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, 1998

                                       OR

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

               For the transition period from _______ to ________

                         Commission file number 0-24095

                           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)

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

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

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

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

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

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

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

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

         Aggregate market value of the voting stock held by nonaffiliates of the
registrant:   The  registrant   registered  an  offering  of  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").  As of December  31,  1998,  net
proceeds to the  Partnership  from its  offering of Units,  after  deduction  of
organizational and offering expenses,  totalled $30,800,000.  As of December 31,
1998, the  Partnership  had invested  approximately  $29,859,000 of the proceeds
described  above to acquire 24  Properties,  including  one Property  owned by a
joint venture in which the Partnership is a co-venturer,  and to pay acquisition
fees  and  certain  acquisition  expenses,  leaving  approximately  $941,000  of
offering  proceeds  available  for  investment  in an  additional  Property.  In
February  1999,  the  Partnership  invested  in  a  joint  venture  arrangement,
Portsmouth Joint Venture,  with an affiliate of the General Partners to hold and
purchase  one  Property  and used the  remaining  amounts to establish a working
capital reserve for Partnership purposes. The Properties are generally leased on
a triple-net basis with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities.

         On March 11, 1999, the  Partnership  entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership  would be merged with and into a subsidiary  of APF (the  "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term,  "triple-net" basis to operators of
national and regional  restaurant  chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger.  At a special meeting of the partners that is expected to be held in
the third  quarter  of 1999,  Limited  Partners  holding in excess of 50% of the
Partnership's  outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger,  APF will own the Properties and other assets of the
Partnership. See Item 8. Financial Statements and Supplementary Data -- Note 11.
Subsequent Event.

         In the event that the Limited  Partners  vote  against the Merger,  the
Partnership will hold its Properties  until the General Partners  determine that
the sale or other  disposition of the Properties is  advantageous in view of the
Partnership's investment objectives. In deciding whether to sell Properties, the
General Partners will consider factors such as potential  capital  appreciation,
net cash flow and federal income tax  considerations.  Certain lessees also have
been granted  options to purchase  Properties,  generally at the Property's then
fair market value after a specified  portion of the lease term has elapsed.  The
Partnership  has no  obligation  to sell all or any portion of a Property at any
particular  time,  except as may be required  under  property  purchase  options
granted to certain lessees.

Description of Leases

         The leases of the  Properties  owned by the  Partnership as of December
31,  1998,  provide for initial  terms  ranging from 15 to 26 years (the average
being 18 years) and expire  between 2012 and 2023. All leases are generally on a
triple-net basis, with the lessees  responsible for all repairs and maintenance,
property taxes, insurance and utilities. The leases for the Properties that were
operational  as of December  31, 1998,  provide for minimum  base annual  rental
payments  (payable in equal  monthly  installments)  ranging from  approximately
$63,200 to $243,600. The majority of


<PAGE>


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

         Generally, the leases provide for two to five five-year renewal options
subject to the same terms and conditions as the initial lease.  Certain  lessees
also have been  granted  options to purchase  the  Properties  after a specified
portion of the lease term has elapsed. The option purchase price is equal to the
Partnership's  original cost of the Property (including acquisition costs), plus
a specified  percentage  or the  Property's  fair  market  value at the time the
purchase option is exercised, whichever is greater.

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

         In October 1998,  three Boston Market tenants,  Boston  Chicken,  Inc.,
Finest  Foodservice,  L.L.C.,  and WMJ Texas,  Inc.,  filed for  bankruptcy  and
rejected  the lease  relating  to one of their  three  leases and ceased  making
rental  payments to the  Partnership.  The  Partnership  will not  recognize any
rental and earned income from this Property  until a new tenant for the Property
is located,  or until the Property is sold and the proceeds from such a sale are
reinvested in an additional Property.  As of March 11, 1999, the Partnership has
continued  receiving rental payments  relating to the two  non-rejected  leases.
While the tenants have not rejected or affirmed the remaining two leases,  there
can be no  assurance  that some or all of the leases will not be rejected in the
future.  The lost revenues  resulting  from the one lease that was rejected,  as
described  above,  and the possible  rejection of the remaining two leases could
have an adverse  effect on the results of operations of the  Partnership  if the
Partnership  is unable to re-lease  these  Properties  in a timely  manner.  The
General Partners are currently  seeking either new tenants or purchasers for the
rejected Property.

         In addition,  in February  1999, the  Partnership  entered into a joint
venture arrangement,  Portsmouth Joint Venture, with an affiliate of the General
Partners, to purchase and hold one restaurant Property. The lease terms for this
Property  are  substantially  the  same  as the  Partnerships  other  leases  as
described above, in the first three paragraphs of this section.

Major Tenants

         During 1998, two lessees of the Partnership,  Golden Corral Corporation
and Foodmaker, Inc., each contributed more than ten percent of the Partnership's
total rental  income.  As of December 31, 1998,  Golden Corral  Corporation  and
Foodmaker,  Inc. were each the lessee under leases relating to four restaurants.
It is  anticipated  that based on the minimum  rental  payments  required by the
leases,  that each of these lessees will  continue to  contribute  more than ten
percent of the  Partnership's  total rental income in 1999.  In addition,  three
Restaurant Chains,  Boston Market,  Golden Corral Family Steakhouse  Restaurants
("Golden Corral"), and Jack in the Box, each accounted for more than ten percent
of the Partnership's total rental income for 1998. During 1998, three tenants of
Boston Market  properties filed for bankruptcy,  as described above. In 1999, it
is anticipated that these  Restaurant  Chains each will contribute more than ten
percent of the Partnership's  rental income to which the Partnership is entitled
under the terms of the leases.  Any failure of such lessees or Restaurant Chains
could materially adversely affect the Partnership's income if the Partnership is
unable to re-lease the Properties in a timely manner, as described above.

Joint Venture Arrangement

         In  August  1998,  the   Partnership   entered  into  a  joint  venture
arrangement, Columbus Joint Venture, with affiliates of the General Partners, to
construct and hold one Property.  The joint venture arrangement provides for the
Partnership  and its joint  venture  partners to share in all costs and benefits
associated  in the joint  venture in  proportion  to each  partner's  percentage
interest in the joint venture.  The Partnership  and its joint venture  partners
are also  jointly  and  severally  liable for all debts,  obligations  and other
liabilities of the joint venture.



<PAGE>


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

         The Partnership  shares  management  control equally with affiliates of
the  General  Partners  for the  joint  venture.  The  joint  venture  agreement
restricts each venturer's ability to sell,  transfer or assign its joint venture
interest  without  first  offering  it for sale to its joint  venture  partners,
either upon such terms and conditions as to which the venturers may agree or, in
the event the venturers  cannot agree,  on the same terms and  conditions as any
offer from a third party to purchase such joint venture interest.

         Net cash flow from  operations of Columbus Joint Venture is distributed
39.93% to the  Partnership  and the balance is  distributed to each of the joint
venture  partners in accordance with its respective  percentage  interest in the
joint venture.  Any liquidation  proceeds,  after paying joint venture debts and
liabilities and funding reserves for contingent liabilities, will be distributed
first to the joint venture  partners with positive  capital account  balances in
proportion to such balances  until such balances  equal zero,  and thereafter in
proportion  to each joint  venture  partner's  percentage  interest in the joint
venture.

         In addition,  in February  1999, the  Partnership  entered into a joint
venture arrangement,  Portsmouth Joint Venture, with an affiliate of the General
Partners,  to  purchase  and hold one  restaurant  Property.  The joint  venture
agreement provides for the Partnership and its joint venture partner to share in
all costs and benefits  associated  with the joint venture in proportion to each
partner's  percentage  interest in the joint venture.  The  Partnership  owns an
approximate 57 percent interest in the profits and losses of the joint venture.

Management Services

         CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain  services  relating  to  the  management  of  the  Partnership  and  its
Properties pursuant to a management  agreement with the Partnership.  Under this
agreement,  CNL  Fund  Advisors,  Inc.  is  responsible  for  collecting  rental
payments,  inspecting  the  Properties  and  the  tenants'  books  and  records,
assisting the  Partnership  in  responding  to tenant  inquiries and notices and
providing  information to the Partnership about the status of the leases and the
Properties.  CNL Fund  Advisors,  Inc.  also  assists  the  General  Partners in
negotiating the leases.  For these  services,  the Partnership has agreed to pay
CNL Fund Advisors,  Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership, plus the Partnership's
allocable  share of gross revenues of joint ventures in which the Partnership is
a co-venturer, but not in excess of competitive fees for comparable services.

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

Competition

         The fast-food,  family-style,  and casual dining restaurant business is
characterized  by intense  competition.  The  restaurants  on the  Partnership's
Properties compete with independently  owned restaurants,  restaurants which are
part of local or regional chains,  and restaurants in other well-known  national
chains, including those offering different types of food and service.

Employees

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




<PAGE>


Item 2.  Properties

         As of December 31, 1998, the Partnership  owned 24 Properties,  located
in 14 states.  Reference is made to the Schedule of Real Estate and  Accumulated
Depreciation  filed with this report for a listing of the  Properties  and their
costs, including acquisition fees and certain acquisition expenses.

Description of Properties

         Land. As of December 31, 1998, the Partnership's  Property sites ranged
from  approximately  24,400 to 120,400  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.

         Buildings.  The Properties  owned by the Partnership as of December 31,
1998,  currently include a building that is one of a Restaurant Chain's approved
designs.  The buildings  generally are rectangular and constructed  from various
combinations of stucco,  steel, wood, brick and tile.  Building sizes range from
approximately  2,200 to 9,700 square feet. All buildings on Properties  acquired
by the  Partnership  are  freestanding  and  surrounded by paved parking  areas.
Buildings are suitable for  conversion to various uses,  although  modifications
may be required prior to use for other than restaurant operations.

         Generally,  a  lessee  is  required,  under  the  terms  of  its  lease
agreement,  to make such capital  expenditures as may be reasonably necessary to
refurbish  buildings,  premises,  signs and  equipment  so as to comply with the
lessee's  obligations,  if applicable,  under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.

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

         Golden Corral  Corporation leases four Golden Corral  restaurants.  The
initial  term of each  lease is 15  years  (expiring  in 2012 to  2013)  and the
average  minimum  base  annual  rent is  approximately  $164,400  (ranging  from
approximately $156,700 to $178,200).

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

Item 3.  Legal Proceedings

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


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

         Not applicable.





<PAGE>


                                     PART II


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

         As of March 11, 1999,  there were 1,567 holders of record of the Units.
There is no public trading market for the Units,  and it is not anticipated that
a public  market for the Units will develop.  Limited  Partners who wish to sell
their  Units  may  offer  the  Units  for  sale  pursuant  to the  Partnership's
distribution  reinvestment  plan (the "Plan"),  and Limited Partners who wish to
have their  distributions  used to acquire additional Units (to the extent Units
are  available  for  purchase),  may do so  pursuant  to such Plan.  The General
Partners have the right to prohibit  transfers of Units.  The price paid for any
Unit  transferred  pursuant to the Plan through  December 31, 1998 was $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 1998 and 1997 other than
pursuant to the Plan, net of commissions

<TABLE>
<CAPTION>
<S> <C>

                                                   1998 (1)                                     1997
                                     --------------------------------------    ---------------------------------------
                                       High           Low         Average        High            Low         Average
                                     ---------     ----------    ----------    ----------     ----------    ----------
    First Quarter                      (2)            (2)           (2)           (2)            (2)           (2)
    Second Quarter                    $7.66          $7.66         $7.66          (2)            (2)           (2)
    Third Quarter                      (2)            (2)           (2)           (2)            (2)           (2)
    Fourth  Quarter                    9.50          8.25          8.87           (2)            (2)           (2)

</TABLE>

(1)      A total of 5,232 Units were  transferred  other  than  pursuant  to the
         Plan for the year ended  December 31, 1998.

(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 the  years  ended  December  31,  1998 and  1997,  the  Partnership
declared cash distributions of $2,657,764 and $1,310,885,  respectively,  to the
Limited  Partners.  No  amounts  distributed  to  partners  for the years  ended
December  31,  1998 and 1997,  are  required  to be or have been  treated by the
Partnership  as a return of capital  for  purposes  of  calculating  the Limited
Partners' return on their adjusted capital contributions.  No distributions have
been made to the General  Partners to date.  As  indicated  in the chart  below,
these   distributions   were  declared  following  the  close  of  each  of  the
Partnership's  calendar  quarters.  These amounts include monthly  distributions
made in arrears for the Limited Partners electing to receive such  distributions
on this basis.

