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 0-19144

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

                   Florida                            59-2922954
       (State or other jurisdiction of   (I.R.S. Employer Identification No.)
       incorporation or organization)

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

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

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

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

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

              Units of limited partnership interest ($500 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 70,000 units of limited
partnership  interest  (the  "Units") on Form S-11 under the  Securities  Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $500 per Unit.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None


<PAGE>




                                     PART I


Item 1.  Business

         CNL Income Fund VI, Ltd. (the  "Registrant" or the  "Partnership") is a
limited  partnership  which was  organized  pursuant to the laws of the State of
Florida on August 17, 1988. 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 June 8, 1989, the Partnership
offered  for  sale up to  $35,000,000  in  limited  partnership  interests  (the
"Units") (70,000 Units at $500 per Unit) pursuant to a registration statement on
Form S-11 under the Securities Act of 1933, as amended,  effective  December 16,
1988.  The offering  terminated  on January 22, 1990,  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  selected   national  and  regional   fast-food  and  family-style
restaurant  chains (the  "Restaurant  Chains").  Net proceeds to the Partnership
from its  offering of Units,  after  deduction  of  organizational  and offering
expenses,  totalled  $30,975,000,  and  were  used  to  acquire  42  Properties,
including  interests  in four  Properties  owned by joint  ventures in which the
Partnership  is a  co-venturer.  During the year ended  December 31,  1994,  the
Partnership  sold its Properties in Batesville and Heber Springs,  Arkansas,  to
the tenant and  reinvested  the net sales proceeds in a Jack in the Box Property
in Dallas,  Texas,  and a Jack in the Box  Property in Yuma,  Arizona,  which is
owned  as  tenants-in-common  with an  affiliate  of the  General  Partners.  In
addition,  during the year ended  December 31, 1995,  the  Partnership  sold its
Property in Little  Canada,  Minnesota,  and  reinvested the majority of the net
sales proceeds in a Denny's Property in Broken Arrow, Oklahoma.  During the year
ended  December 31, 1996,  the  Partnership  reinvested  the remaining net sales
proceeds  from  the sale of the  Property  in  Little  Canada,  Minnesota,  in a
Property  located in Clinton,  North  Carolina,  with  affiliates of the General
Partners as  tenants-in-common.  Also,  during the year ended December 31, 1996,
the  Partnership  sold its  Property  in  Dallas,  Texas.  During the year ended
December 31, 1997,  the  Partnership  reinvested the net sales proceeds from the
sale of the  Property in Dallas,  Texas,  in a  Bertucci's  Property  located in
Marietta, Georgia. In addition, during 1997, the Partnership sold its Properties
in Plattsmouth,  Nebraska;  Venice,  Florida;  Naples,  Florida,  and Whitehall,
Michigan, and the Property in Yuma, Arizona, which was held as tenants-in-common
with an affiliate of the General Partners, and reinvested a portion of these net
sales  proceeds  in two IHOP  Properties,  one in each of Elgin,  Illinois,  and
Manassas,   Virginia,   and  in  a  Property  in   Vancouver,   Washington,   as
tenants-in-common with affiliates of the General Partners. In addition, Show Low
Joint Venture, a joint venture in which the Partnership is a co-venturer with an
affiliate of the General Partners,  sold its Property in Show Low, Arizona.  The
joint venture  reinvested  the net sales  proceeds in a Property in  Greensboro,
North Carolina.  During 1998, the Partnership  reinvested the net sales proceeds
from  the  sales of the  Properties  in  Whitehall,  Michigan  and  Plattsmouth,
Nebraska in one Property in Overland  Park,  Kansas and one Property in Memphis,
Tennessee,  as  tenants-in-common,  with affiliates of the General Partners.  In
addition,  in 1998,  the  Partnership  sold its  Property  in  Deland,  Florida,
Liverpool, New York, Melbourne, Florida, and Bellevue, Nebraska. The Partnership
reinvested  the net sales  proceeds  from the sales of the  Property  in Deland,
Florida in one Property in Fort Myers,  Florida, as  tenants-in-common,  with an
affiliate of the General  Partners and the Partnership  reinvested the net sales
proceeds from the sales of the  Properties  in Melbourne,  Florida and Bellevue,
Nebraska  in two joint  ventures,  Warren  Joint  Venture  and  Melbourne  Joint
Venture,  respectively,  to each  purchase  and  hold one  restaurant  Property.
Generally,  the  Properties  are leased on a  triple-net  basis with the lessees
responsible  for all repairs and  maintenance,  property  taxes,  insurance  and
utilities.  As a result of the above transactions,  as of December 31, 1998, the
Partnership owned 42 Properties,  including interests in six Properties owned by
joint  ventures in which the  Partnership is a co-venturer  and five  Properties
owned with affiliates as tenants-in-common.

         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 12.
Subsequent Event.

         In the event that the General  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  or joint  venture
purchase options granted to certain lessees.

Leases

         Although there are variations in the specific terms of the leases,  the
following  is  a  summarized   description  of  the  general  structure  of  the
Partnership's leases. The leases of the Properties owned by the Partnership, the
joint  ventures in which the  Partnership  is a co-venturer  and the  properties
owned with affiliates as  tenants-in-common  provide for initial terms,  ranging
from five to 20 years (the average being 18 years),  and expire between 2003 and
2018. All leases are on a triple-net basis, with the lessees responsible for all
repairs and maintenance,  property taxes, insurance and utilities. The leases of
the  Properties  provide for minimum  base annual  rental  payments  (payable in
monthly installments) ranging from approximately $30,000 to $222,800. Generally,
the leases provide for  percentage  rent based on sales in excess of a specified
amount. In addition,  some of the leases provide that,  commencing in the fourth
to sixth lease year, the percentage  rent will be an amount equal to the greater
of the  percentage  rent  calculated  under the  lease  formula  or a  specified
percentage  (ranging  from one to five  percent) of the purchase  price or gross
sales.

         Generally,  the leases of the Properties provide for two, three or four
five-year  renewal  options  subject  to the same  terms and  conditions  as the
initial  lease.  Certain  lessees  also have been  granted  options to  purchase
Properties at the  Property's  then fair market value,  or pursuant to a formula
based on the original purchase price of the Property,  after a specified portion
of the lease term has elapsed.

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

         During  1998,   the  lease   relating  to  the  Church's   Property  in
Gainesville,  Florida was amended to provide for rent reductions  effective July
1997 through June 2002,  at which time the rental  payments  will revert back to
the original agreement.

Major Tenants

         During 1998, four lessees of the Partnership and its consolidated joint
venture,  Golden  Corral  Corporation,  Restaurant  Management  Services,  Inc.,
Mid-America  Corporation,  and IHOP Properties  Inc., each contributed more than
ten percent of the  Partnership's  total rental income  (including rental income
from the Partnership's  consolidated joint venture in which the Partnership is a
co-venturer  and the  Partnership's  share of the  rental  income  from the five
properties  owned by  unconsolidated  joint venturers and five Properties  owned
with affiliates as  tenants-in-common).  As of December 31, 1998,  Golden Corral
Corporation was the lessee under leases relating to five restaurants, Restaurant
Management  Services,  Inc.  was the  lessee  under  leases  relating  to  seven
restaurants,  Mid-America  Corporation  was the lessee under leases  relating to
four restaurants,  and IHOP Properties Inc. was the lessee under leases relating
to five  restaurants.  It is  anticipated  that,  based  on the  minimum  rental
payments  required  by the  leases,  these four  lessees  each will  continue to
contribute  more than ten percent of the  Partnership's  total rental  income in
1999. In addition,  three  Restaurant  Chains,  Golden Corral Family  Steakhouse
Restaurants  ("Golden  Corral"),  Burger King and IHOP,  each accounted for more
than ten percent of the Partnership's total rental income in 1998 (including the
Partnership's  consolidated  joint  venture and the  Partnership's  share of the
rental income from the five Properties owned by unconsolidated joint ventures in
which the Partnership is a co-venturer and five Properties owned with affiliates
as  tenants-in-common).  In 1999, it is anticipated  that these three Restaurant
Chains  each  will  continue  to  account  for  more  than  ten  percent  of the
Partnership's total rental income to which the Partnership is entitled under the
terms of the leases.  Any failure of these  lessees or  Restaurant  Chains could
materially  affect the  Partnership's  income if the  Partnership is not able to
re-lease  the  Properties  in a timely  manner.  No  single  tenant  or group of
affiliated tenants lease Properties with an aggregate carrying value,  excluding
acquisition fees and certain  acquisition  expenses,  in excess of 20 percent of
the total assets of the Partnership.

Joint Venture Arrangements

         The  Partnership  has entered into a joint  venture  arrangement,  Caro
Joint Venture, with an unaffiliated entity to purchase and hold one Property. In
addition,   the  Partnership  has  entered  into  five  separate  joint  venture
arrangements,  Auburn Joint  Venture,  Show Low Joint Venture,  Asheville  Joint
Venture,  Melbourne Joint Venture, and Warren Joint Venture,  with affiliates of
the General  Partners,  to purchase and hold five Properties  through such joint
ventures.  The joint venture  arrangements  provide for the  Partnership and its
joint venture  partners to share in all costs and benefits  associated  with the
joint venture in accordance with their  respective  percentage  interests in the
joint venture.  The Partnership  and its joint venture  partners are jointly and
severally liable for all debts,  obligations and other liabilities of each joint
venture.

         Each  joint  venture  has an initial  term of 20 years  and,  after the
expiration of the initial term,  continues in existence from year to year unless
terminated at the option of either joint venturer or by an event of dissolution.
Events of dissolution  include the bankruptcy,  insolvency or termination of any
joint  venturer,  sale of the  Property  owned by the joint  venture  and mutual
agreement of the Partnership and its joint venture partner to dissolve the joint
venture.

         The Partnership has management control of Caro Joint Venture and shares
management  control equally with  affiliates of the General  Partners for Auburn
Joint Venture, Show Low Joint Venture,  Asheville Joint Venture, Melbourne Joint
Venture,  and Warren Joint Venture.  The joint venture agreements  restrict each
venturer's  ability  to sell,  transfer  or assign  its joint  venture  interest
without  first  offering it for sale to its joint venture  partner,  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 Auburn Joint Venture,  Show Low Joint
Venture, Caro Joint Venture,  Asheville Joint Venture,  Melbourne Joint Venture,
and Warren Joint Venture is distributed 3.9%, 36.0%, 66.14%,  14.46%, 50 percent
and 64.29%,  respectively,  to the Partnership and the balance is distributed to
each of the other 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.

         The  Partnership has also entered into agreements to hold a Property in
Vancouver,  Washington and a Property in Clinton Tennessee, as tenants-in-common
with  affiliates  of the  General  Partners.  The  agreement  provides  for  the
Partnership  and the  affiliate  to  share in the  profits  and  losses  of each
Property  in  proportion  to  each  co-venturer's   percentage   interest.   The
Partnership  owns a 23.04% and 18 percent interest in the Property in Vancouver,
Washington and a Property in Clinton, Tennessee, respectively.

         During January 1998, the Partnership entered agreements to hold an IHOP
Property in Overland Park, Kansas and an IHOP Property in Memphis, Tennessee, as
tenants-in-common,  with  affiliates  of the General  Partners.  The  agreements
provide  for the  Partnership  and the  affiliates  to share in the  profits and
losses of the Properties and net cash flow from the Properties, in proportion to
each co-venturer's  percentage interest. The Partnership owns a 34.74% and 46.2%
interest in the  Properties  in Overland  Park,  Kansas and Memphis,  Tennessee,
respectively.

         In addition,  during 1998, the Partnership entered into an agreement to
hold a Bennigan's  Property in Ft. Myers,  Florida, as  tenants-in-common,  with
affiliates of the General Partners.  The agreement  provides for the Partnership
and the  affiliates  to share in the profits and losses of the  Property and net
cash flow from the Properties,  in proportion to each  co-venturer's  percentage
interest.  The  Partnership  owns an 85% interest in the Property in Ft.  Myers,
Florida.

