       687,946        836,386     1,524,332
           Elizabethtown, Kentuc-y           488,945             -    1,045,207         -       488,945      1,045,207     1,534,152

     Ground Round Restaurant:
       Rochester, New York      -            525,891       582,882            -         -       525,891        582,882     1,108,773

     Jack in the Box Restaurants:
       Centerville, Texas       -            261,913             -      543,079         -       261,913        543,079       804,992
       Echo Park, California    -            674,648             -      659,359         -       674,648        659,359     1,334,007
       Houston, Texas           -            778,707             -      589,840         -       778,707        589,840     1,368,547

     NI's Interational Buffet
       Restaurant:
           Stow, Ohio (l)       -            489,799             -            -         -       222,131             (g)      222,131

     Taco Cabana Restaurants:
       Houston, Texas (n)       -            524,910       669,154            -         -       524,910       $669,154     1,194,064
       San Antonio, Texas (n)   -            352,699       543,841            -         -       352,699       $543,841       896,540

     Wendy's Restaurant:
       Sparta, Tennessee        -            221,537             -      432,842         -       221,537        432,842       654,379
                                        -------------  ------------  -----------  --------  ------------   ------------  -----------

                                          $9,121,179    $4,982,760   $5,403,769         -    $8,681,837    $10,360,737   $19,042,574
                                        =============  ============  ===========  ========  ============   ============  ===========

Properties the Partnership
    Invested in Under
    Direct Financing Leases:

     IHOP Restaurants:
         Bridgeview, Illinois   -            354,227     1,151,199            -         -            (f)            (f)          (f)

     NI's Interational Buffet
       Restaurant:
             Stow, Ohio (l)     -                  -     1,280,985            -         -            (f)            (f)          (f)
                                         -----------    ----------   -----------  --------  ------------

                                            $354,227    $2,432,184            -         -             -
                                        =============  ============  ===========  ========  ============
</TABLE>


<page>



                                   Life on Which
                                   Depreciation in
                 Date               Latest Income
  Accumulated  of Con-   Date       Statement is
Depreciation struction  Acquired     Computed
-----------  -------    --------    -------------





      $28,282    1997     07/97          (m)


      170,870    1982     06/98          (b)


            -    1997     04/97          (k)


      155,000    1994     12/96          (b)


      319,783    1994     12/97          (b)



      189,942    1997     12/96          (b)
      184,509    1997     01/97          (b)
      215,850    1997     05/97          (b)


      120,418    1981     10/97          (b)


      121,265    1997     01/97          (b)
      143,094    1997     01/97          (b)
      123,304    1997     05/97          (b)



            -    1997     04/97          (d)


       44,613    1990     1/02           (b)
       28,708    1994     6/02           (b)


       91,510    1997     04/97          (b)
-  -------------

   $1,937,148
=  ===========






)          (e)   1972     07/97          (e)



)          (d)   1997     04/97          (d)








<page>



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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2003


(a)      Transactions in real estate and accumulated depreciation are summarized
         below.  The  balances  in 2003,  2002,  and 2001 have been  adjusted to
         reflect  the   reclassification   of   properties   accounted   for  as
         discontinued operations.
<TABLE>
<CAPTION>

 <c>
                                                                                              Accumulated
                                                                              Cost            Depreciation
                                                                         ----------------   -------------------
            Properties the Partnership has Invested in Under
              Operating Leases:

                 Balance, December 31, 2000                                 $ 20,199,653        $  1,092,859
                 Provision for write-down of assets (j)                         (321,239 )                --
                 Disposition                                                  (2,551,561 )          (132,780 )
                 Depreciation expense                                                 --             326,938
                                                                         ----------------   -----------------

                 Balance, December 31, 2001                                   17,326,853           1,287,017
                 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                                                 --             340,231
                                                                         ----------------   -----------------

                 Balance, December 31, 2002                                   19,042,574           1,589,050
                 Depreciation expense                                                 --             348,098
                                                                         ----------------   -----------------

                 Balance, December 31, 2003                                 $ 19,042,574        $  1,937,148
                                                                         ================   =================
</TABLE>



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

(c)      As of December 31, 2003, the aggregate cost of the Partnership's wholly
         owned  Properties was $20,136,177 for federal income tax purposes.  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.



<PAGE>



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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2003


(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 its estimated
         fair value due to an impairment in value.  The  Partnership  recognized
         the  impairment  by recording a provision  for  write-down of assets of
         approximately  $197,400  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 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.

(j)      For  financial  reporting  purposes,  the  undepreciated  cost  of  the
         Property in San Antonio,  Texas, was written down to its estimated fair
         value due to an impairment in value.  The  Partnership  recognized  the
         impairment  by  recording  a  provision  for  write-down  of  assets of
         approximately  $299,800  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
         years. During 2001, the Partnership  recognized an additional provision
         for  write-down  of  assets  of  approximately   $321,200.   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)      The tenant of this Property filed for bankruptcy and rejected the lease
         relating to this  Property  prior to the  building  being  constructed,
         therefore, depreciation is not applicable.

(l)      For  financial  reporting  purposes,  the  undepreciated  cost  of  the
         Property in Stow,  Ohio, was written-down to its estimated value due to
         an impairment in value.  The  Partnership  recognized the impairment by
         recording  a  provision  for  write-down  of  assets  of  approximately
         $892,200  at  December  31,  2002.  The  impairment   represented   the
         difference  between the Property's net carrying value 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,  2003,
         including the provision for write-down of assets.

(m)      Effective  May 2002,  the lease for the  Property in  Lexington,  North
         Carolina 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 estimated life
         of approximately 25 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.




<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.)

         **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.)

           31.1 Certification  of Chief Executive  Officer of Corporate  General
                Partner  Pursuant to Rule 13a-14 as Adopted  Pursuant to Section
                302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

           31.2 Certification  of Chief Financial  Officer of Corporate  General
                Partner  Pursuant to Rule 13a-14 as Adopted  Pursuant to Section
                302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

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

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



**previously filed


<PAGE>


                                  EXHIBIT 31.1



<PAGE>
                                  EXHIBIT 31.2






<PAGE>


                                  EXHIBIT 32.1








<PAGE>


                                  EXHIBIT 32.2