           Quarter Ended                          1998             1997
           --------------------                -----------      -----------
           March 31                              $601,514         $154,476
           June 30                                656,250          266,507
           September 30                           700,000          379,266
           December 31                            700,000          510,636

         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.




<PAGE>


Item 6.  Selected Financial Data

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

<TABLE>
<CAPTION>

                                                                                                     February 10,
                                                                                                    1995 (Date of
                                         Year Ended         Year Ended          Year Ended        Inception) through
                                        December 31,       December 31,        December 31,          December 31,
                                            1998               1997                1996                  1995
                                       ---------------    ----------------    ----------------    --------------------
<S> <C>
Revenues                                   $3,097,757          $1,453,242            $ 31,614            $   --
Net income (4)                              2,302,322           1,154,760              26,910                --
Cash distributions declared (2)             2,657,764           1,310,885              57,846                --
Net income per Unit                               .66                 .51                 .05                --
Cash distributions declared
    per Unit (2)                                  .76                 .57                 .11                --
Weighted average number of
    Limited Partner Units
    outstanding (3)                         3,495,278           2,279,801             503,436                --

                                            1998               1997                1996                  1995
                                       ---------------    ----------------    ----------------    --------------------
At December 31:
    Total assets                          $31,112,617         $31,807,255          $7,240,324          $ 256,890
    Total partners' capital       `        30,268,497          29,846,580           6,996,213              1,000

</TABLE>


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

   (2)   Approximately  13%, 12%, and 53% of cash distributions  ($0.10,  $0.07,
         and $0.06 per Unit,  respectively)  for the years  ended  December  31,
         1998, 1997, and 1996,  respectively,  represents a return of capital in
         accordance with generally accepted accounting principles ("GAAP"). Cash
         distributions  treated as a return of capital on a GAAP basis represent
         the amount of cash distributions in excess of accumulated net income on
         a GAAP basis.  The Partnership has not treated such amounts as a return
         of capital for purposes of calculating the Limited  Partners' return on
         their invested capital contributions.

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

   (4)   Net income for the year ended December 31, 1998, includes $197,466 from
         provision for loss on land.


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

         The  Partnership  was  organized on February  10, 1995,  to acquire for
cash,  either  directly  or  through  joint  venture  arrangements,  both  newly
constructed  and  existing  restaurant  Properties,  as well as land upon  which
restaurants  were to be constructed,  which are leased primarily to operators of
selected  national  and  regional  fast-food,  family-style  and  casual  dining
Restaurant Chains. The leases are generally  triple-net leases, with the lessees
generally responsible for all repairs and maintenance, property taxes, insurance
and  utilities.  As of December 31, 1998, the  Partnership  owned 24 Properties,
either directly or through a joint venture arrangement.



<PAGE>


Liquidity and Capital Resources

         On September  20, 1996,  the  Partnership  commenced an offering to the
public of up to 3,500,000 Units of limited  partnership  interest  pursuant to a
registration  statement  on Form  S-11  under  the  Securities  Act of 1933,  as
amended,  effective  August  11,  1995.  The  Partnership's  offering  of  Units
terminated  on  February  6,  1998,  at  which  time  the  maximum  proceeds  of
$35,000,000 (3,500,000 Units) had been received from investors. The Partnership,
therefore, will derive no additional capital resources from the offering.

         As of December  31,  1998,  net  proceeds to the  Partnership  from its
offering of Units,  after  deduction of  organizational  and offering  expenses,
totalled  $30,800,000.  During 1996, the  Partnership  invested or committed for
investment  approximately  $2,960,800 of such proceeds to acquire two Properties
and to pay acquisition fees and certain acquisition  expenses.  During 1997, the
Partnership  completed  construction of the Property under  construction in 1996
and acquired 20 additional Properties (one of which was under construction as of
December 31, 1997). During 1998, the Partnership  completed  construction of the
Property  under  construction  as of December 31, 1997,  acquired one additional
Property and entered into one joint venture arrangement, Columbus Joint Venture.
As a result of the above transactions,  as of December 31, 1998, the Partnership
had invested  approximately  $29,859,000  of the net proceeds in 24  Properties,
including one Property  owned by a joint venture in which the  Partnership  is a
co-venturer, and to pay acquisition fees and miscellaneous acquisition expenses,
leaving approximately $941,000 of net offering proceeds available for investment
in Properties.  As of December 31, 1998, the  Partnership had paid $1,575,000 in
acquisition fees to an affiliate of the General Partners.

         In  February  1999,  the  Partnership   invested  in  a  joint  venture
arrangement,  Portsmouth  Joint  Venture,  with  an  affiliate  of  the  General
Partners,  to purchase and hold one  restaurant  property and used the remaining
amounts to establish a working capital reserve for Partnership purposes.

         Currently,  the  Partnership's  primary  source of capital is cash from
operations  (which  includes cash received from tenants,  interest  received and
distributions  from  joint  venture,  less  cash paid for  expenses).  Cash from
operations was $2,831,738,  $1,361,756, and $27,146 for the years ended December
31, 1998, 1997, and 1996, respectively. The increase in cash from operations for
the year ended  December  31, 1998 and 1997,  each as  compared to the  previous
year,  is  primarily a result of changes in income and  expenses as described in
"Results of Operations" below and changes in the Partnership's working capital.

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

         Until  Properties  are  acquired by the  Partnership,  all  Partnership
proceeds are held in  short-term,  highly liquid  investments  which the General
Partners  believe  to have  appropriate  safety of  principal.  This  investment
strategy provides high liquidity in order to facilitate the Partnership's use of
these  funds to  acquire  Properties  at such time as  Properties  suitable  for
acquisition  are located.  At December 31, 1998, the  Partnership had $1,839,613
invested in such short-term  investments,  as compared to $4,143,327 at December
31,  1997.  The decrease in the amount  invested in  short-term  investments  is
primarily a result of the payment during 1998, of costs relating to the Property
that was under  construction at December 31, 1997, the acquisition of additional
Property  during 1998 and the  acquisition  of an  interest  in a joint  venture
arrangement  during 1998. The funds  remaining at December 31, 1998 will be used
to  purchase  an  additional   Property,   to  pay  acquisition  costs,  to  pay
distributions  and  other  liabilities  and to meet  the  Partnership's  working
capital and other needs.

         During the years ended  December 31, 1997 and 1996,  affiliates  of the
General  Partners  incurred on behalf of the Partnership  $211,216 and $285,858,
respectively,  for certain  organizational and offering  expenses.  In addition,
during 1998, 1997, and 1996, affiliates incurred $35,842, $134,138, and $18,036,
respectively,  for certain acquisition expenses and $89,969,  $44,166, and $893,
respectively,  for certain operating expenses. As of December 31, 1998 and 1997,
the Partnership owed $32,775 and $118,231,  respectively, to related parties for
such  amounts,  fees  and  other  reimbursements.  As of  March  11,  1999,  the
Partnership had reimbursed the affiliates all such amounts.  Other  liabilities,
including distributions payable,  decreased to $811,345 at December 31, 1998, as
compared  to  $1,842,444  at December  31,  1997,  primarily  as a result of the
payment during the year ended December 31, 1998, of  construction  costs accrued
for certain Properties at December 31, 1997. The decrease is partially offset by
an  increase  in  distributions  payable to the  Limited  Partners.  The General
Partners  believe that the  Partnership  has sufficient cash on hand to meet its
current working capital needs.

         Based on cash from operations,  the Partnership declared  distributions
to the Limited Partners of $2,657,764,  $1,310,885,  and $57,846,  for the years
ended  December  31,  1998,  1997,  and  1996,  respectively.   This  represents
distributions of $0.76,  $0.57, and $0.11 per Unit, for the years ended December
31, 1998, 1997, and 1996, respectively,  based on the weighted average number of
Units outstanding during the period the Partnership was operational.  No amounts
distributed  or to be  distributed  to the Limited  Partners for the years ended
December 31, 1998,  1997,  and 1996,  are required to be or have been treated by
the  Partnership as a return of capital for purposes of calculating  the Limited
Partners'  return  on their  adjusted  capital  contributions.  The  Partnership
intends to continue to make  distributions of cash available for distribution to
the Limited Partners on a quarterly basis,  although some Limited  Partners,  in
accordance with their election,  receive  monthly  distributions,  for an annual
fee.

         The General  Partners have obtained  contingent  liability and property
coverage for the  Partnership.  This insurance  policy is intended to reduce the
Partnership's  exposure in the unlikely event a tenant's insurance policy lapses
or is insufficient to cover a claim relating to the Property.

         The Partnership's  investment strategy of acquiring Properties for cash
and  leasing  them under  triple-net  leases to  operators  who  generally  meet
specified financial  standards  minimizes the Partnership's  operating expenses.
The General  Partners  believe that the leases will generate cash flow in excess
of operating expenses.

         Due to low  operating  expenses  and  ongoing  cash flow,  the  General
Partners believe that the Partnership has sufficient working capital reserves at
this  time.  In  addition,  because  all 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 General  Partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
the operations of the Partnership.

         On March 11, 1999, the  Partnership  entered into an Agreement and Plan
of Merger with APF,  pursuant to which the Partnership  would be merged with and
into a subsidiary  of APF. As  consideration  for the Merger,  APF has agreed to
issue  3,299,149  APF Shares  which,  for the  purposes  of  valuing  the merger
consideration,  have been valued by APF at $10.00 per APF Share,  the price paid
by APF  investors in APF's most recent public  offering.  In order to assist the
General  Partners in evaluating the proposed merger  consideration,  the General
Partners  retained  Valuation  Associates,  a nationally  recognized real estate
appraisal firm, to appraise the  Partnership's  restaurant  property  portfolio.
Based on Valuation Associates'  appraisal,  the Partnership's property portfolio
and other assets were valued on a going concern basis  (meaning the  Partnership
continues  unchanged) at  $32,493,818  as of December 31, 1998.  Legg Mason Wood
Walker,  Incorporated  has  rendered  a  fairness  opinion  that  the APF  Share
consideration, payable by APF, is fair to the Partnership from a financial point
of view.  The APF Shares are  expected  to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and, therefore,
would be freely  tradable  at the option of the former  Limited  Partners.  At a
special meeting of the partners that is expected to be held in the third quarter
of  1999,  Limited  Partners  holding  in  excess  of 50%  of the  Partnership's
outstanding  limited  partnership  interests  must  approve the Merger  prior to
consummation of the  transaction.  The General Partners intend to recommend that
the Limited Partners of the Partnership  approve the Merger.  In connection with
their  recommendation,  the  General  Partners  will  solicit the consent of the
Limited Partners at the special meeting.

Results of Operations

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

         The  Partnership  owned and leased two wholly owned  Properties in 1996
and 22 wholly owned  Properties in 1997.  During 1998, the Partnership  acquired
one  additional   wholly  owned  Property  and  entered  into  a  joint  venture
arrangement  to construct and hold one restaurant  Property.  As of December 31,
1998,  the  Partnership  owned,  either  directly  or  through  a joint  venture
arrangement, 24 Properties,  which are generally subject to long-term triple-net
leases.  The leases of the  Properties  provide for minimum  base annual  rental
payments (payable in monthly installments) ranging from approximately $63,200 to
$243,600.  The majority of the leases provide for percentage rent based on sales
in excess of a specified amount. In addition, the majority of the leases provide
that,  commencing in specified lease years (generally the sixth lease year), the
annual  base rent  required  under the terms of the lease will  increase.  For a
further  description of the  Partnership's  leases and  Properties,  see Item 1.
Business - Leases and Item 2. Properties.

         During  the  years  ended  December  31,  1998,  1997,  and  1996,  the
Partnership earned $2,953,285,  $1,290,621, and $1,373, respectively,  in rental
income from operating leases and earned income from direct financing leases. The
increase in rental and earned income  during 1998 and 1997,  each as compared to
the previous year, is primarily  attributable  to the  acquisition of additional
Properties subsequent to December 31, 1997 and 1996, respectively,  and the fact
that Properties  acquired during the years ended December 31, 1997 and 1996 were
operational for the full year in 1997, respectively.