Certain Management Services

         CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain  services  relating to management of the  Partnership and its Properties
pursuant to a management  agreement 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 and the Property held as tenants-in-common with an affiliate,  but
not in excess of competitive fees for comparable services.  Under the management
agreement, the management fee is subordinated to receipt by the Limited Partners
of an aggregate,  ten percent,  cumulative  noncompounded annual return on their
adjusted  capital  contributions  (the "10%  Preferred  Return"),  calculated in
accordance   with  the   Partnership's   limited   partnership   agreement  (the
"Partnership  Agreement").  In any year in which the Limited  Partners  have not
received the 10% Preferred Return, no property management fee will be paid.

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

Employees

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


Item 2.  Properties

         As of December 31, 1998,  the  Partnership  owned,  either  directly or
through  joint  venture  arrangements,  42  Properties  located  in  17  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  respective
costs, including acquisition fees and certain acquisition expenses.

Description of Properties

         Land. The Partnership's  Property sites range from approximately 11,500
to 88,200  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.  Each of the Properties owned by the Partnership  includes a
building that is one of a Restaurant  Chain's  approved  designs.  The buildings
generally are  rectangular  and are  constructed  from various  combinations  of
stucco,  steel,  wood, brick and tile.  Building sizes range from  approximately
1,200 to 10,700 square feet.  All buildings on Properties are  freestanding  and
surrounded by paved  parking  areas.  Buildings  are suitable for  conversion to
various uses, although modifications may be required prior to use for other than
restaurant operations.

         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 - Leases.

         Restaurant  Management  Services leases four Popeyes  restaurants,  two
Church's Fried Chicken restaurant and one other restaurant (formerly operated as
a Captain  D's).  The initial term of each lease is 20 years  (expiring  between
2009 and 2010) and the average minimum base annual rent is approximately $49,600
(ranging from approximately $30,000 to $61,900).

         Golden Corral  Corporation leases five Golden Corral  restaurants.  The
initial term of each lease is 15 years (expiring  between 2004 and 2011) and the
average  minimum  base  annual  rent is  approximately  $152,900  (ranging  from
approximately $88,000 to $185,700).

         Mid-America  Corporation  leases  four  Burger  King  restaurants.  The
initial term of each lease is between 14 and 16 years (expiring between 2004 and
2006)  and the  average  minimum  base  annual  rent is  approximately  $110,500
(ranging from approximately $108,100 to $111,300).

         IHOP Properties, Inc. leases five IHOP restaurants. The initial term of
each lease is 20 years (expiring  between 2017 and 2018) and the average minimum
base annual rent is approximately  $141,600 (ranging from approximately $114,500
to $163,200).

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


Item 3.  Legal Proceedings

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


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

         Not applicable.



                                     PART II


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

         As of March 11, 1999,  there were 2,987 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


<PAGE>


price paid for any Unit transferred  pursuant to the Plan was $475 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>

                                                    1998 (1)                              1997 (1)
                                         --------------------------------      --------------------------------
                                          High       Low        Average         High       Low        Average
                                         -------    -------    ----------      -------    -------    ----------
<S> <C>
         First Quarter                     $475       $475          $475         $475       $475          $475
         Second Quarter                     475        442           468          435        361           417
         Third Quarter                      485        399           464          500        415           453
         Fourth Quarter                     475        410           458          475        420           461
</TABLE>

(1)      A total of 768 and 311 Units were  transferred  other than  pursuant to
         the Plan for the years ended December 31, 1998 and 1997, respectively.

         The capital  contribution  per Unit was $500.  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 $3,220,000 and $3,150,000,  respectively,  to the
Limited  Partners.  For the quarter  ended  December 31, 1998,  the  Partnership
declared a special  distribution  to the  Limited  Partners  of  $70,000,  which
represented  cumulative  excess operating  reserves.  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 at 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
distributions on this basis.

           Quarter Ended                      1998               1997
           -------------------------      --------------     --------------
           March 31                            $787,500          $ 787,500
           June 30                              787,500            787,500
           September 30                         787,500            787,500
           December 31 (1)                      857,500            787,500


(1)      Includes a special  distribution to Limited Partners of $70,000,  which
         represented cumulative excess operating reserves, for the quarter ended
         December 31, 1998.

         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
<TABLE>
<CAPTION>

                                         1998            1997            1996            1995            1994
                                      -------------- --------------- -------------- --------------- ---------------
<S> <C>
Year ended December 31:
     Revenues (1)                     $ 3,370,532      $ 3,456,406      $3,565,493     $ 3,438,286     $ 3,468,897
     Net income (2)                     3,020,881        2,899,882       2,803,601       2,861,381       3,095,028
     Cash distributions
         declared (3)                   3,220,000        3,150,000       3,220,000       3,150,000       3,150,000
     Net income per Unit (2)                42.75            41.06           39.65           40.47           43.80
     Cash distributions declared
         per Unit (2)                       46.00            45.00           46.00           45.00           45.00

At December 31:
     Total assets                     $29,655,896      $29,993,069     $30,129,286     $30,442,314     $30,754,999
     Partners' capital                 28,595,130       28,794,249      29,044,367      29,460,766      29,749,385
</TABLE>

(1)      Revenues  include equity in earnings of  unconsolidated  joint ventures
         and minority interest in income of the consolidated joint venture.

(2)      Net income  for the year ended  December  31,  1997 and 1996,  includes
         provision  for loss on land  and  building  of  $263,186  and  $77,023,
         respectively.  In addition, net income for the years ended December 31,
         1997,   1996,   and  1995,   includes   $79,777,   $1,706  and  $7,370,
         respectively, from a loss on sale of land and buildings. Net income for
         the years ended December 31, 1998,  1997, 1995, and 1994, also includes
         $345,122, $626,804, $103,283, and $332,664, respectively, from gains on
         sale of land and buildings.

(3)      Distributions for the year ended December 31, 1998 and 1996,  include a
         special  distribution  to  the  Limited  Partners  of  $70,000,   which
         represented cumulative excess operating reserves.

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



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

         The  Partnership was organized on August 17, 1988, to acquire for cash,
either directly or through joint venture  arrangements,  both newly  constructed
and  existing  restaurant  Properties,  as well as land  upon  which  restaurant
Properties  were to be constructed,  which are leased  primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are 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 42 Properties,  either  directly or indirectly
through joint venture arrangements.

Liquidity and Capital Resources

         During  the  years  ended  December  31,  1998,  1997,  and  1996,  the
Partnership  generated cash from  operations  (which includes cash received from
tenants, distributions from joint ventures and interest received, less cash paid
for expenses) of  $3,243,660,  $3,156,041,  and  $3,310,762  for the years ended
December  31,  1998,  1997,  and 1996,  respectively.  The increase in cash from
operations  during  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 during each
of the respective years.

         Other  sources and uses of capital  included the  following  during the
years ended December 31, 1998, 1997, and 1996.



<PAGE>


         In January 1996,  the  Partnership  reinvested  the remaining net sales
proceeds from the 1995 sale of the Property in Little  Canada,  Minnesota,  in a
Golden Corral Property  located in Clinton,  North Carolina,  with affiliates of
the  General  Partners  as  tenants-in-common.   In  connection  therewith,  the
Partnership  and  its  affiliates   entered  into  an  agreement   whereby  each
co-venturer  will share in the profits and losses of the Property in  proportion
to its applicable  percentage interest. As of December 31, 1998, the Partnership
owned an 18 percent interest in this Property.

         In March 1996,  the  Partnership  entered  into an  agreement  with the
tenant of the Properties in Chester,  Pennsylvania,  and Orlando,  Florida,  for
payment of certain rental payment  deferrals the  Partnership had granted to the
tenant through March 31, 1996.  Under the agreement,  the Partnership  agreed to
abate approximately  $42,700 of the rental payment deferral amounts.  The tenant
made payments of  approximately  $18,600 in each of April 1996,  March 1997, and
April 1998 in accordance with the terms of the agreement,  and has agreed to pay
the  Partnership  the  remaining  balance due of  approximately  $74,400 in four
remaining annual installments through 2002.

         In December 1996, the Partnership  sold its Property in Dallas,  Texas,
to an unrelated  third party for  $1,016,000  and received net sales proceeds of
$982,980.  This Property was originally acquired by the Partnership in June 1994
and  had a cost  of  approximately  $980,900,  excluding  acquisition  fees  and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for  approximately  $2,100 in excess of its original  purchase price. Due to the
fact  that the  Partnership  had  recognized  accrued  rental  income  since the
inception of the lease relating to the  straight-lining of future scheduled rent
increases in accordance  with  generally  accepted  accounting  principles,  the
Partnership  wrote off the  cumulative  balance of such accrued rental income at
the time of the sale of this Property,  resulting in a loss on land and building
of  $1,706  for  financial  reporting  purposes.   Due  to  the  fact  that  the
straight-lining  of  future  rent  increases  over  the  term of the  lease is a
non-cash  accounting  adjustment,  the  write-off of these amounts is a loss for
financial statement purposes only. In February 1997, the Partnership  reinvested
the net sales proceeds,  along with additional  funds, in a Bertucci's  Property
located in Marietta,  Georgia, for a total cost of approximately $1,112,600. The
transaction  relating  to the sale of the  Property  in  Dallas,  Texas  and the
reinvestment  of the net sales proceeds was structured to qualify as a like-kind
exchange transaction for federal income tax purposes.

         In January 1997, Show Low Joint Venture,  in which the Partnership owns
a 36 percent interest,  sold the Property to the tenant for $970,000,  resulting
in a gain to the joint venture of approximately $360,000 for financial reporting
purposes.  The Property was originally  contributed to Show Low Joint Venture in
July 1990 and had a total cost of approximately $663,500,  excluding acquisition
fees and miscellaneous  acquisition expenses;  therefore, the joint venture sold
the  Property  for  approximately  $306,500 in excess of its  original  purchase
price. In June 1997, Show Low Joint Venture reinvested $782,413 of the net sales
proceeds in a Property in Greensboro,  North Carolina.  As of December 31, 1998,
the  Partnership  had received  approximately  $70,000  representing a return of
capital for its pro-rata share of the uninvested net sales proceeds.

         In July 1997, the Partnership sold the Property in Whitehall, Michigan,
to an  unrelated  third party,  for $665,000 and received net sales  proceeds of
$626,907,  resulting in a loss of $79,777 for financial reporting  purposes,  as
described  below  in  "Results  of  Operations."  The net  sales  proceeds  were
reinvested  in a Property in  Overland  Park,  Kansas,  with  affiliates  of the
General Partners as tenants-in-common, in January 1998. In connection therewith,
the  Partnership  and the  affiliates  entered  into an  agreement  whereby each
co-venturer  will share in the profits and losses of the Property in  proportion
to its applicable  percentage interest. As of December 31, 1998, the Partnership
owned a 34.74% interest in this Property.

         In addition, in July 1997, the Partnership sold its Property in Naples,
Florida,  to an unrelated  third party,  for  $1,530,000  and received net sales
proceeds of $1,477,780,  resulting in a gain of $186,550 for financial reporting
purposes.  This Property was originally  acquired by the Partnership in December
1989 and had a cost of approximately $1,083,900,  excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $403,800 in excess of its original purchase price. In December
1997, the  Partnership  reinvested the net sales proceeds in an IHOP Property in
Elgin, Illinois, for a total cost of approximately  $1,484,100. A portion of the
transaction,  relating to the sale of the Property in Naples,  Florida,  and the
reinvestment  of the net sales proceeds was structured to qualify as a like-kind
exchange   transaction   for  federal  income  tax  purposes.   The  Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state  income  taxes,  at a level  reasonably  assumed by the General  Partners,
resulting from the sale.

         In  addition,  in July  1997,  the  Partnership  sold its  Property  in
Plattsmouth,  Nebraska,  to the tenant,  for  $700,000  and  received  net sales
proceeds of $697,650,  resulting in a gain of $156,401 for  financial  reporting
purposes.  This Property was originally  acquired by the  Partnership in January
1990 and had a cost of approximately  $561,000,  excluding  acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately  $138,400 in excess of its original purchase price. In January
1998, the  Partnership  reinvested the net sales proceeds in an IHOP Property in
Memphis,    Tennessee,    with   affiliates   of   the   General   Partners   as
tenants-in-common.  In connection therewith,  the Partnership and the affiliates
entered into an agreement whereby each co-venturer will share in the profits and
losses of the Property in proportion to its applicable  percentage interest.  As
of December 31, 1998, the  Partnership  owned a 46.2% interest in this Property.
The Partnership distributed amounts sufficient to enable the Limited Partners to
pay federal and state income taxes at a level reasonably  assumed by the General
Partners, resulting from the sale.

         In June 1997, the  Partnership  terminated the lease with the tenant of
the Property in Greensburg,  Indiana. In connection  therewith,  the Partnership
accepted a  promissory  note from this  former  tenant for  $13,077  for amounts
relating to past due real estate taxes the  Partnership had incurred as a result
of the former tenant's  financial  difficulties.  The promissory  note, which is
uncollateralized,  bears  interest at a rate of ten  percent  per annum,  and is
being  collected in 36 monthly  installments.  Receivables at December 31, 1998,
included $9,561 of such amounts.  In July 1997, the  Partnership  entered into a
new lease for the Property in Greensburg,  Indiana, with a new tenant to operate
the Property as an Arby's restaurant.  In connection therewith,  the Partnership
agreed to fund $125,000 in renovation  costs.  The renovations were completed in
October 1997, at which time payments of rent commenced.

         In  September  1997,  the  Partnership  sold its  Property  in  Venice,
Florida,  to an unrelated  third party,  for  $1,245,000  and received net sales
proceeds of $1,201,648,  resulting in a gain of $283,853 for financial reporting
purposes.  This Property was  originally  acquired by the  Partnership in August
1989 and had a cost of approximately $1,032,400,  excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $174,300 in excess of its original purchase price. In December
1997, the  Partnership  reinvested the net sales proceeds in an IHOP Property in
Manassas,  Virginia, for a total cost of approximately  $1,126,800. A portion of
the transaction relating to the sale of the Property in Venice, Florida, and the
reinvestment  of the net sales proceeds was structured to qualify as a like-kind
exchange   transaction   for  federal  income  tax  purposes.   The  Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state  income  taxes at a level  reasonably  assumed  by the  General  Partners,
resulting from the sale.

         In   October   1997,   the   Partnership    and   an   affiliate,    as
tenants-in-common,  sold the Property in Yuma, Arizona, in which the Partnership
owned a 51.67% interest,  for a total sales price of $1,010,000 and received net
sales proceeds of $982,025,  resulting in a gain, to the  tenancy-in-common,  of
approximately  $128,400  for  financial  reporting  purposes.  The  Property was
originally acquired in July 1994 and had a total cost of approximately $861,700,
excluding acquisition fees and miscellaneous  acquisition  expenses;  therefore,
the  Property  was sold for  approximately  $120,300  in excess of its  original
purchase price. The Partnership received approximately $455,000,  representing a
return of capital for its pro-rata share of the net sales proceeds.  In December
1997, the  Partnership  reinvested  the amounts  received as a return of capital
from the  sale of the  Yuma,  Arizona  Property,  in a  Property  in  Vancouver,
Washington,  as  tenants-in-common  with affiliates of the General Partners.  In
connection  therewith,  the  Partnership  and  the  affiliates  entered  into an
agreement  whereby each  co-venturer will share in the profits and losses of the
Property in proportion to its applicable percentage interest. As of December 31,
1998, the Partnership owned a 23.04% interest in this Property.  The transaction
relating to the sale of the Property in Yuma,  Arizona and the  reinvestment  of
the net sales  proceeds  was  structured  to  qualify  as a  like-kind  exchange
transaction for federal income tax purposes.

         In January 1998, the Partnership sold its Property in Deland,  Florida,
to the tenant,  for  $1,250,000  and received net sales  proceeds of $1,234,122,
resulting in a gain of $345,122 for financial reporting purposes.  This Property
was  originally  acquired by the  Partnership  in October 1989 and had a cost of
approximately   $1,000,000,   excluding   acquisition  fees  and   miscellaneous
acquisition  expenses;   therefore,   the  Partnership  sold  the  Property  for
approximately  $234,100 in excess of its original  purchase price. In June 1998,
the Partnership  reinvested the majority of the net sales proceeds in a Property
in  Fort  Myers,   Florida,  with  an  affiliate  of  the  general  partners  as
tenants-in-common.  The  transaction  relating  to the sale of the  Property  in
Deland,  Florida, and the reinvestment of the net sales proceeds, was structured
to qualify as a like-kind exchange transaction for federal income tax purposes.

         In February  1998,  the  Partnership  sold its  Property in  Melbourne,
Florida,  for $590,000 and received net sales  proceeds of $552,910.  Due to the
fact that  during  1997,  the  Partnership  recorded  an  allowance  for loss of
$158,239  for  this  Property,  no gain or loss  was  recognized  for  financial
reporting  purposes in February  1998,  relating to the sale. In April 1998, the
Partnership  contributed a portion of the net sales proceeds to Melbourne  Joint
Venture,  with an affiliate of the General  Partners,  to construct and hold one
restaurant Property. As of December 31, 1998, the Partnership had contributed an
amount to purchase  land and pay  construction  costs  relating to the  property
owned by the joint venture. The Partnership has agreed to contribute  additional
amounts  to  fund  additional  construction  costs  to the  joint  venture.  The
Partnership  expects to have a 50 percent  interest in the profits and losses of
the joint venture.

         In addition,  in February  1998, the  Partnership  sold its Property in
Liverpool,  New York,  for $157,500 and received net sales proceeds of $145,221.
Due to the fact that in prior years the  Partnership  recorded an allowance  for
loss of $181,970 for this Property, no gain or loss was recognized for financial
reporting  purposes in February  1998,  relating  to the sale.  The  Partnership
intends to reinvest the net sales  proceeds from the sale of this Property in an
additional Property.

         In June 1998, the Partnership sold its Property in Bellevue,  Nebraska,
to a third party and received sales  proceeds of $900,000.  Due to the fact that
during  1998 the  Partnership  wrote off  $155,528  in  accrued  rental  income,
representing  a portion of the accrued  rental income that the  Partnership  had
recognized since the inception of the lease relating to the  straight-lining  of
future scheduled rent increases in accordance with generally accepted accounting
principles,  no gain or loss was recorded for  financial  reporting  purposes in
June 1998 relating to this sale.  This Property was  originally  acquired by the
Partnership in December 1989 and had a cost of approximately $899,500, excluding
acquisition  fees  and  miscellaneous   acquisition  expenses;   therefore,  the
Partnership sold the Property for  approximately  $500 in excess of its original
purchase price.  In September 1998, the Partnership  contributed the majority of
the  net  sales  proceeds  to  Warren  Joint  Venture.  The  Partnership  has an
approximate  64 percent  interest  in the  profits  and  losses of Warren  Joint
Venture and the remaining interest in this joint venture is held by an affiliate
of the General Partners.

         None of the Properties  owned by the  Partnership or the joint ventures
in which the  Partnership  owns an interest is or may be  encumbered.  Under its
Partnership  Agreement,  the  Partnership  is prohibited  from borrowing for any
purpose;  provided,  however,  that the General Partners or their affiliates are
entitled to reimbursement,  at cost, for actual expenses incurred by the General
Partners or their  affiliates  on behalf of the  Partnership.  Affiliates of the
General Partners from time to time incur certain operating expenses on behalf of
the  Partnership  for which the  Partnership  reimburses the affiliates  without
interest.

         Currently,  rental income from the Partnership's Properties is invested
in money market accounts or other short-term,  highly liquid investments pending
the  Partnership's  use of such  funds to pay  Partnership  expenses  or to make
distributions  to the  partners.  At December  31,  1998,  the  Partnership  had
$1,170,686 invested in such short-term  investments as compared to $1,614,759 at
December 31, 1997.  The decrease in cash and cash  equivalents  during 1998,  is
primarily due to the receipt of $626,907 in net sales  proceeds from the sale of
the  Property  in  Whitehall,  Michigan  in July 1997,  which were being held at
December 31, 1997, which were reinvested in a Property in Overland Park, Kansas,
as tenants-in-common  with affiliates of the General Partners,  in January 1998.
This  decrease is partially  offset by an increase in cash and cash  equivalents
due to the  receipt  of  $145,221  in net  sales  proceeds  from the sale of the
Property  in  Liverpool,  New York in  February  1998.  The funds  remaining  at
December 31, 1998, after payment of distributions and other liabilities, will be
used to invest in an  additional  Property  as  described  above and to meet the
Partnership's working capital and other needs.

         During  1998,  1997,  and  1996,  affiliates  of the  General  Partners
incurred  on  behalf  of  the  Partnership   $103,157,   $82,503,  and  $96,112,
respectively,  for certain operating expenses. As of December 31, 1998 and 1997,
the Partnership owed $19,403 and $32,019,  respectively,  to affiliates for such
amounts and accounting and  administrative  services.  Other  liabilities of the
Partnership,  including distributions payable, decreased to $896,414 at December
31,  1998,  from  $1,022,326  at  December  31,  1997.  The  decrease  in  other
liabilities is partially  attributable  to the payment during 1998 of renovation
costs accrued at December 31, 1997 for the Property in Greensburg,  Indiana,  in
connection with the new lease entered into in July 1997, as described  above. In
addition,  the decrease in other  liabilities  at December 31, 1998 was due to a
decrease in accrued and escrowed  real estate  taxes  payable as a result of the
Partnership  accruing  real estate taxes  relating to its Property in Melbourne,
Florida at December 31, 1997,  after the tenant  vacated the Property in October
1997.  This  Property  was sold in 1998 and no accrual was made at December  31,
1998.  Other  liabilities  also  decreased  due to a  decrease  in rents paid in
advance at December 31, 1998.  The  decrease in other  liabilities  is partially
offset by an increase in  distributions  payable as a result of the  Partnership
accruing a special  distribution  payable to the Limited  Partners of $70,000 at
December  31,  1998.  The General  Partners  believe  that the  Partnership  has
sufficient cash on hand to meet its current working capital needs.

         Based on cash from operations, and cumulative excess operating reserves
for the years  ended  December  31,  1998 and  1996,  the  Partnership  declared
distributions to the Limited Partners of $3,220,000,  $3,150,000, and $3,220,000
for the years ended  December  31,  1998,  1997,  and 1996,  respectively.  This
represents  distributions  of $46,  $45,  and $46 per Unit for the  years  ended
December 31, 1998, 1997, and 1996,  respectively.  No amounts distributed to the
Limited  Partners for the years ended  December 31, 1998,  1997,  and 1996,  are
required to be or have been  treated by the  Partnership  as a return of capital
for  purposes of  calculating  the Limited  Partners'  return on their  adjusted
capital contributions. The Partnership intends to continue to make distributions
of cash available for distribution to the Limited Partners on a quarterly basis.

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

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

         Due to low  operating  expenses  and  ongoing  cash flow,  the  General
Partners do not believe that  working  capital  reserves  are  necessary at this
time. In addition,  because the leases of the Partnership's  Properties are on a
triple-net basis, it is not anticipated that a permanent reserve for maintenance
and repairs will be established at this time. To the extent,  however,  that the
Partnership has insufficient funds for such 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,  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  3,730,388  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  $36,721,726  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.