         During  the  year  ended   December  31,  1998,   two  lessees  of  the
Partnership,  Golden Corral  Corporation and Foodmaker,  Inc., each  contributed
more than ten percent of the  Partnership's  total rental income. As of December
31, 1998,  Golden Corral  Corporation  and Foodmaker,  Inc. were each the lessee
under leases relating to four restaurants.  It is anticipated that, based on the
minimum rental payments required by the leases, these lessees each will continue
to contribute more than ten percent of the Partnership's  total rental income in
1999. In addition,  during the year ended  December 31, 1998,  three  Restaurant
Chains,  Golden Corral,  Jack in the Box, and Boston Market,  each accounted for
more than ten percent of the  Partnership's  total rental  income.  During 1998,
three tenants of Boston Market  Properties  filed for  bankruptcy,  as described
below. In 1999, it is anticipated that these three  Restaurant  Chains each will
continue  to account  for more than ten  percent of the total  rental  income to
which the Partnership is entitled under the terms of the leases.  Any failure of
such  lessees  or  Restaurant  Chains  could  materially  adversely  affect  the
Partnership's income if the Properties are not re-leased in a timely manner.

         In 1998, the tenants of three Boston Market Properties, Boston Chicken,
Inc., Finest Foodservice,  L.L.C., and WMJ Texas, Inc., filed for bankruptcy and
rejected the lease relating to one of their three  Properties.  The  Partnership
will not recognize  any rental and earned income from this Property  until a new
tenant  for the  Property  is  located,  or until the  Property  is sold and the
proceeds from such a sale are reinvested in an additional Property.  As of March
11, 1999, the Partnership has continued  receiving  rental payments  relating to
the two non-rejected leases. While the tenants have not rejected or affirmed the
remaining two leases,  there can be no assurance  that some or all of the leases
will not be rejected in the future.  The lost  revenues  resulting  from the one
lease that was rejected,  as described above, and the possible  rejection of the
remaining  two leases could have an adverse  effect on the results of operations
of the Partnership if the Partnership is unable to re-lease these  Properties in
a timely manner.  The General Partners are currently seeking either a new tenant
or purchaser for the rejected Property.

         During  the  years  ended  December  31,  1998,  1997,  and  1996,  the
Partnership earned $144,472, $162,621, and $30,241 in interest and other income.
The decrease in interest and other income  during 1998,  as compared to 1997, is
primarily  attributable  to the  decrease  in the  amount of funds  invested  in
short-term  liquid  investments  due to the payment during 1998, of construction
costs relating to the Property that was under construction at December 31, 1997,
the  acquisition  of an  additional  property in 1998 and  investing  in a joint
venture  arrangement  during  1998.  The  increase in interest  and other income
during 1997, as compared to 1996, is primarily  attributable  to the increase in
the amount of funds  invested in short-term  liquid  investments  as a result of
additional Limited Partner capital contributions during 1997.



<PAGE>


         Operating expenses,  including  depreciation and amortization  expense,
were $597,969, $298,482, and $4,704 for the years ended December 31, 1998, 1997,
and 1996.  The  increase in  operating  expenses  during 1998 and 1997,  each as
compared to the  previous  year,  is  primarily  attributable  to an increase in
depreciation  expense as the result of the acquisition of additional  Properties
during 1998 and 1997,  and the fact that  Properties  acquired  during the years
ended December 31, 1997 and 1996 were  operational for the full year in 1998 and
1997, respectively. Operating expenses also increased during 1998 and 1997, each
as  compared  to  the  previous  year,  as  a  result  of  an  increase  in  (i)
administrative expenses for services related to accounting;  financial,  tax and
regulatory compliance and reporting; lease and loan compliance;  limited partner
distributions  and reporting;  and investor  relations (ii) management fees as a
result of the  increase in rental  revenues and (iii) state taxes as a result of
the  Partnership  incurring  additional  taxes relating to the filing of various
state tax returns during 1997 and 1998.

         The increase in operating  expenses for 1998,  as compared to 1997,  is
also  partially  due to the  fact  that  the  Partnership  incurred  $15,522  in
transaction costs related to the General Partners retaining  financial and legal
advisors to assist them in evaluating and  negotiating  the proposed Merger with
APF, as described  above in "Liquidity  and Capital  Resources."  If the Limited
Partners  reject  the  Merger,  the  Partnership  will bear the  portion  of the
transaction  costs  based upon the  percentage  of "For"  votes and the  General
Partners  will  bear  the  portion  of such  transaction  costs  based  upon the
percentage of "Against" votes and abstentions.

         During the year ended December 31, 1998, the Partnership established an
allowance for loss on land of $197,466 for financial reporting purposes relating
to the  Property in  Minnetonka,  Minnesota.  The tenant of this  Boston  Market
Property  declared  bankruptcy and rejected the lease relating to this Property.
The loss  represents  the difference  between the  Property's  carrying value at
December  31, 1998 and the current  estimate of net  realizable  value.  No such
allowance was established during the years ended December 31, 1997 and 1996.

         In April 1998, the American  Institute of Certified Public  Accountants
issued   Statement  of  Position  98-5  "Reporting  on  the  Costs  of  Start-Up
Activities." The Statement,  which is effective for fiscal years beginning after
December  15,  1998,  requires  that an entity  expense  the  costs of  start-up
activities and  organization  costs as they are incurred.  The Partnership  will
adopt this Statement in 1999. The General Partners believe that adoption of this
Statement  will  not  have a  material  effect  on the  Partnership's  financial
position or results of operations.

         The  Partnership's  leases as of December 31, 1998,  and the leases the
Partnership  expects to enter into,  are or are  expected to be on a  triple-net
basis and contain provisions that management  believes will mitigate the adverse
effect of inflation.  Such provisions  include clauses  requiring the payment of
percentage rent based on certain restaurant sales above a specified level and/or
automatic  increases  in base rent at  specified  times  during  the term of the
lease.  Management  expects that  increases in  restaurant  sales volumes due to
inflation  and real sales growth  should  result in an increase in rental income
over  time.  Continued  inflation  also may cause  capital  appreciation  of the
Partnership's Properties.  Inflation and changing prices, however, also may have
an  adverse  impact on the sales of the  restaurants  and on  potential  capital
appreciation of the Properties.

Year 2000

         The Year 2000 problem is the result of information  technology  systems
and embedded  systems  (products which are made with  microprocessor  (computer)
chips such as HVAC systems,  physical  security  systems and elevators)  using a
two-digit  format,  as  opposed  to four  digits,  to  indicate  the year.  Such
information  technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.

         The  Partnership  currently  does not have any  information  technology
systems.  Affiliates of the General Partners provide all services  requiring the
use of information  technology  systems pursuant to a management  agreement with
the  Partnership.   The  maintenance  of  embedded  systems,   if  any,  at  the
Partnership's  Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's  leases.  The General Partners
and  affiliates  have  established  a team  dedicated to reviewing  the internal
information technology systems used in the operation of the Partnership, and the
information  technology and embedded  systems and the Year 2000 compliance plans
of the Partnership's tenants, significant suppliers,  financial institutions and
transfer agent.



<PAGE>


         The  information  technology  infrastructure  of the  affiliates of the
General  Partners  consists of a network of personal  computers and servers that
were  obtained   from  major   suppliers.   The   affiliates   utilize   various
administrative  and financial  software  applications on that  infrastructure to
perform the business functions of the Partnership.  The inability of the General
Partners  and  affiliates  to identify  and timely  correct  material  Year 2000
deficiencies  in  the  software  and/or   infrastructure   could  result  in  an
interruption in, or failure of, certain of the Partnership's business activities
or operations.  Accordingly,  the General Partners and affiliates have requested
and  are  evaluating  documentation  from  the  suppliers  of the  software  and
infrastructure  of the  affiliates  regarding the Year 2000  compliance of their
products  that  are  used  in  the  business  activities  or  operations  of the
Partnership.   The  General  Partners  and  affiliates  have  not  yet  received
sufficient certifications to be assured that the suppliers have fully considered
and mitigated any potential material impact of the Year 2000  deficiencies.  The
costs  expected to be incurred by the General  Partners and affiliates to become
Year 2000  compliant  will be incurred by the General  Partners and  affiliates;
therefore,  these  costs  will  have no impact  on the  Partnership's  financial
position or results of operations.

         The  Partnership  has  material  third  party  relationships  with  its
tenants,  financial  institutions and transfer agent. The Partnership depends on
its  tenants  for  rents  and  cash  flows,   its  financial   institutions  for
availability  of cash and its  transfer  agent to  maintain  and track  investor
information.  If any of these third parties are unable to meet their obligations
to the  Partnership  because of the Year 2000  deficiencies,  such a failure may
have a material impact on the  Partnership.  Accordingly,  the General  Partners
have requested and are evaluating  documentation from the Partnership's tenants,
financial  institutions,   and  transfer  agent  relating  to  their  Year  2000
compliance  plans.  The  General  Partners  have  not  yet  received  sufficient
certifications  to be assured  that the  tenants,  financial  institutions,  and
transfer agent have fully considered and mitigated any potential material impact
of the Year 2000 deficiencies.  Therefore,  the General Partners do not, at this
time,  know of the potential  costs to the  Partnership of any adverse impact or
effect of any Year 2000 deficiencies by these third parties.

         The General  Partners  currently  expect that all year 2000  compliance
testing  and any  necessary  remedial  measures  on the  information  technology
systems used in the business  activities and operations of the Partnership  will
be completed prior to June 30, 1999.  Based on the progress the General Partners
and affiliates  have made in identifying and addressing the  Partnership's  Year
2000 issues and the plan and timeline to complete the  compliance  program,  the
General  Partners  do  not  foresee   significant   risks  associated  with  the
Partnership's  Year 2000 compliance at this time.  Because the General  Partners
and affiliates are still  evaluating  the status of the  information  technology
systems used in business  activities and operations of the  Partnership  and the
systems of the third parties with which the  Partnership  conducts its business,
the General Partners have not yet developed a comprehensive contingency plan and
are unable to identify "the most reasonably  likely worst case scenario" at this
time.  If  the  General  Partners  identify  significant  risks  related  to the
Partnership's  Year 2000 compliance or if the Partnership's Year 2000 compliance
program's  progress deviates  substantially from the anticipated  timeline,  the
General Partners will develop appropriate contingency plans.


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 Accountants                                   13

Financial Statements:

  Balance Sheets                                                    14

  Statements of Income                                              15

  Statements of Partners' Capital                                   16

  Statements of Cash Flows                                          17

  Notes to Financial Statements                                     19


<PAGE>






                        Report of Independent Accountants




To the Partners
CNL Income Fund XVIII, Ltd.


In our opinion,  the financial  statements  listed in the index  appearing under
item 14(a)(1) present fairly, in all material  respects,  the financial position
of CNL Income Fund XVIII,  Ltd. (a Florida limited  partnership) at December 31,
1998 and 1997,  and the results of its operations and its cash flows for each of
the three  years in the  period  ended  December  31,  1998 in  conformity  with
generally  accepted  accounting  principles.  In addition,  in our opinion,  the
financial  statement schedules listed in the index appearing under item 14(a)(2)
present fairly, in all material respects, the information set forth therein when
read in  conjunction  with the related  financial  statements.  These  financial
statements  and  financial  statement  schedules are the  responsibility  of the
Partnership's  management;  our responsibility is to express an opinion on these
financial  statements and financial  statement schedules based on our audits. We
conducted our audits of these  statements in accordance with generally  accepted
auditing  standards  which  require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.






Orlando, Florida
January 21, 1999, except for Note 11 for which the date is March 11, 1999.


<PAGE>

<TABLE>
<CAPTION>

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

                                                   BALANCE SHEETS
                                                   --------------
<S> <C>

                                                                                           December 31,
                                                                                   1998                     1997
                                                                             -----------------         ----------------
                         ASSETS

Land and buildings on operating leases, less
    accumulated depreciation and allowance
    for loss on land                                                              $22,876,012              $21,311,062
Net investment in direct financing leases                                           5,937,312                6,004,878
Investment in joint venture                                                           160,395                       --
Cash and cash equivalents                                                           1,839,613                4,143,327
Receivables, less allowance for doubtful
    accounts of $62,189 and $35                                                             --                   68,000
Prepaid expenses                                                                        3,653                        --
Organization costs, less accumulated
    amortization of $4,411 and $2,411                                                   5,589                    7,589
Accrued rental income                                                                 230,999                  111,867
Other assets                                                                           59,044                  160,532
                                                                             -----------------         ----------------
                                                                                  $31,112,617              $31,807,255
                                                                             =================         ================


                     LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                                                                    $   2,558                $  10,456
Accrued construction costs payable                                                         --                1,108,627
Distributions payable                                                                 700,000                  510,636
Due to related parties                                                                 32,775                  118,231
Rents paid in advance                                                                   7,351                   28,277
Deferred rental income                                                                101,436                  184,448
                                                                             -----------------         ----------------
       Total liabilities                                                              844,120                1,960,675

Partners' capital                                                                  30,268,497               29,846,580
                                                                             -----------------         ----------------

                                                                                  $31,112,617              $31,807,255
                                                                             =================         ================







                 See accompanying notes to financial statements.


<PAGE>


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

                                                STATEMENTS OF INCOME
                                                --------------------


                                                                            Year Ended December 31,

                                                                1998                 1997                1996
                                                            --------------       --------------      --------------
Revenues:
    Rental income from operating leases                        $2,396,215            $ 950,316           $   1,373
    Earned income from direct financing
       leases                                                     557,070              340,305                  --
    Interest and other income                                     144,472              162,621              30,241
                                                            --------------       --------------      --------------
                                                                3,097,757            1,453,242              31,614
                                                            --------------       --------------      --------------
Expenses:
    General operating and administrative                          145,661              123,708               3,980
    Professional services                                          25,670               20,429                  --
    Management fees to related party                               28,038               11,842                  12
    State and other taxes                                           8,605                  424                  --
    Depreciation and amortization                                 374,473              142,079                 712
    Transaction costs                                              15,522                   --                  --
                                                            --------------       --------------      --------------
                                                                  597,969              298,482               4,704
                                                            --------------       --------------      --------------

Income Before Provision for Loss
    on Land                                                     2,499,788            1,154,760              26,910

Provision for Loss on Land                                       (197,466 )                 --                  --
                                                            --------------       --------------      --------------

Net Income                                                     $2,302,322           $1,154,760           $  26,910
                                                            ==============       ==============      ==============

Allocation of Net Income:
    General partners                                            $  (1,582 )          $  (1,421 )          $     (7 )
    Limited partners                                            2,303,904            1,156,181              26,917
                                                            --------------       --------------      --------------

                                                               $2,302,322           $1,154,760           $  26,910
                                                            ==============       ==============      ==============

Net Income Per Limited Partner Unit                              $   0.66             $   0.51           $    0.05
                                                            ==============       ==============      ==============

Weighted Average Number of
    Limited Partner Units Outstanding                           3,495,278            2,279,801             503,436
                                                            ==============       ==============      ==============








                 See accompanying notes to financial statements.


<PAGE>


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

                                                                         STATEMENTS OF PARTNERS' CAPITAL

                                                                  Years Ended December 31, 1998, 1997, and 1996

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

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

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

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

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

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

    Contributions from limited partners         --            --        854,241              --        --           --      854,241
    Distributions to limited partners
       ($0.76  per limited partner unit)        --            --             --      (2,657,764)       --           --   (2,657,764)
    Syndication costs                           --            --             --              --        --      (76,882)     (76,882)
    Net income                                  --        (1,582 )           --              -- 2,303,904           --    2,302,322
                                        ----------   ------------  ------------   ------------- ---------   ----------  ------------

Balance, December 31, 1998              $   1,000      $  (3,010 )  $35,000,000   $  (4,026,495)$3,487,002  $(4,190,000)$30,268,497
                                        ==========   ============  ============   =============  =========  =========== ============




                 See accompanying notes to financial statements.


<PAGE>


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

                                              STATEMENTS OF CASH FLOWS

                                                                                  Year Ended December 31,
                                                                      1998                 1997                  1996
                                                                 ----------------     ----------------     ----------------
Increase (Decrease) in Cash and Cash
   Equivalents:
      Cash Flows from Operating Activities:
         Cash received from tenants                                  $ 2,884,620          $1,353,968                 $   --
         Distributions from joint venture                                  5,630                  --                     --
         Interest received                                               141,408             161,826                 30,241
         Cash paid for expenses                                         (199,920 )          (154,038  )              (3,095)
                                                                 ----------------     ----------------     ----------------
             Net cash provided by operating
                activities                                             2,831,738           1,361,756                 27,146
                                                                 ----------------     ----------------     ----------------

      Cash Flows from Investing Activities:
         Additions to land and buildings on
             operating leases                                         (3,134,046 )       (18,581,999  )          (1,533,446)
         Investment in direct financing leases                           (12,945 )        (5,962,087  )                  --
         Investment in joint venture                                    (166,025 )                --                     --
         Increase in other assets                                             --                  --               (276,848)
         Other                                                                --                 107                   (107)
                                                                 ----------------     ----------------     ----------------

             Net cash used in investing activities                    (3,313,016 )       (24,543,979  )          (1,810,401)
                                                                 ----------------     ----------------     ----------------

      Cash Flows from Financing Activities:
         Reimbursement of acquisition and syndication
             costs by related parties on behalf of the
             Partnership                                                 (37,135 )          (396,548  )            (497,420)
         Contributions from limited partners                             854,241          25,723,944              8,498,815
         Distributions to limited partners                            (2,468,400 )          (855,957  )              (2,138)
         Payment of syndication costs                                   (161,142 )        (2,450,214  )            (845,657)
         Other                                                           (10,000 )           (67,000  )                  --
                                                                 ----------------     ----------------     ----------------
                Net cash provided by (used in)
                   financing activities                               (1,822,436 )        21,954,225              7,153,600
                                                                 ----------------     ----------------     ----------------

Net Increase (Decrease) in Cash and Cash Equivalents                  (2,303,714 )        (1,227,998  )           5,370,345

Cash and Cash Equivalents at Beginning of Year                         4,143,327           5,371,325                    980
                                                                 ----------------     ----------------     ----------------

Cash and Cash Equivalents at End of Year                             $ 1,839,613          $4,143,327            $ 5,371,325
                                                                 ================     ================     ================









                 See accompanying notes to financial statements.


<PAGE>


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

                                        STATEMENTS OF CASH FLOWS - CONTINUED

                                                                              Year Ended December 31,
                                                                   1998                  1997               1996
                                                              ----------------      ---------------    ----------------
Reconciliation of Net Income to Net Cash
   Provided by Operating Activities:

      Net income                                                $  2,302,322          $  1,154,760         $    26,910
                                                              ----------------      ---------------    ----------------
      Adjustments to reconcile net income to
         net cash provided by operating
         activities:
             Depreciation                                            372,473               140,079                 301
             Amortization                                              2,000                 2,000                 411
             Distributions from joint venture                          5,630                    --                  --
             Provision for loss on land                              197,466                    --                  --
             Decrease in net investment in direct
                financing leases                                      81,211                28,084                  --
             Increase (decrease) in receivables                       68,000               (66,771 )            (1,227 )
             Increase in prepaid expenses                             (3,653  )                 --                  --
             Increase in accrued rental income                      (119,132  )           (128,079 )              (146 )
             Increase in accounts payable                              2,102                   398                  57
             Increase in due to related parties,
                excluding acquisition,
                organization and syndication costs
                paid on behalf of the Partnership                     27,257                 2,202                 820
             Increase (decrease) in rents paid
                in advance                                           (20,926  )             28,277                  --
             Increase (decrease) in deferred
                rental income                                        (83,012  )            200,806                  --
             Other                                                        --                    --                  20
                                                              ----------------      ---------------    ----------------

                Total adjustments                                    529,416               206,996                 236
                                                              ----------------      ---------------    ----------------

Net Cash Provided by Operating Activities                       $  2,831,738          $  1,361,756         $    27,146
                                                              ================      ===============    ================

Supplemental Schedule of Non-Cash Investing
   and Financing Activities:

      Related parties paid certain  acquisition
         and syndication  costs on behalf
         of the Partnership as follows:
             Acquisition costs                                    $   35,842           $   134,138         $    18,036
             Syndication costs                                            --               211,216             285,858
                                                              ----------------      ---------------    ----------------
                                                                  $   35,842           $   345,354         $   303,894
                                                              ================      ===============    ================
      Distributions declared and unpaid at
         December 31                                             $   700,000           $   510,636         $    55,708
                                                              ================      ===============    ================


</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, 1998, 1997, and 1996


1.       Significant Accounting Policies:

         Organization and Nature of Business - CNL Income Fund XVIII,  Ltd. (the
         "Partnership") is a Florida limited  partnership that was organized for
         the purpose of acquiring both newly constructed and existing restaurant
         properties,  as well as properties  upon which  restaurants  were to be
         constructed,  which are leased  primarily  to operators of national and
         regional  fast-food,  family-style and casual dining restaurant chains.
         Under the terms of a registration  statement  filed with the Securities
         and Exchange  Commission,  the  Partnership  was  authorized  to sell a
         maximum  of  3,500,000  units   ($35,000,000)  of  limited  partnership
         interest.   A  total  of  3,500,000  units   ($35,000,000)  of  limited
         partnership interest had been sold as of December 31, 1998.

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

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

         Real  Estate  and  Lease  Accounting  -  The  Partnership  records  the
         acquisition of land and buildings at cost,  including  acquisition  and
         closing costs. Land and buildings are leased to unrelated third parties
         on a triple-net basis, whereby the tenant is generally  responsible for
         all operating  expenses  relating to the property,  including  property
         taxes, insurance, maintenance and repairs. The leases are accounted for
         using the direct  financing  or  operating  methods.  Such  methods are
         described below:

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


<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 1998, 1997, and 1996


1.       Significant Accounting Policies - Continued:

                  Operating  method - Land and  building  leases  accounted  for
                  using the  operating  method are recorded at cost,  revenue is
                  recognized as rentals are earned and  depreciation  is charged
                  to operations as incurred.  Buildings are  depreciated  on the
                  straight-line  method over their estimated  useful lives of 30
                  years. When scheduled rentals  (including rental payments,  if
                  any,  required  during the  construction  of a property)  vary
                  during the lease term, income is recognized on a straight-line
                  basis so as to produce a constant periodic rent over the lease
                  term commencing on the date the property is placed in service.

                  Accrued  rental  income  represents  the  aggregate  amount of
                  income  recognized  on a  straight-line  basis  in  excess  of
                  scheduled  rental  payments  to date.  In  contrast,  deferred
                  rental income  represents  the  aggregate  amount of scheduled
                  rental payments to date (including  rental payments due during
                  construction  and  prior  to  the  property  being  placed  in
                  service)  in excess of income  recognized  on a  straight-line
                  basis over the lease term  commencing on the date the property
                  is placed in  service.  Whenever a tenant  defaults  under the
                  terms of its  lease,  or events  or  changes  in  circumstance
                  indicate  that the tenant will not lease the property  through
                  the end of the lease term, the Partnership  either reserves or
                  writes-off the cumulative accrued rental income balance.

         When  the  properties  are  sold,  the  related  cost  and  accumulated
         depreciation  for operating  leases and the net  investment  for direct
         financing leases,  plus any accrued rental income, will be removed from
         the  accounts  and gains or losses  from  sales  will be  reflected  in
         income.  The general partners of the Partnership  review 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.  Although  the general  partners
         have  made  their  best  estimate  of these  factors  based on  current
         conditions,  it is reasonably  possible that changes could occur in the
         near term which could adversely affect the general  partners'  estimate
         of net cash flows  expected to be generated from its properties and the
         need for asset impairment write-downs.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


1.       Significant Accounting Policies - Continued:

         When the  collection  of amounts  recorded as rental or other income is
         considered  to be  doubtful,  an  adjustment  is made to  increase  the
         allowance for doubtful accounts,  which is netted against  receivables,
         and to decrease rental or other income or increase bad debt expense for
         the  current  period,  although  the  Partnership  continues  to pursue
         collection of such amounts.  If amounts are subsequently  determined to
         be  uncollectible,  the  corresponding  receivable  and  allowance  for
         doubtful accounts are decreased accordingly.

         Investment in Joint Venture - The Partnership's  investment in Columbus
         Joint  Venture  is  accounted  for using the  equity  method  since the
         Partnership  shares control with affiliates which have the same general
         partners.