<PAGE>


Results of Operations

         During 1996, the Partnership and its consolidated  joint venture,  Caro
Joint  Venture  owned and  leased  38 wholly  owned  Properties  (including  one
Property in Dallas,  Texas,  which was sold in December 1996),  during 1997, the
Partnership  owned and  leased  40  wholly  owned  Properties  (including  three
Properties  which were sold in 1997) and during 1998, the Partnership  owned and
leased 36 wholly owned Properties  (including four Properties which were sold in
1998).  In addition,  during 1996,  the  Partnership  was a co-venturer in three
separate  joint  ventures that each owned and leased one Property,  during 1997,
the  Partnership  was a co-venturer  in three separate joint ventures that owned
and  leased a total of five  Properties  (including  one  Property  in Show Low,
Arizona,  which was sold in January 1997) and during 1998, the Partnership was a
co-venturer in five separate joint ventures that owned and leased a total of six
Properties.  During 1996, the  Partnership  owned and leased two Properties with
affiliates as  tenants-in-common,  during 1997, the Partnership owned and leased
four Properties with affiliates as tenants-in-common  (including one Property in
Yuma, Arizona, which was sold in October, 1997) and during 1998, the Partnership
owned and leased five  Properties with  affiliates as  tenants-in-common.  As of
December 31, 1998, the Partnership owned, either directly,  as tenants-in-common
with affiliates, or through joint venture arrangements,  42 Properties which are
subject to long-term,  triple-net  leases.  The leases of the Properties provide
for minimum base annual rental amounts (payable in monthly installments) ranging
from  approximately  $37,900 to  $222,800.  Generally,  the leases  provide  for
percentage  rent based on sales in excess of a specified  amount.  In  addition,
some of the leases  provide that,  commencing in the fourth to sixth lease year,
the  percentage  rent will be an amount  equal to the greater of the  percentage
rent calculated under the lease formula or a specified  percentage (ranging from
one to  five  percent)  of the  purchase  price  or  gross  sales.  For  further
description of the Partnership's  leases and Properties,  see Item 1. Business -
Leases and Item 2. Properties, respectively.

         During  the  years  ended  December  31,  1998,  1997,  and  1996,  the
Partnership  and its  consolidated  joint venture,  Caro Joint  Venture,  earned
$2,823,377,  $2,897,402,  and  $3,333,665,  respectively,  in rental income from
operating leases (net of adjustments to accrued rental income) and earned income
from  direct   financing   leases.   Rental  and  earned  income   decreased  by
approximately  $185,200 during 1998 due to the sales of four  Properties  during
1998.  The decrease in rental and earned  income  during 1998 and 1997,  each as
compared to the  previous  year,  was  partially  attributable  to a decrease of
approximately $226,600 and $159,400,  during 1998 and 1997,  respectively,  as a
result of the sales of four  Properties  during 1997. The decrease in rental and
earned income during 1997, as compared to 1996, was partially  attributable to a
decrease of $103,100 in rental and earned  income from the sale of the  Property
in Dallas, Texas in December 1996. The decrease in rental income during 1998 and
1997 was partially offset by an increase of approximately  $19,600 and $109,400,
respectively,  due to the  reinvestment  of the net sales proceeds from the 1996
sale of the Property in Dallas,  Texas, in a Property in Marietta,  Georgia,  in
February 1997. The decrease in rental and earned income during 1998 and 1997 was
partially  offset  by  an  increase  of   approximately   $293,800  and  $1,600,
respectively,  in rental and earned income due to the fact that the  Partnership
reinvested  the net sales  proceeds from the 1997 sales of two Properties in two
IHOP Properties in Elgin, Illinois and Manassas, Virginia in December 1997.

         In  addition,  the  decrease in rental and earned  income for 1998,  as
compared  to 1997,  was  partially  offset by the fact  that  during  1998,  the
Partnership's consolidated joint venture collected and recognized as income past
due rental  amounts  of  approximately  $36,000  for which the  Partnership  had
previously  established  an  allowance  for doubtful  accounts.  The decrease in
rental income during 1998 as compared to 1997, was partially  offset by, and the
decrease in rental income during 1997, as compared to 1996, was attributable to,
the  fact  that  during  1997  the  Partnership's   consolidated  joint  venture
established an allowance for doubtful  accounts for rental amounts unpaid by the
tenant of the Property in Caro, Michigan totalling  approximately $84,500 due to
financial  difficulties  the  tenant was  experiencing.  No such  allowance  was
established during 1998 or 1996.

         In addition,  the decrease in rental and earned  income  during 1998 as
compared to 1997,  was  partially  offset by, and the decrease  during 1997,  as
compared to 1996, was partially  attributable to, the Partnership increasing its
allowance for doubtful accounts during 1997 by approximately  $40,500 for rental
amounts relating to the Hardee's Property located in Greensburg, Indiana, due to
financial  difficulties  the  tenant was  experiencing.  No such  allowance  was
recorded in 1998.  Rental and earned  income  also  decreased  by  approximately
$43,700  during 1997 due to the fact that the  Partnership  terminated the lease
with the former tenant of the Property in Greensburg,  Indiana, in June 1997, as
described above in "Liquidity and Capital  Resources." The General Partners have
agreed that they will cease  collection  efforts on past due rental amounts once
the former  tenant of this  Property  pays all amounts due under the  promissory
note for past due real estate taxes  described  above in "Liquidity  and Capital
Resources." The decrease in rental and


<PAGE>


earned  income in 1998 and 1997,  each as compared  to the  previous  year,  was
slightly offset by an increase of $18,400 and $14,200,  respectively,  in rental
income from the new tenant of this Property who began  operating the Property in
1997 after it was renovated into an Arby's Property.

         In addition,  the decrease in rental and earned  income during 1998, as
compared to 1997,  was  partially  due to the fact that  during  June 1998,  the
Partnership wrote off  approximately  $155,500 in accrued rental income relating
to the Property in Bellevue,  Nebraska to adjust the carrying value of the asset
to the net proceeds  received  from the sale of this  Property in June 1998.  In
addition,  rental and earned  income  decreased  during 1997, as a result of the
Partnership   establishing  an  allowance  for  doubtful  accounts  during  1997
totalling  approximately  $107,100 for rental  amounts  relating to the Property
located  in  Melbourne,  Florida,  due to the fact that the tenant  vacated  the
Property in October 1997. The Partnership will continue to pursue  collection of
past due rental  amounts  relating  to this  Property  and will  recognize  such
amounts as income if collected.  The Partnership  sold this Property in February
1998, as described above in "Liquidity and Capital Resources."

         In  addition,  rental  and earned  income  decreased  by  approximately
$35,300  during 1997, as a result of the fact that in December  1996, the tenant
ceased  operations  and  vacated  the  Property  in  Liverpool,  New  York.  The
Partnership  sold  this  Property  in  February  1998,  as  described  above  in
"Liquidity and Capital Resources."

         The decrease in rental and earned  income  during 1997,  as compared to
1996,  was offset by the fact that the  Partnership  collected  and  recorded as
income  approximately  $18,600  and  $5,300,  respectively,  in  rental  payment
deferrals  for  the  two  Properties  leased  by the  same  tenant  in  Chester,
Pennsylvania,  and Orlando, Florida. Previously, the Partnership had established
an  allowance  for  doubtful  accounts  for these  amounts.  These  amounts were
collected in accordance with the agreement  entered into in March 1996, with the
tenant to pay the remaining  balance of the rental payment  deferral  amounts as
discussed above in "Liquidity and Capital Resources."

         For the years ended December 31, 1998,  1997, and 1996, the Partnership
also earned $156,676, $147,437, and $110,073, respectively, in contingent rental
income.  The increase in contingent  rental income during 1998 and 1997, each as
compared to the previous year, is primarily  attributable  to increases in gross
sales  relating  to certain  Properties  whose  leases  require  the  payment of
contingent rent.

         In addition, for the years ended December 31, 1998, 1997, and 1996, the
Partnership earned $323,105, $280,331, and $97,381,  respectively,  attributable
to  net  income  earned  by  joint  ventures  in  which  the  Partnership  is  a
co-venturer. The increase in net income earned by joint ventures during 1998, as
compared to 1997,  is primarily  due to the fact that in 1998,  the  Partnership
reinvested  the net sales  proceeds it received  from the 1997 and 1998 sales of
three Properties,  in additional  Properties in Overland Park, Kansas;  Memphis,
Tennessee,  and Fort Myers,  Florida with affiliates of the general  partners as
tenants-in-common.  The increase in net income earned by joint  ventures  during
1998, as compared to 1997, was partially offset by, and the increase in 1997, as
compared to 1996, was primarily due to, the fact that in January 1997,  Show Low
Joint Venture, in which the Partnership owns a 36 percent interest, recognized a
gain of approximately  $360,000 for financial  reporting purposes as a result of
the sale of its Property.  Show Low Joint Venture reinvested the majority of the
net sales  proceeds in a  replacement  Property in June 1997.  In  addition,  in
October 1997, the Partnership and an affiliate,  as tenants-in-common,  sold the
Property in Yuma, Arizona,  and recognized a gain of approximately  $128,400 for
financial  reporting  purposes,  as described  above in  "Liquidity  and Capital
Resources."  The  Partnership  owned a 51.67%  interest in the Property in Yuma,
Arizona, held as tenants-in-common with an affiliate. The Partnership reinvested
its portion of the net sales proceeds in a Property in Vancouver, Washington, in
December 1997, as described above in "Liquidity and Capital Resources."

         During the year ended  December  31,  1998,  four of the  Partnership's
lessees,  Golden  Corral  Corporation,  Restaurant  Management  Services,  Inc.,
Mid-America  Corporation,  and IHOP Properties,  Inc. each contributed more than
ten percent of the  Partnership's  total rental income  (including rental income
from the Partnership's consolidated joint venture and the Partnership's share of
the  rental  income  from  the  Properties  owned by five  unconsolidated  joint
ventures in which the  Partnership is a co-venturer  and five  Properties  owned
with affiliates as  tenants-in-common).  As of December 31, 1998,  Golden Corral
Corporation  and IHOP  Properties,  Inc.  were  each the  lessees  under  leases
relating to five  restaurants,  Restaurant  Management  Services,  Inc.  was the
lessee under leases relating to seven  restaurants  and Mid-America  Corporation
was the lessee  under leases  relating to four  restaurants.  It is  anticipated
that, based on the minimum annual rental payments required by the leases,  these
four  lessees  each will  continue  to  contribute  more than ten percent of the
Partnership's  total rental income during 1999.  In addition,  three  Restaurant
Chains,  Golden  Corral,  Burger King, and IHOP each accounted for more than ten
percent of the Partnership's  total rental income during the year ended December
31,  1998,  (including  the  Partnership's  consolidated  joint  venture and the
Partnership's  share of the  rental  income  from the  Properties  owned by five
unconsolidated joint ventures in which the Partnership is a co-venturer and five
Properties  owned  with  affiliates  as  tenants-in-common).   In  1999,  it  is
anticipated that these Restaurant  Chains each will continue to account for more
than  ten  percent  of the  Partnership's  total  rental  income  to  which  the
Partnership  is  entitled  under the terms of the  leases.  Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner.

         For the years ended 1998,  1997, and 1996, the Partnership  also earned
$110,502, $119,961, and $49,056, respectively, in interest and other income. The
increase in interest and other income  during the year ended  December 31, 1997,
as compared to the year ended December 31, 1996, was primarily  attributable  to
interest  earned on the net sales proceeds  received and held in escrow relating
to the  sales  of  several  Properties  pending  reinvestment  of the net  sales
proceeds in additional Properties.

         Operating expenses,  including  depreciation and amortization  expense,
were  $694,773,  $840,365,  and $683,163 for the years ended  December 31, 1998,
1997, and 1996, respectively. The decrease in operating expenses during 1998, as
compared to 1997,  and the  increase  in  operating  expenses  during  1997,  as
compared to 1996,  is partially  due to the fact that the  Partnership  recorded
approximately  $122,400 in bad debt  expense and  approximately  $19,400 in real
estate tax expense during 1997 for the Property  located in Melbourne,  Florida,
due to the fact that the  tenant  vacated  the  Property  in October  1997.  The
Partnership  sold  this  Property  in  February  1998,  as  described  above  in
"Liquidity and Capital  Resources." In addition,  during 1997, the Partnership's
consolidated  joint venture,  Caro Joint Venture,  recorded bad debt expense and
real  estate tax  expense of  approximately  $26,200  relating  to the  Property
located in Caro,  Michigan,  representing past due rental and other amounts.  No
such bad debt expense and real estate tax expense were recorded  during the year
ended  December 31, 1998 due to the fact that the tenant has been making  rental
payments in accordance with the terms of its lease agreement.

         The decrease in operating  expenses  during 1998,  as compared to 1997,
was partially  attributable  to, and the increase in operating  expenses  during
1997 as compared to 1996, was partially  offset by, the decrease in depreciation
expense which resulted from the sale of several  Properties during 1998 and 1997
and the sale of the Property in Dallas,  Texas in December 1996. The decrease in
depreciation expense was partially offset by an increase in depreciation expense
attributable to the purchase of the Property in Marietta,  Georgia,  in February
1997.

         The decrease in operating expenses for 1998, is partially offset by the
fact that the Partnership  incurred $20,211 in transaction costs in 1998 related
to the General Partners retaining financial and legal advisors to assist them in
evaluating  and  negotiating  the  proposed  Merger  with APF, as  described  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.

         As a  result  of the  sale  of the  Property  in  Deland,  Florida,  as
described above in "Liquidity and Capital Resources," the Partnership recognized
a gain of  $345,122  during the year ended  December  31,  1998,  for  financial
reporting  purposes.  As a result  of the  sales of the  Properties  in  Naples,
Florida;  Plattsmouth,  Nebraska  and Venice,  Florida,  as  described  above in
"Liquidity and Capital Resources," the Partnership recognized a gain of $626,804
during 1997 for financial  reporting  purposes.  The gain for 1997 was partially
offset by a loss of $79,777 for financial reporting purposes, resulting from the
July 1997 sale of the Property in
Whitehall, Michigan, as described above in "Liquidity and Capital Resources." As
a result of the sale of the Property in Dallas,  Texas,  in December  1996,  the
Partnership recognized a loss for financial reporting purposes of $1,706 for the
year ended  December 31,  1996,  as discussed  above in  "Liquidity  and Capital
Resources."

         During the years  ended  December  31, 1996 and 1997,  the  Partnership
recorded  provisions  for losses on land and  building in the amounts of $77,023
and $104,947, respectively, for financial reporting purposes for the Property in
Liverpool,  New York.  This lease was terminated in December 1996. The allowance
at December 31, 1997, represented the difference between the Property's carrying
value at December 31, 1997 and the net realizable value of the Property based on
the net sales proceeds  received in February 1998 from the sale of the Property.
The  allowance at December  31, 1996,  represented  the  difference  between the
Property's  carrying value at December 31, 1996 and the estimated net realizable
value for this Property based on an anticipated sales price to a third party. No
such provision was recorded during the year ended December 31, 1998.

         During the year ended December 31, 1997, the Partnership established an
allowance for loss on land and an allowance for impairment in the carrying value
of the net investment in direct  financing  lease for its Property in Melbourne,
Florida,  in the amount of  $158,239.  The tenant of this  Property  vacated the
Property  in October  1997 and ceased  making  rental  payments.  The  allowance
represented the difference between the Property's carrying value at December 31,
1997 and the net sales  proceeds  received in February 1998 from the sale of the
Property,  as described  above in  "Liquidity  and Capital  Resources."  No such
provision was recorded during the year ended December 31, 1998 and 1996.

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

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.

         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 VI, LTD.
                         (A Florida Limited Partnership)

                                    CONTENTS







                                                       Page

Report of Independent Accountants                    

Financial Statements:

     Balance Sheets                                  

     Statements of Income                            

     Statements of Partners' Capital                 

     Statements of Cash Flows                        

     Notes to Financial Statements                   


<PAGE>






                        Report of Independent Accountants



To the Partners
CNL Income Fund VI, 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 VI, 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 19, 1999, except for Note 12 for which the date is March 11, 1999.


<PAGE>


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

                                 BALANCE SHEETS
<TABLE>
<CAPTION>

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

Land and buildings on operating leases, less
    accumulated depreciation and allowance for loss
    on land and building                                                         $18,559,844              $20,785,684
Net investment in direct financing leases, less
    allowance for impairment in carrying value                                     3,929,152                4,708,841
Investment in joint ventures                                                       5,021,121                1,130,139
Cash and cash equivalents                                                          1,170,686                1,614,759
Restricted cash                                                                           --                  709,227
Receivables, less allowance for doubtful accounts of
    $323,813 and $363,410                                                            150,912                  157,989
Prepaid expenses                                                                         949                    4,235
Lease costs, less accumulated amortization of
    $7,181 and $5,581                                                                 10,519                   12,119
Accrued rental income, less allowance for doubtful
    accounts of $38,944 and $27,245                                                  785,982                  843,345
Other assets                                                                          26,731                   26,731
                                                                            -----------------        -----------------

                                                                                 $29,655,896              $29,993,069
                                                                            =================        =================

                    LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                                                                    $  8,173                $  14,138
Accrued construction costs payable                                                        --                  125,000
Accrued and escrowed real estate taxes payable                                         2,500                   38,025
Due to related parties                                                                19,403                   32,019
Distributions payable                                                                857,500                  787,500
Rents paid in advance and deposits                                                    28,241                   57,663
                                                                            -----------------        -----------------
       Total liabilities                                                             915,817                1,054,345

Minority interest                                                                    144,949                  144,475

Partners' capital                                                                 28,595,130               28,794,249
                                                                            -----------------        -----------------

                                                                                 $29,655,896              $29,993,069
                                                                            =================        =================
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


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

                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                           Year Ended December 31,
                                                                  1998                1997              1996
                                                              -------------       -------------     ----------------
<S> <C>
Revenues:
    Rental income from operating leases                        $ 2,520,346          $2,465,817        $2,776,776
    Adjustments to accrued rental income                          (167,227 )           (17,548 )            (537 )
    Earned income from direct financing leases                     470,258             449,133           557,426
    Contingent rental income                                       156,676             147,437           110,073
    Interest and other income                                      110,502             119,961            49,056
                                                              -------------       -------------     ----------------
                                                                 3,090,555           3,164,800         3,492,794
                                                              -------------       -------------     ----------------
Expenses:
    General operating and administrative                           160,358             156,847           159,388
    Professional services                                           32,400              25,861            32,272
    Bad debt expense                                                12,854             131,184                --
    Real estate taxes                                                   --              43,676                --
    State and other taxes                                           10,392               8,969             7,930
    Depreciation and amortization                                  458,558             473,828           483,573
    Transaction costs                                               20,211                  --                --
                                                              -------------       -------------     ----------------
                                                                   694,773             840,365           683,163
                                                              -------------       -------------     ----------------
Income Before Minority Interest in Income of Consolidated
    Joint  Venture,  Equity in Earnings  of  Unconsolidated
    Joint Ventures, Gain (Loss) on Sale of Land and Buildings
    and Net Investment in Direct Financing Leases and Provision
    for Loss on  Land  and  Building  and  Impairment  in
    Carrying Value of Net Investment in Direct Financing Lease   2,395,782           2,324,435         2,809,631

Minority interest in Income of Consolidated Joint Venture          (43,128 )            11,275           (24,682 )

Equity in Earnings of Unconsolidated Joint Ventures                323,105             280,331            97,381

Gain  (Loss)  on  Sale  of  Land  and   Buildings  and  Net
Investment                                                         345,122             547,027            (1,706 )
    in Direct Financing Leases

Provision for Loss on Land and Buildings and Impairment in
    Carrying Value of Net Investment in Direct Financing Lease          --            (263,186 )         (77,023 )
                                                              -------------       -------------     ----------------

Net Income                                                      $3,020,881          $2,899,882        $2,803,601
                                                              =============       =============     ================

Allocation of Net Income:
    General partners                                              $ 28,327            $ 25,353          $ 28,337
    Limited partners                                             2,992,554           2,874,529         2,775,264
                                                              -------------       -------------     -------------

                                                                $3,020,881          $2,899,882        $2,803,601
                                                              =============       =============     =============

Net Income Per Limited Partner Unit                               $  42.75            $  41.06          $  39.65
                                                              =============       =============     =============

Weighted Average Number of Limited Partner Units
    Outstanding                                                     70,000              70,000            70,000
                                                              =============       =============     ================
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


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

                         STATEMENTS OF PARTNERS' CAPITAL

                  Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>



                                    General Partners                          Limited Partners
                              ----------------------------  --------------------------------------------------------
                                              Accumulated                                  Accumulated   Syndication
                              Contributions     Earnings    Contributions  Distributions    Earnings        Costs          Total
                              -------------  -------------  -------------  -------------   ------------  ------------  ------------
<S> <C>
Balance, December 31, 1995     $1,000           $174,673      $35,000,000   $(19,214,226 )  $17,514,319  $(4,015,000)   $29,460,766

    Distributions to limited
       partners ($46.00 per
       limited partner unit)       --                 --               --     (3,220,000 )           --           --     (3,220,000)
    Net income                     --             28,337               --             --      2,775,264           --      2,803,601
                              --------          ---------     ------------  -------------   ------------   -----------   ----------

Balance, December 31, 1996      1,000            203,010        35,000,000    (22,434,226 )   20,289,583   (4,015,000 )  29,044,367

    Distributions to limited
       partners ($45.00 per
       limited partner unit)       --                 --                --     (3,150,000 )           --           --    (3,150,000)
    Net income                     --             25,353                --             --      2,874,529           --     2,899,882
                              --------         ----------      ------------ --------------  ------------   -----------   ----------

Balance, December 31, 1997      1,000            228,363        35,000,000    (25,584,226 )   23,164,112   (4,015,000 )  28,794,249

    Distributions to limited
       partners ($46.00 per
       limited partner unit)       --                 --                --     (3,220,000 )           --           --    (3,220,000)
    Net income                     --             28,327                --             --      2,992,554           --     3,020,881
                              --------          --------       -----------  -------------   ------------   ----------    ----------

Balance, December 31, 1998     $1,000           $256,690       $35,000,000   $(28,804,226 )  $26,156,666  $(4,015,000)  $28,595,130
                              ========   ================     ============  =============   ============  ===========  =============

</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


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

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


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

      Cash Flows from Operating Activities:
         Cash received from tenants                                   $3,092,644          $3,097,751            $3,363,188
         Distributions from unconsolidated joint
             ventures                                                    328,721             144,016               114,163
         Cash paid for expenses                                         (270,339 )          (180,530  )           (203,432  )
         Interest received                                                92,634              94,804                36,843
                                                                 ----------------      ---------------       ---------------
             Net cash provided by operating activities                 3,243,660           3,156,041             3,310,762
                                                                 ----------------      ---------------       ---------------

      Cash Flows from Investing Activities:
         Proceeds from sale of land and buildings                      2,832,253           4,003,985               982,980
         Additions to land and buildings on operating
             leases                                                     (125,000 )        (2,666,258  )                 --
         Investment in direct financing leases                                --          (1,057,282  )                 --
         Investment in joint ventures                                 (3,896,598 )          (521,867  )           (146,090  )
         Return of capital from joint ventures                               (84 )           524,975                    --
         Collections on mortgage note receivable                              --                  --                 3,033
         Decrease (increase) in restricted cash                          697,650             279,367              (977,017  )
         Payment of lease costs                                           (3,300 )            (3,300  )             (3,300  )
                                                                 ----------------      ---------------       ---------------
             Net cash provided by (used in) investing
                activities                                              (495,079 )           559,620              (140,394  )
                                                                 ----------------      ---------------       ---------------

      Cash Flows from Financing Activities:
         Distributions to limited partners                            (3,150,000 )        (3,220,000  )         (3,150,000  )
         Distributions to holder of minority interest                    (42,654 )            (8,832  )            (13,437  )
                                                                 ----------------      ---------------       ---------------
                Net cash used in financing activities                 (3,192,654 )        (3,228,832  )         (3,163,437  )
                                                                 ----------------      ---------------       ---------------

Net Increase (Decrease) in Cash and Cash Equivalents                    (444,073 )           486,829                 6,931

Cash and Cash Equivalents at Beginning of Year                         1,614,759           1,127,930             1,120,999
                                                                 ----------------      ---------------       ---------------