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

         Cash  accounts  maintained  on  behalf  of the  Partnership  in  demand
         deposits  at  commercial  banks  and  money  market  funds  may  exceed
         federally insured levels;  however, the Partnership has not experienced
         any losses in such  accounts.  The  Partnership  limits  investment  of
         temporary cash investments to financial  institutions  with high credit
         standing;  therefore, the Partnership believes it is not exposed to any
         significant credit risk on cash and cash equivalents.

         Organization  Costs - Organization  costs are amortized over five years
         using the  straight-line  method upon  commencement  of operations.  In
         April 1998,  the American  Institute of  Certified  Public  Accountants
         issued  Statement of Position 98-5  "Reporting on the Costs of Start-Up
         Activities."  The  Statement,  which  is  effective  for  fiscal  years
         beginning after December 15, 1998,  requires that an entity expense the
         costs  of  start-up  activities  and  organization  costs  as they  are
         incurred.  The  Partnership  will adopt  this  Statement  in 1999.  The
         general  partners believe that adoption of this Statement will not have
         a material effect on the Partnership's financial position or results of
         operations.

         Income Taxes - Under  Section 701 of the  Internal  Revenue  Code,  all
         income,  expenses and tax credit items flow through to the partners for
         tax  purposes.  Therefore,  no  provision  for federal  income taxes is
         provided in the accompanying  financial statements.  The Partnership is
         subject to certain state taxes on its income and property.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


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 are netted  against
         partners' capital and represent a reduction of Partnership equity and a
         reduction in the basis of each partner's investment (Note 6).

         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.

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

         Use of Estimates - The general  partners of the Partnership have made a
         number of estimates and assumptions relating to the reporting of assets
         and liabilities and the disclosure of contingent assets and liabilities
         to prepare these  financial  statements in  conformity  with  generally
         accepted accounting principles.  Actual results could differ from those
         estimates.

         Reclassification   -  Certain  items  in  the  prior  years'  financial
         statements  have been  reclassified  to conform  to 1998  presentation.
         These  reclassifications  had no effect  on  partners'  capital  or net
         income.

2.       Leases:

         The Partnership  leases its land and buildings to operators of national
         and regional  fast-food and  family-style  restaurants.  The leases are
         accounted for under the provisions of Statement of Financial Accounting
         Standards No. 13,  "Accounting  for Leases." Some of the  Partnership's
         leases are  classified as operating  leases and some of the leases have
         been classified as direct financing  leases.  For the leases classified
         as direct  financing  leases,  the  building  portions of the  property
         leases are accounted for as direct financing leases while


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


2.       Leases - Continued:

         the land portions of the majority of the leases are  operating  leases.
         The leases have initial terms of 15 to 26 years and the majority of the
         leases provide for minimum and  contingent  rentals.  In addition,  the
         tenant pays all property  taxes and  assessments,  fully  maintains the
         interior and exterior of the  building and carries  insurance  coverage
         for public liability,  property damage, fire and extended coverage. The
         lease options  generally  allow the tenants to renew the leases for two
         to five  successive  five-year  periods  subject  to the same terms and
         conditions as the initial  lease.  Most leases also allow the tenant to
         purchase the property at fair market value after a specified portion of
         the lease has elapsed.

3.       Land and Buildings on Operating Leases:

         Land and  buildings on operating  leases  consisted of the following at
         December 31:

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

              Land                           $ 11,982,332      $ 10,812,849
              Buildings                        11,603,999         9,476,977
                                            --------------   ---------------
                                               23,586,331        20,289,826
              Less accumulated depreciation      (512,853 )        (140,380 )
                                            --------------   ---------------
                                               23,073,478        20,149,446
              Construction in progress                  --         1,161,616
                                            --------------   ---------------
                                               23,073,478        21,311,062
              Less allowance for loss on
                 land                            (197,466 )              --
                                            --------------   ---------------
                                             $ 22,876,012      $ 21,311,062
                                            ==============   ===============

         During the year ended December 31, 1998, the Partnership established an
         allowance  for  loss on  land of  $197,466,  relating  to the  property
         located in Minnetonka,  Minnesota. The tenant of this property declared
         bankruptcy  in October  1998 and  rejected  the lease  relating to this
         property.  The allowance represents the difference between the carrying
         value of the property at December 31, 1998, and the current estimate of
         net realizable value for this property.

         Generally,  the leases provide for escalating  guaranteed minimum rents
         throughout the lease term.  Income from these  scheduled rent increases
         is  recognized on a  straight-line  basis over the terms of the leases.
         For the years ended December 31, 1998,  1997, and 1996, the Partnership
         recognized $209,725,  $128,079, and $146, respectively,  of such rental
         income.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


3.       Land and Buildings on Operating Leases - Continued:

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

                1999                                 $2,236,248
                2000                                  2,238,166
                2001                                  2,239,693
                2002                                  2,314,933
                2003                                  2,377,365
                Thereafter                           26,771,320
                                               -----------------

                                                    $38,177,725
                                               =================

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

4.       Net Investment in Direct Financing Leases:

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

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

           Minimum lease payments
               receivable                       $12,564,207     $13,241,374
           Estimated residual values              1,420,667       1,773,526
           Less unearned income                  (8,047,562 )    (9,010,022 )
                                               ------------    ------------
           Net investment in direct financing
               leases                           $ 5,937,312     $ 6,004,878
                                               =============   =============




<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


4.       Net Investment in Direct Financing Leases - Continued:

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

                1999                                            $ 677,167
                2000                                              677,167
                2001                                              677,167
                2002                                              683,170
                2003                                              691,575
                Thereafter                                      9,157,961
                                                         -----------------

                                                              $12,564,207
                                                         =================

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

5.       Investment in Joint Venture:

         In  August  1998,  the   Partnership   entered  into  a  joint  venture
         arrangement,  Columbus  Joint Venture,  with  affiliates of the general
         partners, to construct and hold one restaurant property. As of December
         31, 1998, the Partnership had  contributed  $166,025,  to purchase land
         and pay construction  costs relating to the Property owned by the joint
         venture.  The  Partnership  has  agreed  to  contribute   approximately
         $225,811 in additional  construction costs to the joint venture.  As of
         December 31, 1998, the Partnership had a 39.93% interest in the profits
         and  losses of the joint  venture.  The  Partnership  accounts  for its
         investment  in  this  property   using  the  equity  method  since  the
         Partnership shares control with affiliates, and amounts relating to its
         investment are included in investment in joint ventures.  The following
         presents the combined,  condensed  financial  information for the joint
         venture at December 31:

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

             Land on operating lease and
                construction work in progress          $875,700          $ --
             Cash                                         3,935            --
             Liabilities                                477,945            --
             Partners' capital                          401,690            --




<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


6.       Syndication Costs:

         Syndication  costs  consisting  of  legal  fees,  commissions,  the due
         diligence  expense  reimbursement  fee,  printing  and  other  expenses
         incurred in connection with the offering totalled $76,882,  $2,717,452,
         and $1,395,666  for the years ended December 31, 1998,  1997, and 1996,
         respectively.  These  offering  expenses  were  charged to the  limited
         partners'  capital  accounts to reflect the net capital proceeds of the
         offering.

7.       Allocations and Distributions:

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

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

         Net sales  proceeds from the sale of a property not in  liquidation  of
         the  Partnership  generally  will be  distributed  first to the limited
         partners  in an amount  sufficient  to provide  them with the return of
         their invested capital  contributions,  plus their  cumulative  Limited
         Partners' 8% Return. The general partners will then receive a return of
         their capital contributions and, to the extent previously  subordinated
         and unpaid, a five percent interest in all net cash flow distributions.
         Any remaining net sales  proceeds will be distributed 95 percent to the
         limited partners and five percent to the general partners.

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



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


7.       Allocations and Distributions - Continued:

         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 percent to the limited partners and five percent
         to the general partners.

         During  the  years  ended  December  31,  1998,  1997,  and  1996,  the
         Partnership   declared   distributions   to  the  limited  partners  of
         $2,657,764, $1,310,885, and $57,846. 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 - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


8.       Income Taxes:

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

<TABLE>
<CAPTION>


                                                                    1998              1997             1996
                                                                 ------------      ------------     -----------
<S> <C>
                  Net income for financial
                      reporting purposes                          $2,302,322        $1,154,760        $ 26,910

                  Depreciation for tax reporting
                      purposes in excess of depreciation
                      for financial reporting purposes               (33,436 )         (45,009 )          (386 )
                      

                  Allowance for loss on land                         197,466                --              --

                  Direct financing leases recorded as
                      operating leases for tax reporting
                      purposes                                        81,211            28,084              --

                  Capitalization  of transaction  costs
                  for tax reporting purposes                          15,522                --              --

                  Capitalization    of   administrative
                      expenses for tax reporting purposes                 --                --           3,662

                  Equity in earnings of joint venture
                      for tax reporting purposes in excess
                      of  equity in  earnings  of joint              
                      venture for financial reporting purposes         7,168                --              --

                  Accrued rental income                             (209,725 )        (128,079 )          (146 )

                  Deferred rental income                             (73,028 )         281,415              --

                  Rents paid in advance                              (20,926 )          28,277              --

                  Allowance for doubtful accounts                     62,155                34              --

                  Amortization for financial reporting
                      purposes (less than) in excess of
                      amortization for tax reporting
                      purposes                                        (3,984 )            (732 )           183
                                                                 ------------      ------------     -----------

                  Net income for federal income tax
                      purposes                                    $2,324,745        $1,318,750       $  30,223
                                                                 ============      ============     ===========

</TABLE>


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


9.       Related Party Transactions:

         One of the individual general partners, James M. Seneff, Jr., is one of
         the principal  shareholders  of CNL Group,  Inc., the parent company of
         CNL  Securities  Corp.  and majority  stockholder of CNL Fund Advisors,
         Inc. James M. Seneff,  Jr. is director and chief  executive  officer of
         CNL  Securities  Corp.  and  is  director,  chairman  of the  board  of
         directors and chief  executive  officer of CNL Fund Advisors,  Inc. The
         other  individual  general partner,  Robert A. Bourne,  is director and
         president of CNL Securities  Corp.,  is treasurer,  director,  and vice
         chairman of the board of directors of CNL Fund Advisors, Inc.

         CNL  Securities  Corp.  was  entitled  to receive  selling  commissions
         amounting to 8.5% of the total amount  raised from the sale of units of
         limited  partnership  interest  for  services  in  connection  with the
         formation of the  Partnership  and the offering of units, a substantial
         portion of which was paid as commissions to other  broker-dealers.  For
         the years ended  December 31, 1998,  1997,  and 1996,  the  Partnership
         incurred  $72,611,  $2,186,535,  and $715,854,  respectively,  of which
         $67,539, $2,050,986, and $673,534, respectively, was reallowed to other
         broker-dealers.

         In  addition,  CNL  Securities  Corp.  was  entitled  to  receive a due
         diligence  expense  reimbursement fee equal to 0.5% of the total amount
         raised  from  the  sale of units of  limited  partnership  interest,  a
         portion of which was reallowed to other  broker-dealers  and from which
         all due diligence  expenses were paid. For the years ended December 31,
         1998, 1997, and 1996, the Partnership  incurred $4,271,  $128,620,  and
         $42,109,  respectively,  of such fees.  The majority of these fees were
         reallowed  to  other  broker-dealers  for  payment  of  bona  fide  due
         diligence expenses.

         CNL Fund Advisors,  Inc. was entitled to receive  acquisition  fees for
         services in finding,  negotiating and acquiring properties on behalf of
         the Partnership  equal to 4.5% of the total amount raised from the sale
         of units of limited partnership interest.  For the years ended December
         31, 1998, 1997, and 1996, the Partnership incurred $38,441, $1,157,577,
         and  $378,982,  respectively,  of such fees.  Such fees are included in
         land  and  buildings,   net  investment  in  direct  financing  leases,
         investment in joint venture and other assets.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


9.       Related Party Transactions - Continued:

         The  Partnership  and CNL  Fund  Advisors,  Inc.  have  entered  into a
         management agreement pursuant to which CNL Fund Advisors, Inc. receives
         annual management fees of one percent of the sum of gross revenues from
         properties  wholly  owned  by the  Partnership  and  the  Partnership's
         allocable share of gross revenues from joint  ventures.  The management
         fee,  which will not  exceed  fees which are  competitive  for  similar
         services in the same geographic area, may or may not be taken, in whole
         or in part as to any year, in the sole discretion of CNL Fund Advisors,
         Inc.  All or any  portion  of the  management  fee not  taken as to any
         fiscal year shall be deferred without interest and may be taken in such
         other fiscal year as CNL Fund Advisors,  Inc. shall determine.  For the
         years ended December 31, 1998, 1997, and 1996, the Partnership incurred
         $28,038, $11,842, and $12, respectively, for such management fees.