Cash and Cash Equivalents at End of Year                             $ 1,170,686         $ 1,614,759           $ 1,127,930
                                                                 ================      ===============       ===============

</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>

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

      Net income                                                  $3,020,881            $2,899,882          $2,803,601
                                                               ---------------      ---------------    ----------------
      Adjustments to reconcile net income to
         net cash provided by operating
         activities:
             Bad debt expense                                         12,854               131,184                  --
             Depreciation                                            456,958               471,938             481,683
             Amortization                                              1,600                 1,890               1,890
             Minority interest in income of
                consolidated joint venture                            43,128               (11,275 )            24,682
             Equity in earnings of unconsolidated
                joint ventures, net of distributions                   5,616              (136,315 )            16,782
             Loss (gain) on sale of land and building               (345,122  )           (547,027 )             1,706
             Provision for loss on land and building
                and impairment in carrying value of
                net investment in direct financing
                lease                                                     --               263,186              77,023
             Decrease (increase) in receivables                        8,649                17,113             (90,360 )
             Decrease (increase) in prepaid expenses                   3,286                (3,072 )             4,087
             Decrease in net investment in direct
                financing leases                                      63,868                67,389              68,177
             Decrease (increase) in accrued rental
                income                                                51,142               (81,244 )          (103,935 )
             Increase (decrease)  in accounts payable
                and accrued expenses                                 (37,246  )             25,964               2,529
             Increase (decrease) in due to related
                parties                                              (12,532  )             29,470              (3,391 )
             Increase (decrease) in rents paid in
                advance and deposits                                 (29,422  )             26,958              26,288
                                                               ---------------      ---------------    ----------------
                   Total adjustments                                 222,779               256,159             507,161
                                                               ---------------      ---------------    ----------------

Net Cash Provided by Operating Activities                         $3,243,660            $3,156,041          $3,310,762
                                                               ===============      ===============    ================

Supplemental Schedule of Non-Cash Investing and
   Financing Activities:

      Distributions declared and unpaid at
         December 31                                              $  857,500           $  787,500           $  857,500
                                                               ===============      ===============    ================
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


                            CNL INCOME FUND VI, 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 VI,  Ltd.  (the
         "Partnership") is a Florida limited  partnership that was organized for
         the purpose of acquiring both newly constructed and existing restaurant
         properties,  as well as properties  upon which  restaurants  were to be
         constructed,  which are leased  primarily  to operators of national and
         regional fast-food and family-style restaurant chains.

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

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

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

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


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


1.       Significant Accounting Policies - Continued:

                  Accrued  rental  income  represents  the  aggregate  amount of
                  income  recognized  on a  straight-line  basis  in  excess  of
                  scheduled rental payments to date.  Whenever a tenant defaults
                  under  the  terms  of its  lease,  or  events  or  changes  in
                  circumstance  indicate  that the  tenant  will not  lease  the
                  property  through the end of the lease term,  the  Partnership
                  either  reserves or writes-off the  cumulative  accrued rental
                  income balance.

         When  the  properties  are  sold,  the  related  cost  and  accumulated
         depreciation  for operating  leases and the net  investment  for direct
         financing leases,  plus any accrued rental income, are removed from the
         accounts and gains or losses from sales are  reflected  in income.  The
         general   partners  of  the  Partnership   review  the  properties  for
         impairment  whenever events or changes in  circumstances  indicate that
         the  carrying  amount  of the  assets  may not be  recoverable  through
         operations.  The general  partners  determine  whether an impairment in
         value has occurred by comparing the estimated future  undiscounted cash
         flows, including the residual value of the property,  with the carrying
         cost of the  individual  property.  If an impairment is indicated,  the
         assets are adjusted to their fair value.  Although the general partners
         have  made  their  best  estimate  of these  factors  based on  current
         conditions,  it is reasonably  possible that changes could occur in the
         near term which  could  adversely  affect the  general  partners'  best
         estimate of net cash flows expected to be generated from its properties
         and the need for asset impairment write-downs.

         When the  collection  of amounts  recorded as rental or other income is
         considered  to be  doubtful,  an  adjustment  is made to  increase  the
         allowance for doubtful  accounts,  which is netted against  receivables
         and accrued  rental income,  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  Ventures  - The  Partnership  accounts  for  its
         approximate  66  percent  interest  in Caro  Joint  Venture,  a Florida
         general partnership,  using the consolidation method. Minority interest
         represents the minority joint venture partner's  proportionate share of
         equity in the Partnership's consolidated joint venture. All significant
         intercompany accounts and transactions have been eliminated.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


1.       Significant Accounting Policies - Continued:

         The Partnership's  investments in Auburn Joint Venture,  Show Low Joint
         Venture,  Asheville Joint Venture,  Warren Joint Venture, and Melbourne
         Joint Venture and  properties in Clinton,  North  Carolina,  Vancouver,
         Washington;  Overland Park, Kansas; Memphis,  Tennessee and Fort Myers,
         Florida,  each of which is held as  tenants-in-common  with affiliates,
         are accounted for using the equity method since the Partnership  shares
         control with the affiliates.

         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.

         Lease  Costs - Brokerage  fees and lease  incentive  costs  incurred in
         finding new tenants and  negotiating  new leases for the  Partnership's
         properties  are  amortized  over the terms of the new leases  using the
         straight-line method.

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

         Additionally,  for tax  purposes,  syndication  costs are  included  in
         Partnership equity and in the basis of each partner's  investment.  For
         financial  reporting  purposes,  syndication  costs are netted  against
         partners' capital and represent a reduction of Partnership equity and a
         reduction in the basis of each partner's investment.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996

1.       Significant Accounting Policies - Continued:

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

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

2.       Leases:

         The Partnership leases its land and buildings primarily 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."  The leases
         generally are classified as operating leases; however, some leases have
         been classified as direct financing  leases.  For the leases classified
         as direct  financing  leases,  the  building  portions of the  property
         leases are  accounted  for as direct  financing  leases  while the land
         portions of some of these leases are  operating  leases.  Substantially
         all  leases  are  for  10 to 20  years  and  provide  for  minimum  and
         contingent rentals. In addition, the tenant pays all property taxes and
         assessments,  fully maintains the interior and exterior of the building
         and carries insurance  coverage for public liability,  property damage,
         fire and extended  coverage.  The lease options generally allow tenants
         to  renew  the  leases  for two to four  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.


<PAGE>


                            CNL INCOME FUND VI, 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:

         Land and  buildings on operating  leases  consisted of the following at
         December 31:
<TABLE>
<CAPTION>

                                                                    1998                  1997
                                                              -----------------     -----------------
<S> <C>
                  Land                                             $ 8,558,191          $ 10,046,309
                  Buildings                                         13,587,739            14,344,114
                                                              -----------------     -----------------
                                                                    22,145,930            24,390,423
                  Less accumulated depreciation                     (3,586,086 )          (3,327,334 )
                                                              -----------------     -----------------
                                                                    18,559,844            21,063,089
                  Less allowance for loss on
                      land and building                                     --              (277,405 )
                                                              -----------------     -----------------
                                                                   $18,559,844          $ 20,785,684
                                                              =================     =================
</TABLE>

         In February  1997,  the  Partnership  reinvested the net sales proceeds
         from the sale of a property  in Dallas,  Texas,  along with  additional
         funds, in a Bertucci's property in Marietta,  Georgia, for a total cost
         of approximately $1,112,600.

         In July 1997, the Partnership sold the property in Whitehall, Michigan,
         to a third party,  for  $665,000  and  received  net sales  proceeds of
         $626,907,  resulting  in a loss  of  $79,777  for  financial  reporting
         purposes.

         In addition, in July 1997, the Partnership sold its property in Naples,
         Florida,  to a third  party,  for  $1,530,000  and  received  net sales
         proceeds of  $1,477,780,  resulting in a gain of $186,550 for financial
         reporting  purposes.  This  property  was  originally  acquired  by the
         Partnership   in  December  1989  and  had  a  cost  of   approximately
         $1,083,900,  excluding  acquisition fees and miscellaneous  acquisition
         expenses;   therefore,   the   partnership   sold  the   property   for
         approximately  $403,800 in excess of its original  purchase  price.  In
         December 1997, the Partnership  reinvested the net sales proceeds in an
         IHOP  property in Elgin,  Illinois,  for a total cost of  approximately
         $1,484,100.



<PAGE>


                            CNL INCOME FUND VI, 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:

         In July 1997, the Partnership entered into a new lease for the property
         in Greensburg, Indiana, with a new tenant to operate the property as an
         Arby's restaurant.  In connection  therewith,  the Partnership incurred
         $125,000 in renovation costs, which were paid in 1998.

         In  September  1997,  the  Partnership  sold its  property  in  Venice,
         Florida,  to a third  party,  for  $1,245,000  and  received  net sales
         proceeds of  $1,201,648,  resulting in a gain of $283,853 for financial
         reporting  purposes.  This  property  was  originally  acquired  by the
         Partnership in August 1989 and had a cost of approximately  $1,032,400,
         excluding  acquisition  fees and  miscellaneous  acquisition  expenses;
         therefore, the Partnership sold the property for approximately $174,300
         in excess  of its  original  purchase  price.  In  December  1997,  the
         Partnership  reinvested  the net sales  proceeds in an IHOP property in
         Manassas, Virginia, for a total cost of approximately $1,126,800.

         In 1997,  the  Partnership  recorded a  provision  for loss on land and
         building in the amount of $104,947 for financial reporting purposes for
         the  property  in  Liverpool,  New York.  The terms of this  lease were
         terminated in December 1996. This allowance  represented the difference
         between (i) the  property's  carrying  value at December 31, 1997,  and
         (ii) the net  realizable  value of the property  based on the net sales
         proceeds  of $145,221  received  in February  1998 from the sale of the
         property. Due to the fact that in 1997 and prior years, the Partnership
         had  recorded  an  allowance  for  loss  totalling  $181,970  for  this
         property,  no gain or  loss  was  recognized  for  financial  reporting
         purposes  during 1998 relating to the sale of this Property in February
         1998.

         During 1997, the Partnership  established an allowance for loss on land
         in the amount of $95,435 for its property in  Melbourne,  Florida.  The
         tenant of this Property vacated the property in October 1997 and ceased
         making rental payments. The allowance represents the difference between
         the  property's  carrying  value for the land at December 31, 1997, and
         the net realizable value of the land based on the net sales proceeds of
         $552,910  received in February 1998 from the sale of the  property.  No
         gain or loss was recognized for financial  reporting  purposes relating
         to the sale of this property in February 1998.



<PAGE>


                            CNL INCOME FUND VI, 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:

         In January 1998, the Partnership sold its property in Deland,  Florida,
         to the  tenant  for  $1,250,000  and  received  net sales  proceeds  of
         $1,234,122,  resulting  in a gain of $345,122 for  financial  reporting
         purposes.  This property was originally  acquired by the Partnership in
         October  1989  and had a cost of  approximately  $1,000,000,  excluding
         acquisition fees and miscellaneous acquisition expenses; therefore, the
         Partnership sold the property for  approximately  $234,100 in excess of
         its original  purchase price.  In June 1998, the  Partnership  sold its
         property  in  Bellevue,   Nebraska,  and  received  sales  proceeds  of
         $900,000.  Due to the fact that during 1998, the Partnership  wrote off
         $155,528 in accrued  rental  income,  representing  the majority of the
         accrued rental income that the  Partnership  had  recognized  since the
         inception  of the  lease  relating  to the  straight-lining  of  future
         scheduled  rent  increases  in  accordance   with  generally   accepted
         accounting  principles,  no gain or loss  was  recorded  for  financial
         reporting  purposes in June 1998  relating to this sale.  This property
         was originally  acquired by the  Partnership in December 1989 and had a
         cost  of  approximately   $899,500,   excluding  acquisition  fees  and
         miscellaneous acquisition expenses; therefore, the Partnership sold the
         property  for  approximately  $500 in excess of its  original  purchase
         price.

         Some leases provide for escalating  guaranteed minimum rents throughout
         the  lease  terms.  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 a loss of $51,142 (net of $155,528 in write-offs and $11,699
         in  reserves),  and income of $81,244 (net of $17,548 in reserves)  and
         $103,935  (net of  $537  in  reserves),  respectively,  of such  rental
         income.

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

                1999                                      $ 2,329,253
                2000                                        2,402,277
                2001                                        2,451,812
                2002                                        2,466,895
                2003                                        2,458,306
                Thereafter                                 11,370,855
                                                     -----------------

                                                          $23,479,398
                                                     =================



<PAGE>


                            CNL INCOME FUND VI, 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:

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

4.       Net Investment in Direct Financing Leases:

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

                                                                               1998              1997
                                                                          ---------------- -----------------
<S> <C>
                 Minimum lease payments
                     receivable                                                $7,212,677        $9,313,752
                 Estimated residual values                                      1,440,446         1,655,911
                 Less unearned income                                          (4,723,971 )      (6,198,018 )
                                                                          ---------------- -----------------
                                                                                3,929,152         4,771,645
                 Less allowance for impairment in
                     carrying value                                                    --           (62,804 )
                                                                          ---------------- ----------------
                 Net investment in direct financing
                     leases                                                    $3,929,152        $4,708,841
                                                                          ================ =================
</TABLE>

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

                1999                                $ 486,632
                2000                                  488,772
                2001                                  501,492
                2002                                  501,492
                2003                                  501,492
                Thereafter                          4,732,797
                                              ----------------

                                                   $7,212,677
                                              ================

         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).


<PAGE>


                            CNL INCOME FUND VI, 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:

         In July 1997, the Partnership sold its property in Naples, Florida, for
         which the building  portion had been  classified as a direct  financing
         lease. In connection  therewith,  the gross  investment  (minimum lease
         payments  receivable and estimated residual values) and unearned income
         relating to this  property  were removed from the accounts and the gain
         from the sale  relating to this  property was reflected in income (Note
         3).

         In  addition,  in July  1997,  the  Partnership  sold its  property  in
         Plattsmouth,  Nebraska,  to the tenant,  for  $700,000 and received net
         sales  proceeds  of  $697,650,  resulting  in a gain  of  $156,401  for
         financial reporting purposes.  This property was originally acquired by
         the  Partnership  in  January  1990  and  had a cost  of  approximately
         $561,000,  excluding  acquisition  fees and  miscellaneous  acquisition
         expenses;   therefore,   the   Partnership   sold  the   property   for
         approximately $138,400 in excess of its original purchase price.

         At December 31, 1997, the  Partnership had established an allowance for
         impairment in carrying  value in the amount of $62,804 for its property
         in Melbourne,  Florida. The allowance represents the difference between
         (i) the carrying  value of the net  investment in the direct  financing
         lease at December 31, 1997,  and (ii) the net  realizable  value of the
         net  investment  in the direct  financing  lease based on the net sales
         proceeds  received in February  1998 from the sale of the property (see
         Note 3).

         In June 1998, the Partnership sold its property in Bellevue,  Nebraska,
         for  which  the  building  portion  had  been  classified  as a  direct
         financing lease. In connection therewith, the gross investment (minimum
         lease payments  receivable and estimated  residual  value) and unearned
         income  relating to this  property  were removed from the accounts (see
         Note 3).

5.       Investment in Joint Ventures:

         The Partnership has a 3.9%, a 36 percent,  a 14.46%,  and an 18 percent
         interest in the profits and losses of Auburn  Joint  Venture,  Show Low
         Joint  Venture,  Asheville  Joint  Venture,  and a property in Clinton,
         North Carolina, held as tenants-in-common,  respectively. The remaining
         interests in these joint  ventures and the property  held as tenants in
         common are held by  affiliates of the  Partnership  which have the same
         general partners.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


5.       Investment in Joint Venture - Continued:

         In January 1997, Show Low Joint Venture,  in which the Partnership owns
         a 36 percent  interest,  sold its property to the tenant for  $970,000,
         resulting in a gain to the joint venture of approximately  $360,000 for
         financial reporting purposes.  The property was originally  contributed
         to Show Low Joint Venture in July 1990 and had a cost of  approximately
         $663,500,  excluding  acquisition  fees and  miscellaneous  acquisition
         expenses;   therefore,   the  joint   venture  sold  the  property  for
         approximately  $306,500 in excess of its original  purchase  price.  In
         June 1997,  Show Low Joint  Venture  reinvested  $782,413  of net sales
         proceeds in a property in Greensboro,  North Carolina. During 1997, the
         Partnership  received  approximately  $70,000  representing a return of
         capital, for its pro-rata share of the uninvested net sales proceeds.

         In   October   1997,   the   Partnership    and   an   affiliate,    as
         tenants-in-common,  sold the  property in Yuma,  Arizona,  in which the
         Partnership  owned a  51.67%  interest,  for a  total  sales  price  of
         $1,010,000 and received net sales proceeds of $982,025,  resulting in a
         gain, to the tenancy-in-common, of approximately $128,400 for financial
         reporting  purposes.  The property was originally acquired in July 1994
         and had a total cost of approximately  $861,700,  excluding acquisition
         fees and miscellaneous  acquisition expenses;  therefore,  the property
         was sold for approximately  $120,300 in excess of its original purchase
         price. The Partnership received  approximately  $455,000 representing a
         return of capital for its pro-rata share of the net sales proceeds.  In
         December 1997,  the  Partnership  reinvested the amounts  received as a
         return of capital  from the sale of the Yuma,  Arizona  property,  in a
         property in Vancouver, Washington, as tenants-in-common with affiliates
         of the general partners. The Partnership accounts for its investment in
         the property in  Vancouver,  Washington,  using the equity method since
         the Partnership shares control with affiliates, and amounts relating to
         its  investment  are included in  investment in joint  ventures.  As of
         December  31,  1998,  the  Partnership  owned a 23.04%  interest in the
         Vancouver,    Washington,    property   owned   with    affiliates   as
         tenants-in-common.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


5.       Investment in Joint Venture - Continued:

         In January 1998, the Partnership contributed approximately $558,800 and
         $694,800 to acquire a property in Overland Park, Kansas, and a property
         in  Memphis,   Tennessee,   respectively,   as  tenants-in-common  with
         affiliates  of the general  partners.  As of  December  31,  1998,  the
         Partnership  had a  34.74%  and a 46.2%  interest  in the  property  in
         Overland Park,  Kansas and Memphis,  Tennessee,  respectively.  In June
         1998, the Partnership contributed approximately $1,249,300 to acquire a
         property in Fort Myers, Florida, as tenants-in-common with an affiliate
         of the general  partners.  As of December 31, 1998, the Partnership had
         an 85 percent  interest in the  property in Fort  Myers,  Florida.  The
         Partnership  accounts for its investments in these properties using the
         equity method since the Partnership shares control with affiliates, and
         amounts relating to its investments are included in investment in joint
         ventures.

         In  April  1998,   the   Partnership   entered  into  a  joint  venture
         arrangement,  Melbourne Joint Venture, with an affiliate of the general
         partners, to construct and hold one restaurant property. As of December
         31, 1998, the  Partnership had  contributed  approximately  $494,900 to
         purchase land and pay construction costs relating to the property owned
         by the joint venture and has agreed to contribute an additional $31,300
         to fund additional construction costs to the joint venture. At December
         31, 1998, the Partnership had an approximate 50 percent interest in the
         profits and losses of the joint venture.  The Partnership  accounts for
         its  investment in this joint venture under the equity method since the
         Partnership shares control with the affiliate.

         In  September  1998,  the  Partnership  entered  into a  joint  venture
         arrangement,  Warren  Joint  Venture,  with an affiliate of the general
         partners to hold one restaurant property.  As of December 31, 1998, the
         Partnership had contributed approximately $898,100 to the joint venture
         to acquire the  restaurant  property.  As of  December  31,  1998,  the
         Partnership  owned a 64.29%  interest  in the profits and losses of the
         joint  venture.  The  Partnership  accounts for its  investment in this
         joint  venture  under the equity  method since the  Partnership  shares
         control with the affiliate.

         Auburn Joint Venture, Show Low Joint Venture,  Asheville Joint Venture,
         Melbourne Joint Venture,  Warren Joint Venture, and the Partnership and
         affiliates  as  tenants-in-common  in five  separate  tenancy-in-common
         arrangements, each own and lease one property to an



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


5.       Investment in Joint Venture - Continued:

         operator  of  national  fast-food  and  family-style  restaurants.  The
         following presents the combined,  condensed  financial  information for
         the joint ventures and the properties  held as  tenants-in-common  with
         affiliates at December 31:
<TABLE>
<CAPTION>

                                                                               1998                 1997
                                                                          ---------------      ---------------
<S> <C>
                Land and buildings on operating
                    leases, less accumulated
                    depreciation                                              $9,030,392           $4,568,842
                Net investment in direct financing
                    leases                                                     3,331,869              911,559
                Cash                                                              12,138                7,991
                Receivables                                                       56,360               22,230
                Accrued rental income                                            237,451              160,197
                Other assets                                                       1,190                  414
                Liabilities                                                      105,868                7,557
                Partners' capital                                             12,563,532            5,663,676
                Revenues                                                       1,098,957              471,627
                Gain on sale of land and building                                     --              488,372
                Net income                                                       959,057              889,883
</TABLE>

         The Partnership  recognized income totalling  $323,105,  $280,331,  and
         $97,381  for the  years  ended  December  31,  1998,  1997,  and  1996,
         respectively, from these joint ventures.

6.       Restricted Cash:

         As of December 31, 1997,  net sales  proceeds of $697,650 from the sale
         of the property in  Plattsmouth,  Nebraska,  plus  accrued  interest of
         $11,577, were being held in an interest-bearing  escrow account pending
         the  release  of funds by the escrow  agent to  acquire  an  additional
         property.  In January 1998,  the escrow agent  released  these funds to
         acquire the  property in Memphis,  Tennessee,  with  affiliates  of the
         general partners, as tenants-in-common.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


7.       Receivables:

         In June 1997, the  Partnership  terminated the lease with the tenant of
         the property in  Greensburg,  Indiana.  In  connection  therewith,  the
         Partnership  accepted a  promissory  note from this  former  tenant for
         $13,077  for  amounts  relating  to past  due  real  estate  taxes  the
         Partnership had incurred as a result of the former  tenant's  financial
         difficulties.  The promissory  note, which is  uncollateralized,  bears
         interest at a rate of ten percent per annum and is being  collected  in
         36 monthly  installments.  Receivables  at December  31, 1998 and 1997,
         included $9,561 and $13,631,  respectively,  of such amounts, including
         accrued interest of $554 in 1997.

8.       Allocations and Distributions:

         Generally, all net income and net losses of the Partnership,  excluding
         gains and losses from the sale of properties,  are allocated 99 percent
         to the  limited  partners  and one  percent  to the  general  partners.
         Distributions  of net  cash  flow are made 99  percent  to the  limited
         partners and one percent to the general  partners;  provided,  however,
         that the one percent of net cash flow to be  distributed to the general
         partners  is  subordinated  to receipt by the  limited  partners  of an
         aggregate,  ten percent,  cumulative,  noncompounded  annual  return on
         their adjusted capital contributions (the "10% Preferred Return").