         During the years ended  December 31,  1998,  1997,  and 1996,  CNL Fund
         Advisors,  Inc.  and its  affiliates  provided  various  administrative
         services to the Partnership,  including services related to accounting;
         financial, tax and regulatory compliance and reporting;  lease and loan
         compliance; limited partners distributions and reporting; due diligence
         and  marketing;   and  investor  relations  (including   administrative
         services  in  connection  with  selling  units of  limited  partnership
         interest),  on a  day-to-day  basis.  The  expenses  incurred for these
         services were classified as follows for the years ended December 31:

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

         Syndication costs                 $  --      $ 212,279     $106,887
         General operating and
             administrative expenses     104,709         98,207        2,980
                                      -----------   ------------  -----------
                                       $ 104,709      $ 310,486     $109,867
                                      ===========   ============  ===========



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


9.       Related Party Transactions - Continued:

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

<TABLE>
<CAPTION>


                                                                              1998                1997
                                                                          --------------      -------------
<S> <C>
                Due to CNL Fund Advisors, Inc.
                    and its affiliates:
                       Expenditures incurred on
                          behalf of the Partnership                            $ 13,698            $ 1,737
                       Acquisition fees                                              --             29,757
                       Accounting and
                          administrative services                                 9,608              1,921
                       Management fees                                            2,379                556
                       Other                                                      7,090                 --
                                                                          --------------      -------------
                                                                                 32,775             33,971
                                                                          --------------      -------------

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

                                                                               $ 32,775          $ 118,231
                                                                          ==============      =============
</TABLE>


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


10.      Concentration of Credit Risk:

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

<TABLE>
<CAPTION>


                                                         1998               1997               1996
                                                     --------------     --------------    ---------------
<S> <C>
             Golden Corral Corp.                          $626,564           $241,395              $  --
             Foodmaker, Inc.                               509,456            240,261                 --
             IHOP Properties, Inc.                             N/A            152,343                 --
             Tiffany, L.L.C.                                   N/A            154,153                 --
             Platinum Rotisserie, L.L.C.                       N/A            133,591                 --
             Carrols Corporation                               N/A                N/A              1,373

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


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

             Golden Corral                                $784,292           $395,548              $  --
             Jack in the Box                               509,456            240,261                 --
             Boston Market                                 455,118            231,489                 --
             IHOP                                              N/A            152,343                 --
             Burger King                                       N/A                N/A              1,373
</TABLE>

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

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

         In 1998, Boston Chicken,  Inc.,  Finest  Foodservice,  L.L.C.,  and WMJ
         Texas, Inc., the tenants of three of the Boston Market properties filed
         for  bankruptcy  and rejected the lease  relating to one property.  The
         Partnership  will not  recognize  any rental  income  relating  to this
         property  until a new tenant for the property is located,  or until the
         property is sold and


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


10.      Concentration of Credit Risk - Continued:

         the proceeds from such a sale are reinvested in an additional property.
         While the  tenants  have not  rejected or affirmed  the  remaining  two
         leases,  there can be no assurance  that some or all of the leases will
         not be rejected in the future. The lost revenues resulting from the one
         lease that was rejected, as described above, and the possible rejection
         of the remaining two leases could have an adverse effect on the results
         of  operations  of the  Partnership  if the  Partnership  is  unable to
         re-lease these Properties in a timely manner.  The General Partners are
         currently  seeking  either new tenant or purchaser for the one rejected
         Property.

11.      Subsequent Event:

         On March 11, 1999, the  Partnership  entered into an Agreement and Plan
         of Merger with CNL American Properties Fund, Inc. ("APF"),  pursuant to
         which the Partnership would be merged with and into a subsidiary of APF
         (the  "Merger").  As  consideration  for the Merger,  APF has agreed to
         issue 3,299,149  shares of its common stock, par value $0.01 per shares
         (the "APF  Shares")  which,  for the  purposes  of  valuing  the merger
         consideration,  have been  valued by APF at $10.00 per APF  Share,  the
         price paid by APF  investors in APF's most recent public  offering.  In
         order to assist the general  partners in evaluating the proposed merger
         consideration,  the general partners retained Valuation  Associates,  a
         nationally  recognized  real estate  appraisal  firm,  to appraise  the
         Partnership's   restaurant  property  portfolio.   Based  on  Valuation
         Associates'  appraisal,  the Partnership's property portfolio and other
         assets were valued on a going  concern basis  (meaning the  Partnership
         continues unchanged) at $32,493,818 as of December 31, 1998. Legg Mason
         Wood Walker,  Incorporated has rendered a fairness opinion that the APF
         Share consideration,  payable by APF, is fair to the Partnership from a
         financial  point of view.  The APF Shares are expected to be listed for
         trading  on  the  New  York  Stock  Exchange   concurrently   with  the
         consummation of the Merger, and, therefore, would be freely tradable at
         the option of the former limited partners.  At a special meeting of the
         partners  that is  expected  to be held in the third  quarter  of 1999,
         limited  partners  holding  in  excess  of  50%  of  the  Partnership's
         outstanding limited partnership interests must approve the Merger prior
         to  consummation  of the  transaction.  The general  partners intend to
         recommend  that the  limited  partners of the  Partnership  approve the
         Merger. In connection with their  recommendation,  the general partners
         will  solicit  the  consent  of the  limited  partners  at the  special
         meeting.  If the limited  partners  reject the Merger,  the Partnership
         will  bear  the  portion  of  the  transaction  costs  based  upon  the
         percentage  of "For"  votes  and the  general  partners  will  bear the
         portion  of  such  transaction  costs  based  upon  the  percentage  of
         "Against" votes and abstentions.



<PAGE>


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

         None.



                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

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

         James M. Seneff, Jr., age 52, is a principal  stockholder of CNL Group,
Inc., a diversified  real estate company,  and has served as its Chairman of the
Board of Directors,  a director and Chief Executive  Officer since its formation
in 1980. Mr. Seneff has been Chairman of the Board of Directors,  director,  and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979. Mr.
Seneff also has held the position of Chairman of the Board of  Directors,  Chief
Executive  Officer,   President  and  director  of  CNL  Management  Company,  a
registered investment advisor,  since its formation in 1976, has served as Chief
Executive  Officer,  Chairman  of the Board  and a  director  of CNL  Investment
Company,  has served as Chief Executive  Officer, a director and Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc., a publicly-traded REIT,
listed on the NYSE, since 1992,  served as Chief Executive  Officer,  a director
and  Chairman of the Board of Directors of CNL Realty  Advisors,  Inc.  from its
inception in May 1992 through  December  1997, at which time such company merged
with  Commercial  Net Lease  Realty,  Inc.,  and has held the  position of Chief
Executive  Officer,  Chairman of the Board and a director  of CNL  Institutional
Advisors, Inc., a registered investment advisor, since its inception in December
1990.  Mr.  Seneff  has  served as  Chairman  of the Board of  Directors  of CNL
American  Properties  Fund, Inc. since December 1994 and as a director and Chief
Executive  Officer  since May 1994.  Mr.  Seneff has served as  Chairman  of the
Board,  Chief Executive Officer and a director of CNL Fund Advisors,  Inc. since
March 1994.  Mr.  Seneff has served as Chairman  of the Board,  Chief  Executive
Officer and a director of CNL Hospitality  Properties,  Inc. since June 1996 and
of CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also served
as Chairman of the Board,  Chief Executive  Officer and a director of CNL Health
Care  Properties,  Inc. since  December 1997 and CNL Health Care Advisors,  Inc.
since July 1997. Mr. Seneff previously served on the Florida State Commission on
Ethics  and is a  former  member  and past  Chairman  of the  State  of  Florida
Investment  Advisory Council,  which advises the Florida Board of Administration
investments for various Florida employee  retirement funds. The Florida Board of
Administration,  Florida's  principal  investment  advisory and money management
agency,  oversees the  investment of more then $60 billion of retirement  funds.
Mr.  Seneff  has  served as a member of the board of  directors  of First  Union
National  Bank of  Florida  since  May 1998 and has  served  as a member  of the
Orlando Advisory Board of First Union National Bank of Florida since March 1994.
Since 1971,  Mr.  Seneff has been active in the  acquisition,  development,  and
management  of real  estate  projects  and,  directly  or through an  affiliated
entity,  has  served as a general  partner  or joint  venturer  in over 100 real
estate ventures involved in the financing, acquisition, construction, and rental
of restaurants,  office buildings,  apartment complexes,  hotels, and other real
estate.  Included in these real estate ventures are  approximately  65 privately
offered  real  estate  limited  partnerships  in which Mr.  Seneff,  directly or
through an affiliated  entity,  serves or has served as a general partner.  Also
included are CNL Income Fund,  Ltd.,  CNL Income Fund II, Ltd.,  CNL Income Fund
III,  Ltd.,  CNL Income Fund IV, Ltd.,  CNL Income Fund V, Ltd., CNL Income Fund
VI, Ltd., CNL Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund
IX, Ltd.,  CNL Income Fund X, Ltd.,  CNL Income Fund XI,  Ltd.,  CNL Income Fund
XII,  Ltd.,  CNL Income Fund XIII,  Ltd.,  CNL Income Fund XIV, Ltd., CNL Income
Fund XV, Ltd.,  CNL Income Fund XVI,  Ltd. and CNL Income Fund XVII,  Ltd.  (the
"CNL Income Fund  Partnerships"),  public real estate limited  partnerships with
investment  objectives similar to those of the Partnership,  in which Mr. Seneff
serves as a  general  partner.  Mr.  Seneff  received  his  degree  in  Business
Administration from Florida State University in 1968.

         Robert A.  Bourne,  age 51, is  President  and  Treasurer of CNL Group,
Inc.,  President,  Treasurer,  a director,  and a  registered  principal  of CNL
Securities  Corp.,  President,  Treasurer,  and a  director  of  CNL  Investment
Company,  and  Chief  Investment  Officer,  a  director  and  Treasurer  of  CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne served
as President of CNL Institutional  Advisor,  Inc. from the date of its inception
through  July 1997.  Mr.  Bourne  served as President  of  Commercial  Net Lease
Realty,  Inc.  from July 1992 through  February  1996,  served as Secretary  and
Treasurer from February 1996 through December 1997, and has served as a director
since July 1992 and as Vice  Chairman of the Board of Directors  since  February
1996. In addition,  Mr. Bourne served as President of CNL Realty Advisors,  Inc.
from May 1992 through  February  1996,  served as Treasurer  from  February 1996
through  December 1997,  served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from  February 1996 through  December  1997, at
which time such company merged with Commercial Net Lease Realty, Inc. Mr. Bourne
has served as a Vice  Chairman of the Board of  Directors  and  Treasurer of CNL
American  Properties  Fund,  Inc.  since February 1999, has served as a director
since May 1994 and previously served as President from May 1994 through February
1999. Mr. Bourne has served as a director of CNL Fund Advisors, Inc. since March
1994, has served as Treasurer and Vice Chairman of the Board of Directors  since
September  1997,  and  previously  served as  President  from March 1994 through
September  1997.  Mr.  Bourne has  served as  President  and a  director  of CNL
Hospitality  Properties,  Inc. since June 1996 and of CNL Hospitality  Advisors,
Inc.  since January 1997. Mr. Bourne has served as President and director of CNL
Health Care  Properties,  Inc. since December 1997 and CNL Health Care Advisors,
Inc. since July 1997. Mr. Bourne,  who joined CNL Securities  Corp. in 1979, has
participated  as a general  partner or joint  venturer  in over 100 real  estate
ventures  involved in the financing,  acquisition,  construction,  and rental of
restaurants,  office  buildings,  apartment  complexes,  hotels,  and other real
estate.  Included in these real estate ventures are  approximately  64 privately
offered  real  estate  limited  partnerships  in which Mr.  Bourne,  directly or
through an affiliated  entity,  serves or has served as a general partner.  Also
included  are the CNL Income  Fund  Partnerships,  public  real  estate  limited
partnerships with investment objectives similar to those of the Partnership,  in
which  Mr.  Bourne  serves as a  general  partner.  Mr.  Bourne  formerly  was a
certified public  accountant with Coopers & Lybrand and a partner in the firm of
Bourne & Rose, P.A. Mr. Bourne received a B.A. in Accounting,  with honors, from
Florida State University in 1970.

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

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

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

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

         Curtis B. McWilliams,  age 43, joined CNL Group, Inc. in April 1997 and
currently serves as an Executive Vice President. In addition, Mr. McWilliams has
served  as  President  of  CNL  Fund  Advisors,  Inc.  and as  President  of the
Restaurant  and Financial  Services  Groups within CNL Group,  Inc.  since April
1997. Mr.  McWilliams has served as President of CNL American  Properties  Fund,
Inc. since February 1999 and previously  served as Executive Vice President from
February 1998 through February 1999. From September 1983 through March 1997, Mr.
McWilliams  was employed by Merrill  Lynch & Co.,  most  recently as Chairman of
Merrill  Lynch's  Private  Advisory  Services until March 1997.  Mr.  McWilliams
received a B.S.E. in Chemical  Engineering from Princeton University in 1977 and
a Masters of Business  Administration  with a concentration  in finance from the
University of Chicago in 1983.

         John T. Walker,  age 40, has served as Executive  Vice President of CNL
American  Properties  Fund, Inc. since January 1996, as Chief Operating  Officer
since March 1995, and previously  served as Senior Vice President since December
1994. In addition, Mr. Walker has served as Executive Vice President of CNL Fund
Advisors, Inc. since January 1996, Chief Operating Officer since April 1995, and
previously  served as Senior Vice President  from November 1994 through  January
1996. In addition,  Mr. Walker  previously served as Executive Vice President of
CNL Hospitality  Properties,  Inc. and CNL Hospitality  Advisors,  Inc. From May
1992 to May 1994, Mr. Walker, a certified public accountant,  was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc.,   a  cable   television   network   (subsequently   acquired   by  Gaylord
Entertainment),   where  he  was   responsible   for   overall   financial   and
administrative  management  and planning.  From January 1990 through April 1992,
Mr. Walker was Chief  Financial  Officer of the First Baptist Church in Orlando,
Florida.  From  April  1984  through  December  1989,  he was a  partner  in the
accounting firm of Chastang, Ferrell & Walker, P.A., where he was the partner in
charge of audit and consulting services, and from 1981 to 1984, Mr. Walker was a
Senior  Consultant/Audit  Senior at Price Waterhouse.  Mr. Walker is a Cum Laude
graduate of Wake Forest University with a B.S. in Accountancy and is a certified
public accountant.

         Lynn E. Rose,  age 50, a  certified  public  accountant,  has served as
Secretary of CNL American  Properties  Fund, Inc. since December 1994 and served
as Treasurer from December 1994 through  February 1999. Ms. Rose has served as a
director  and  Secretary of CNL Fund  Advisors,  Inc.  since March 1994,  and as
Treasurer  from the date of its  inception  through June 30, 1997.  Ms. Rose has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer of
CNL Group, Inc. since December 1993, and served as Controller of CNL Group, Inc.
from 1987  until  December  1993.  In  addition,  Ms.  Rose has  served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She has
served as Chief Operating Officer, Vice President and Secretary of CNL Corporate
Services,  Inc. since November 1994. Ms. Rose also has served as Chief Financial
Officer and Secretary of CNL Institutional Advisors, Inc. since its inception in
1990, as Treasurer of CNL Realty Advisors,  Inc. from 1991 to February 1996, and
as Secretary and a director of CNL Realty Advisors,  Inc. since its inception in
1991 until  December 31, 1997, at which time CNL Realty  Advisors,  Inc.  merged
with Commercial Net Lease Realty, Inc. In addition, Ms. Rose served as Secretary
and Treasurer of Commercial  Net Lease Realty,  Inc. from 1992 to February 1996.
Ms. Rose also serves as Secretary and Treasurer of CNL  Hospitality  Properties,
Inc. and CNL Health Care  Properties,  Inc. and as  Secretary,  Treasurer  and a
director of CNL Hospitality  Advisors,  Inc. and CNL Health Care Advisors,  Inc.
Ms. Rose also  currently  serves as Secretary  for  approximately  50 additional
corporations.  Ms.  Rose  oversees  the  legal  compliance,  accounting,  tenant
compliance,  and reporting  for over 250  corporations,  partnerships  and joint
ventures.  Prior to joining CNL, Ms. Rose was a partner with Robert A. Bourne in
the accounting firm of Bourne & Rose, P.A.,  Certified Public  Accountants.  Ms.
Rose holds a B.A. in Sociology from the University of Central Florida.

         Jeanne A. Wall,  age 40, has served as Executive  Vice President of CNL
American  Properties  Fund,  Inc.  since  December  1994. Ms. Wall has served as
Executive  Vice  President of CNL Fund  Advisors,  Inc. since November 1994, and
previously  served as Vice President from March 1994 through  November 1994. Ms.
Wall has served as Chief Operating Officer of CNL Investment  Company and of CNL
Securities  Corp. since November 1994 and has served as Executive Vice President
of CNL  Investment  Company since January 1991.  Ms. Wall joined CNL  Securities
Corp. in 1984. In 1985, Ms. Wall became Vice  President of CNL Securities  Corp.
In 1987, she became Senior Vice President and in July 1997 she became  Executive
Vice  President of CNL  Securities  Corp. In this  capacity,  Ms. Wall serves as
national  marketing and sales director and oversees the national  marketing plan
for  the CNL  investment  programs.  In  addition,  Ms.  Wall  oversees  product
development,  partnership  administration  and  investor  services  for programs
offered  through  participating  brokers and  corporate  communications  for CNL
Group,  Inc.  and its  affiliates.  Ms.  Wall also has  served  as  Senior  Vice
President of CNL Institutional Advisors,  Inc., a registered investment advisor,
from 1990 to 1993,  as Vice  President of CNL Realty  Advisors,  Inc.  since its
inception in 1991 until  December 31, 1997,  at which time CNL Realty  Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., and served as Vice President
of  Commercial  Net Lease Realty,  Inc. from 1992 through  December 31, 1997. In
addition,  Ms.  Wall  serves as  Executive  Vice  President  of CNL  Hospitality
Properties,  Inc., CNL Hospitality  Advisors,  Inc., CNL Health Care Properties,
Inc.  and CNL Health  Care  Advisors,  Inc.  Ms.  Wall holds a B.A.  in Business
Administration  from  Linfield  College  and is a  registered  principal  of CNL
Securities  Corp.  Ms.  Wall  currently  serves as a trustee on the board of the
Investment Program Association and on the Direct Participation Program committee
for the National Association of Securities Dealers (NASD).

         Steven D.  Shackelford,  age 35, a  certified  public  accountant,  has
served as Chief Financial  Officer of CNL American  Properties  Fund, Inc. since
January 1997 and as Chief  Financial  Officer of CNL Fund  Advisors,  Inc. since
September  1996.  From  March 1995 to July 1996,  Mr.  Shackelford  was a senior
manager in the national office of Price  Waterhouse where he was responsible for
advising  foreign  clients  seeking to raise capital and a public listing in the
United  States.  From August  1992 to March 1995,  he served as a manager in the
Price Waterhouse,  Paris, France office serving several  multinational  clients.
Mr.  Shackelford  was an audit  staff and audit  senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse.  Mr. Shackelford received a B.A. in
Accounting,  with honors, and a Masters of Business  Administration from Florida
State University.


Item 11.  Executive Compensation

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


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         As of March 11,  1999,  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 11, 1999,  the beneficial
ownership interests of the General Partners in the Registrant.

<TABLE>
<CAPTION>

<S> <C>

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

      Limited Partnership Interests       James M. Seneff, Jr.      2,500 Units                        0.07%
                                          Robert A. Bourne          2,500 Units                        0.07%
                                                                                                 ============
                                                                                                       0.14%
                                                                                                 ============

</TABLE>

         Neither the General  Partners,  nor any of their  affiliates,  owns any
interest  in the  Registrant,  except as noted  above.  On March 11,  1999,  the
Registrant  entered  into an  Agreement  and Plan of  Merger  with CNL  American
Properties  Fund, Inc.  ("APF") pursuant to which the Registrant would be merged
with and into a subsidiary of APF (the "Merger").  For further  discussion,  see
Item 8. Financial Statements and Supplementary Data -- Note 11.
Subsequent Event.






<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, 1998,  exclusive of any  distributions  to which the General
Partners or their affiliates may be entitled in the event they purchase Units.

<TABLE>
<CAPTION>


                                                                                                 Amount Incurred
       Type of Compensation                                                                    For the Year Ended
            and Recipient                            Method of Computation                      December 31, 1998
      -----------------------                        ---------------------                    -------------------
<S> <C>
Selling  commissions  to  CNL  Securities     Commissions  of 8.5% per Unit on all     $72,611,   of  which   $67,539   was
Corp.,   as   managing   dealer   of  the     Units sold,  up to eight  percent of     reallowed to other broker-dealers
Partnership's offering of Units               which  may  be  reallowed  to  other
                                              dealers  with  respect to Units sold
                                              by such dealers.

Due diligence expense  reim-bursement fee     Fee equal to 0.5% of gross  offering     $4,271,  the  majority  of which was
to CNL Securities Corp.                       proceeds,  a portion of which may be     reallowed  to  other  broker-dealers
                                              reallowed to other  dealers and from     for the  payment  of bona  fide  due
                                              which  all  due  diligence  expenses     diligence expenses.
                                              will be paid.

Acquisition  fees  and  expenses  to  CNL     Fees   equal   to  4.5%   of   gross     Acquisition fees:  $38,441
Fund Advisors, Inc.                           offering   proceeds   to  CNL   Fund
                                              Advisors,  Inc., plus reimburse-ment     Acquisition                expenses:
                                              to the  General  Partners  and their     $35,842
                                              affiliates  for  expenses   actually
                                              incurred.

Reimbursement to CNL Fund Advisors,  Inc.     Operating  expenses  are  reimbursed     Operating   expenses   incurred   on
and affiliates for operating expenses         at the  lower of cost or 90  percent     behalf    of    the     Partnership:
                                              of  the  prevailing  rate  at  which     $89,969
                                              comparable  services could have been
                                              obtained  in  the  same   geographic     Accounting      and      administra-
                                              area.   Affiliates  of  the  General     tive services:  $104,709
                                              Partners  from  time to  time  incur
                                              certain   operating    expenses   on
                                              behalf of the  Partnership for which
                                              the   Partnership   reimburses   the
                                              affiliates without interest.


<PAGE>



                                                                                                 Amount Incurred
       Type of Compensation                                                                    For the Year Ended
            and Recipient                            Method of Computation                      December 31, 1998
      -----------------------                        ---------------------                    -------------------

Annual   management   fee  to  CNL   Fund     One  percent  of the  sum  of  gross                   $28,038
Advisors, Inc.                                revenues  (excluding  noncash  lease
                                              accounting    adjustments)    from
                                              Properties  wholly  owned  by  the
                                              Partnership plus the Partnership's
                                              allocable  share of gross revenues
                                              of joint  ventures  in  which  the
                                              Partnership is a co-venturer.  The
                                              management  fee,  which  will  not
                                              exceed   competi-tive   fees   for
                                              comparable  services  in the  same
                                              geographic area, may or may not be
                                              taken,  in  whole or in part as to
                                              any year,  in the sole  discretion
                                              of CNL Fund Advisors,  Inc. All or
                                              any portion of the  management fee
                                              not  taken as to any  fiscal  year
                                              shall be deferred without interest
                                              and may be  taken  in  such  other
                                              fiscal year as CNL Fund  Advisors,
                                              Inc. shall determine.

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

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



<PAGE>



                                                                                                 Amount Incurred
       Type of Compensation                                                                    For the Year Ended
            and Recipient                            Method of Computation                      December 31, 1998
      -----------------------                        ---------------------                    -------------------

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

    General    Partners'    share    of        Distributions    of   net   sales                    $ - 0 -
    Partnership   net  sales   proceeds        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>


         As discussed  above in Item 8. Financial  Statements and  Supplementary
Data -- Note 11.  Subsequent Event, the Registrant has entered into an Agreement
and Plan of  Merger,  dated  March  11,  1999,  with APF  pursuant  to which the
Registrant would be merged with and into a subsidiary of APF in exchange for the
issuance of APF Shares.  The APF Shares are expected to be listed for trading on
the New York Stock Exchange concurrently with the consummation of the Merger. If
the Merger is approved by Limited Partners holding units greater than 50% of the
outstanding  units of the  Registrant,  the General  Partners of the  Registrant
would receive certain  benefits.  For instance,  following the Merger,  James M.
Seneff, Jr. and Robert A. Bourne, the individual General Partners, will continue
to serve as directors of APF, with Mr. Seneff serving as Chairman and Mr. Bourne
serving as Vice Chairman. As APF directors, they may also be entitled to receive
stock options under any stock option plan adopted by APF.



<PAGE>


                                     PART IV

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

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

         1.  Financial Statements

                  Report of Independent Accountants

                  Balance Sheets at December 31, 1998 and 1997

                  Statements  of Income for the years ended  December  31, 1998,
                  1997, and 1996

                  Statements of Partners'  Capital for the years ended  December
                  31, 1998, 1997, and 1996

                  Statements  of Cash  Flows for the years  ended  December  31,
                  1998, 1997, and 1996

                  Notes to Financial Statements

         2.  Financial Statement Schedule

                  Schedule II - Valuation and Qualifying  Accounts for the years
                  ended December 31, 1998, 1997, and 1996

                  Schedule  III - Real Estate and  Accumulated  Depreciation  at
                  December 31, 1998

                  Notes  to  Schedule   III  -  Real   Estate  and   Accumulated
                  Depreciation at December 31, 1998

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

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

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

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

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

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

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

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

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

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

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



<PAGE>


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

                  27       Financial Data Schedule (Filed herewith.)

         (b)      The Registrant  filed no reports on Form 8-K during the period
                  October 1, 1998 through  December 31, 1998.


**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 27th day of
March, 1999.

                                          CNL INCOME FUND XVIII, LTD.

                                          By:      CNL REALTY CORPORATION
                                                   General Partner

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


                                          By:      ROBERT A. BOURNE
                                                   General Partner
                                                   /s/ Robert A. Bourne 
                                                   ROBERT A. BOURNE


                                          By:      JAMES M. SENEFF, JR.
                                                   General Partner

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


<PAGE>


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

<TABLE>
<CAPTION>


              Signature                                    Title                                   Date
              ---------                                    -----                                   ----
<S> <C>
/s/ Robert A. Bourne                       President,   Treasurer  and  Director              March 27, 1999
------------------------------------
Robert A. Bourne                           (Principal        Financial       and
                                           Accounting  Officer)

/s/ James M. Seneff, Jr.                   Chief  Executive  Officer,   Chairman              March 27, 1999
------------------------------------
James M. Seneff, Jr.                       and  Director  (Principal   Executive
                                           Officer)


</TABLE>


<PAGE>







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

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                  Years Ended December 31, 1998, 1997, and 1996

<TABLE>
<CAPTION>


                                                               Additions                         Deductions
                                                     -------------------------------     ----------------------------
                                    Collected
                                    or Deter-
                                    Balance at       Charged to       Charged to          Deemed          mined to       Balance
                                     Beginning        Costs and          Other           Uncollec-        be Col-         at End
    Year         Description          of Year         Expenses         Accounts            tible          lectible       of Year
   --------    -----------------   --------------   --------------   ---------------    -------------   -------------  ------------
<S> <C>
    1996       Allowance for
                   doubtful
                   accounts (a)          $    --         $    --           $    --  (b)      $   --          $    --         $   --
                                   ==============   ==============   ===============    =============   =============  ============

    1997       Allowance for
                   doubtful
                   accounts (a)          $    --         $    --          $     35  (b)      $   --          $    --        $    35
                                   ==============   ==============   ===============    =============   =============  ============

    1998       Allowance for
                   doubtful
                   accounts (a)         $     35         $    --         $  70,921  (b)      $   --        $   8,767      $  62,189
                                   ==============   ==============   ===============    =============   =============  ============
</TABLE>


         (a)  Deducted from receivables on the balance sheet.

         (b) Reduction of rental and other income.




<PAGE>

<TABLE>
<CAPTION>


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

                                                  SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                                                      December 31, 1998
<S> <C>


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

    Arby's Restaurant:
      Lexington, North Carolina            -              $210,977              -            -         -    

    Bennigan's Restaurant:
      Sunrise, Florida                     -             1,147,705        925,087            -         -    

    Boston Market Restaurants:
      Raleigh, North Carolina              -               702,215        599,388            -         -    
      Timonium, Maryland                   -               769,653              -      429,774         -    
      San Antonio, Texas                   -               677,584              -      223,333         -    
      Minnetonka, Minnesota (i)            -               574,766              -            -         -    

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

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

    Golden Corral Family
     Steakhouse Restaurants:
      Houston, Texas                       -               889,003              -      844,282         -    
      Stow, Ohio                           -               489,799              -            -         -    
      Galveston, Texas                     -               687,946              -      836,386         -    
      Elizabethtown, Kentucky              -               488,945              -    1,045,207         -    
      Destin, Florida                      -               565,354              -    1,022,196         -    

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

    IHOP Restaurant:
      Santa Rosa, California               -               501,216              -            -         -    

    Jack in the Box Restaurants:
      Centerville, Texas                   -               261,913              -      543,079         -    
      Echo Park, California                -               674,647              -      659,358         -    
      Henderson, Nevada                    -               522,741              -      608,548         -    
      Houston, Texas                       -               778,706              -      589,840         -    

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

                                                        $11,982,332     $4,369,154   $7,234,845    $    -   
                                                       ============  =============  ===========  ======== 


Properties the Partnership
  Invested in Under Direct
  Financing Leases:

    Arby's Restaurant:
      Lexington, North Carolina            -                     -       $459,004            -         -    

    Black-eyed Pea Restaurant:
      Atlanta, Georgia                     -                     -              -      653,737         -    

    Golden Corral Family
     Steakhouse Restaurant:
      Stow, Ohio                           -                     -      1,280,986            -         -    

    IHOP Restaurants:
      Bridgeview, Illinois                 -               354,227      1,151,199            -         -    
      Santa Rosa, California               -                     -        859,306            -         -    

    On the Border Restaurant:
      San Antonio, Texas                   -                     -              -    1,288,148         -    
                                                      ------------  -------------  -----------  --------

                                           -              $354,227     $3,750,495   $1,941,885         -
                                                      ============  =============  ===========  ========

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

     Arby's Restaurant:
       Columbus, Ohio                      -              $406,975              -     $468,725         -    
                                                      ============  =============  ===========  ======== 




                                
         Gross Amount at Which                                                    Life on Which
        Carried at Close of Period (c)                                            Depreciation in            
 -----------------------------------------                   Date                  Latest Income                     
               Buildings and                Accumulated     of Con-      Date       Statement is      
    Land       Improvements     Total       Depreciation   struction   Acquired      Computed        
 ------------  ------------  -------------  -----------    ----------  --------    -------------     
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
  $210,977            (f)      $210,977            -           1997     07/97          (d)             
                                                                                                
                                                                                                
 1,147,705       925,087      2,072,792       16,677           1982     06/98          (b)             
                                                                                                
                                                                                                
   702,215       599,388      1,301,603       38,690           1994     01/97          (b)             
   769,653       429,774      1,199,427       20,976           1997     05/97          (b)             
   677,584       223,333        900,917       10,159           1997     04/97          (b)             
   574,766            (f)       574,766            -           1997     04/97          (d)             
                                                                                                
                                                                                                
   262,498       663,421        925,919       44,420           1994     12/96          (b)             
                                                                                                
                                                                                                
 1,029,236     1,598,376      2,627,612       53,378           1994     12/97          (b)             
                                                                                                
                                                                                                
                                                                                                
   889,003       844,282      1,733,285       49,223           1997     12/96          (b)             
   489,799            (f)       489,799            -           1997     04/97          (d)             
   687,946       836,386      1,524,332       45,107           1997     01/97          (b)             
   488,945     1,045,207      1,534,152       41,645           1997     05/97          (b)             
   565,354     1,022,196      1,587,550       30,623           1998     09/97          (b)             
                                                                                                
                                                                                                
   525,891       582,882      1,108,773       23,267           1981     10/97          (b)             
                                                                                                
                                                                                                
   501,216            (f)       501,216            -           1997     05/97          (d)             
                                                                                                
                                                                                                
   261,913       543,079        804,992       30,737           1997     01/97          (b)             
   674,647       659,358      1,334,005       33,187           1997     01/97          (b)             
   522,741       608,548      1,131,289       30,407           1997     01/97          (b)             
   778,706       589,840      1,368,546       24,994           1997     05/97          (b)             
                                                                                                
                                                                                                
   221,537       432,842        654,379       19,363           1997     04/97          (b)             
-----------  ------------  -------------  -----------                                           
                                                                                                
$11,982,332   $11,603,999    $23,586,331     $512,853                                           
===========  ============  =============  ===========                                           
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
         -            (f)            (f)          (d)          1997     07/97          (d)             
                                                                                                
                                                                                                
         -            (f)            (f)          (d)          1991     03/97          (d)             
                                                                                                
                                                                                                
                                                                                                
         -            (f)            (f)          (d)          1997     04/97          (d)             
                                                                                                
                                                                                                
        (f)           (f)            (f)          (d)          1972     07/97          (e)             
         -            (f)            (f)          (d)          1994     05/97          (d)             
                                                                                                
                                                                                                
         -            (f)            (f)          (d)          1997     04/97          (d)             
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
  $406,975      $468,725       $875,700           (h)          (g)      08/98          (h)             
==========  ============  =============                                                         
                                                                                                
                                                                                                
                                                                                                
</TABLE>





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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 1998



(a)      Transactions in real estate and  accumulated  depreciation during 1998,
         1997, and 1996 are summarized as follows:

<TABLE>
<CAPTION>

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

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

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

                  Balance, December 31, 1997                                       21,451,442               140,380
                  Acquisitions                                                      2,134,889                    --
                  Depreciation expense (i)                                                 --               372,473
                                                                               ----------------      -----------------

                  Balance, December 31, 1998                                     $ 23,586,331           $   512,853
                                                                               ================      =================

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

                  Balance, December 31, 1997                                     $        --            $       --
                  Acquisitions                                                       875,700                    --
                  Depreciation expense (h)                                                --                    --
                                                                               ----------------      -----------------

                  Balance, December 31, 1998                                      $  875,700              $     --
                                                                               ================      =================

</TABLE>


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

(c)      As of December 31, 1998, the aggregate cost of the Properties  owned by
         the  Partnership  and the joint venture for federal income tax purposes
         was  $27,560,145  and  $874,700,  respectively.  All of the  leases are
         treated as operating leases for federal income tax purposes.

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


<PAGE>


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

  NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED

                                December 31, 1998


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

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

(g)      Scheduled for completion in 1999.

(h)      Property was not placed in service as of December 31, 1998;  therefore,
         no depreciation was taken.

(i)      For  financial  reporting  purposes,  the  undepreciated  cost  of  the
         Property in Minnetonka,  Minnesota,  was written down to net realizable
         value  due to an  anticipated  impairment  in  value.  The  Partnership
         recognized the impairment by recording an allowance for loss on land in
         the  amount of  $197,466  at  December  31,  1998.  The  tenant of this
         Property  declared  bankruptcy  and rejected the lease relating to this
         Property.   The  impairment  at  December  31,  1998,   represents  the
         difference between the Property's  carrying value at December 31, 1998,
         and the estimated net realizable value of the Property. The cost of the
         Property  presented  on this  schedule is the gross amount at which the
         Property was carried at December 31, 1998,  excluding the allowance for
         loss on land.





<PAGE>






                                    EXHIBITS


<PAGE>







                                  EXHIBIT INDEX


Exhibit Number

         **3.1    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,
                  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.  (Filded  as  Exhibit  3.2 to  Registrant's
                  Registration   Statement   on  Form   S-11  No.   33-90998-01,
                  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   Form of  Joint  Venture  Agreement  for  Joint  Ventures  with
                  Unaffiliated   Entities   (Filed  as   Exhibit   10.2  to  the
                  Registrant's   Registration   Statement  on  Form  S-11,   No.
                  33-90998, incorporated herein by reference.)

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

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

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

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

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

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

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

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

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

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

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

         27       Financial Data Schedule (Filed herewith.)


**previously filed