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



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


8.       Allocations and Distributions:

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

         During  the  years  ended  December  31,  1998,   1997,  and  1996  the
         Partnership   declared   distributions   to  the  limited  partners  of
         $3,220,000,  $3,150,000 and $3,220,000,  respectively. No distributions
         have been made to the general partners to date.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


9.       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              $3,020,881       $2,899,882         $2,803,601

           Depreciation for tax reporting purposes in excess
               of depreciation for financial reporting purposes        (65,666 )        (92,303 )         (104,412 )

           Allowance for loss on land and building                          --          263,186             77,023

           Direct financing leases recorded as operating
               leases for tax reporting purposes                        63,868           67,392             68,177

           Gain and loss on sale of land and buildings for
               financial reporting purposes in excess of gain
               and loss on sale for tax reporting purposes            (543,697 )       (335,658 )            1,706

           Equity  in   earnings  of   unconsolidated   joint
               ventures for financial reporting purposes in excess
               of equity in earnings of  unconsolidated joint 
               ventures for tax reporting purposes                     (14,400 )       (147,256 )              (49 )

           Allowance for doubtful accounts                             (39,597 )        369,935            (78,517 )

           Accrued rental income                                        51,142          (81,244 )         (103,935 )

           Rents paid in advance                                       (30,922 )         26,458             26,288

           Capitalization of transaction costs for tax
               reporting purposes                                       20,211               --                 --

           Minority interest in timing
               differences of consolidated joint
               venture                                                  14,513          (30,778 )            1,781
                                                                 --------------     ------------     --------------

           Net income for federal income tax
               purposes                                             $2,476,333       $2,939,614        $ 2,691,663
                                                                 ==============     ============     ==============
</TABLE>



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


10.      Related Party Transactions:

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

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

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


<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


10.      Related Party Transactions - Continued:

         During the years ended December 31, 1998, 1997, and 1996, the Affiliate
         provided accounting and administrative services to the Partnership on a
         day-to-day  basis.  The  Partnership  incurred  $107,969,  $87,877  and
         $95,420  for the  years  ended  December  31,  1998,  1997,  and  1996,
         respectively, for such services.

         The due to related  parties at  December  31,  1998 and 1997,  totalled
$19,403 and $32,019, respectively.

11.      Concentration of Credit Risk:

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

                                                                1998              1997               1996
                                                            -------------     -------------      -------------
<S> <C>
                  Golden Corral Corporation                     $758,646          $751,866           $758,348
                  IHOP Properties, Inc.                          454,889               N/A                 --
                  Mid-America Corporation                        439,519           439,519            439,519
                  Restaurant Management
                      Services, Inc.                             438,257           478,750            511,040

</TABLE>


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


11.      Concentration of Credit Risk - Continued:

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

                                                                1998              1997               1996
                                                            -------------     -------------      -------------
<S> <C>
                  Golden Corral Family
                      Steakhouse Restaurants                    $758,646          $751,866           $758,348
                  IHOP Properties, Inc.                          454,889               N/A                 --
                  Burger King                                    453,634           496,487            455,764
                  Denny's                                            N/A           317,041                N/A
                  Hardee's                                           N/A               N/A            410,951
</TABLE>

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

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

12.      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 3,730,388  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


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


12.      Subsequent Event:

         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  $36,721,726  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
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., CNL Income Fund XVII, Ltd. and CNL Income Fund XVIII,  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.



<PAGE>


         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>


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


         Neither the General  Partners,  nor any of their  affiliates,  owns any
interest  in the  Registrant,  except as noted  above.  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 12.  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 by reason of their  purchase  and
ownership of Units.
<TABLE>
<CAPTION>

                                                                                                 Amount Incurred
       Type of Compensation                                                                       For the Year
             and Recipient                           Method of Computation                   Ended December 31, 1998
     -------------------------                       ---------------------                   -----------------------
<S> <C>
Reimbursement     to    affiliates    for     Operating  expenses  are  reimbursed     Operating   expenses   incurred   on
operating expenses                            at the  lower of cost or 90  percent     behalf of the Partnership: $103,157
                                              of  the  prevailing  rate  at  which
                                              comparable  services could have been     Accounting    and     administrative
                                              obtained  in  the  same   geographic     services:  $107,969
                                              area.   Affiliates  of  the  General
                                              Partners  from  time to  time  incur
                                              certain   operating    expenses   on
                                              behalf of the  Partnership for which
                                              the   Partnership   reimburses   the
                                              affiliates without interest.

Annual,  subordinated  manage-ment fee to     One  percent  of the  sum  of  gross        $ - 0 -
affiliates                                    operating  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  and the Property
                                              owned   with   an   affiliate   as
                                              tenants-in-common, subordinated to
                                              certain  minimum  returns  to  the
                                              Limited  Partners.  The management
                                              fee  will not  exceed  competitive
                                              fees for comparable services.  Due
                                              to the fact  that  these  fees are
                                              non-cumulative,   if  the  Limited
                                              Partners  have not received  their
                                              10%   Preferred   Return   in  any
                                              particular   year,  no  management
                                              fees  will be due or  payable  for
                                              such year.

</TABLE>


<PAGE>
<TABLE>
<CAPTION>



                                                                                                 Amount Incurred
       Type of Compensation                                                                       For the Year
           and Recipient                             Method of Computation                   Ended December 31, 1998
     ------------------------                        ---------------------                   -----------------------
<S> <C>
Deferred,    subordinated   real   estate     A   deferred,    subordinated   real        $ - 0 -
disposition fee payable to affiliates         estate   disposition   fee,  payable
                                              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
                                              affiliates of the General Partners
                                              provide  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.  However, if the
                                              net sales  proceeds are reinvested
                                              in a replacement Property, no such
                                              real estate  disposition  fee will
                                              be incurred until such replacement
                                              Property is sold and the net sales
                                              proceeds are distributed.

General        Partners'        deferred,     A   deferred,   subordinated   share        $ - 0 -
sub-ordinated  share of  Partnership  net     equal to one percent of  Partnership
cash flow                                     distributions   of  net  cash  flow,
                                              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
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.


</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                                                                 Amount Incurred
       Type of Compensation                                                                       For the Year
           and Recipient                             Method of Computation                   Ended December 31, 1998
     ------------------------                        ---------------------                   -----------------------
<S> <C>
General  Partners'  share of  Partnership     Distributions  of net sales proceeds        $ - 0 -
net sales  proceeds  from a sale or sales     from   a   sale    or    sales    of
in liquidation of the Partnership             substantially     all     of     the
                                              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 12.  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, including:

         o        With respect to their ownership in the Registrant, the General
                  Partners  will be issued  approximately  37,724  shares of APF
                  common stock, par value $0.01 per share.

         o        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 Schedules

                  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      Certificate of Limited Partnership of CNL Income Fund VI, Ltd.
                  (Included  as  Exhibit  3.3  to  Registration   Statement  No.
                  33-23892 on Form S-11 and incorporated herein by reference.)

         4.1      Certificate of Limited Partnership of CNL Income Fund VI, Ltd.
                  (Included  as  Exhibit  4.2  to  Registration   Statement  No.
                  33-23892 on Form S-11 and incorporated herein by reference.)

         4.2      Agreement and Certificate of Limited Partnership of CNL Income
                  Fund VI, Ltd. (Included as Exhibit 4.2 to Form 10-K filed with
                  the Securities  and Exchange  Commission on April 1, 1996, and
                  incorporated herein by reference.)

         10.1     Management  Agreement  (Included  as Exhibit 10.1 to Form 10-K
                  filed with the Securities and Exchange Commission on March 31,
                  1994, and incorporated herein by reference.)

         10.2     Assignment of Management Agreement from CNL Investment Company
                  to CNL Income Fund Advisors, Inc. (Included as Exhibit 10.2 to
                  Form 10-K filed with the Securities and Exchange Commission on
                  March 30, 1995, and incorporated herein by reference.)



<PAGE>


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

         27       Financial Data Schedule (Filed herewith.)

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


<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 29th day of
March, 1999.

                                     CNL INCOME FUND VI, 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 29, 1999
---------------------------
Robert A. Bourne                           (Principal  Financial and  Accounting
                                           Officer)

/s/ James M. Seneff, Jr.                   Chief Executive  Officer and Director              March 29, 1999
---------------------------
James M. Seneff, Jr.                       (Principal Executive Officer)

</TABLE>

<PAGE>







                            CNL INCOME FUND VI, 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)     $ 203,569         $  --          $ 11,762   (b)     $ 78,084   (c)      $ 11,658     $ 125,589
                                 =============  =============    ==============       ============       ============  ===========

  1997         Allowance for
                   doubtful
                   accounts (a)     $ 125,589         $  --         $ 285,570   (b)      $ 1,914   (c)      $ 18,590     $ 390,655
                                 =============  =============    ==============       ============       ============  ===========

  1998         Allowance for
                   doubtful
                   accounts (a)     $ 390,655         $  --          $ 46,023   (b)     $ 12,264   (c)      $ 61,657     $ 362,757
                                 =============  =============    ==============       ============       ============  ===========
</TABLE>




         (a) Deducted from  receivables and accrued rental income on the balance
               sheet.

         (b) Reduction of rental and other income.

         (c) Amounts written off as uncollectible.


<PAGE>

<TABLE>
<CAPTION>


                                                                   CNL INCOME FUND VI, 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:

     Bertucci's:
       Marietta, Georgia                    -              $399,885       $712,762           -         -   

     Burger King Restaurants:
       Sevierville, Tennessee               -               352,845        609,006           -         -   
       Walker Springs, Tennessee            -               370,839        563,193           -         -   
       Broadway, Tennessee                  -               421,258        539,964           -         -   
       Greeneville, Tennessee               -               318,817        642,538           -         -   

     Church's Fried Chicken
       Restaurant:
         Orlando,Florida                    -               177,440        270,985           -         -   

     Golden Corral Family
      Steakhouse Restaurants:
        Alburguerque, New Mexico            -               717,708      1,018,823           -         -   
           Amarillo, Texas                  -               773,627        908,171           -         -   
           Lawton, Oklahoma                 -               559,095        838,642           -         -   
           El Paso, Texas                   -               670,916              -     837,317         -   

     Hardee's Restaurants:
       Greensburg, Indiana                  -               222,559              -     640,529         -   
       Springfield, Tennessee               -               203,159        413,221           -         -   

     IHOP:
       Elgin, Illinois                      -               426,831              -           -         -   
       Manassas, Virginia                   -               366,992        759,788           -         -   

     Jack in the Box Restaurant:
       San Antonio, Texas                   -               272,300              -           -         -   

     KFC Restaurants:
       Caro, Michigan                       -               150,804              -     373,558         -   
       Gainesville, Florida                 -               321,789        287,429           -         -   

     Popeyes Famous Fried
       Chicken Restaurants:
         Jacksonville, Florida              -               121,901        190,505     123,663         -   
         Jacksonville, Florida              -               141,356        185,933     132,144         -   
         Gainesville, Florida               -                83,542        208,564     192,227         -   
         Jacksonville, Florida              -                93,914        158,543     163,399         -   
         Tallahassee, Florida               -               116,019        233,858     177,915         -   

     Shoney's Restaurants:
       Nashville, Tennessee                 -               320,540        531,507           -         -   

     Taco Bell Restaurants:
       Detroit, Michigan                    -               171,240              -     385,709         -   

     Waffle House Restaurants:
       Clearwater Florida                   -               130,499        268,580           -         -   
       Roanoke, Virginia                    -               119,533        236,219           -         -   
       Atlantic Beach, Florida              -               141,627        263,021           -         -   

     Other:
       Hermitage, Tennessee                 -               391,156              -     720,026         -   
                                                       ------------  -------------  ----------  --------

                                                         $8,558,191     $9,841,252  $3,746,487        -    
                                                       ============  =============  ==========  ========

Property of Joint Venture
   in Which the Partnership
   has a 36% Interest and has
   Invested in Under an
   Operating Lease:

     Darryl's Restaurant:
       Greensboro, North Carolina           -              $261,013              -           -         -   
                                                       ============  =============  ==========  ======== 

Property of Joint Venture
   in Which the Partnership
   has a 3.9% Interest and has
   Invested in Under an
   Operating Lease:

     KFC Restaurant:
       Auburn, Massachusetts                -              $484,362              -           -         -   
                                                       ============  =============  ==========  ======== 

Property of Joint Venture
   in Which the Partnership
   has a 14.46% Interest and has
   Invested in Under an
   Operating Lease:

     Burger King Restaurant:
       Asheville, North Carolina            -              $438,695       $450,432           -         -   
                                                       ============  =============  ==========  ======== 

Property in Which the Partner-
   ship has a 18% Interest
   as Tenants-in-Common and
   has Invested in Under an
   Operating Lease:

     Golden Corral Family
      Steakhouse Restaurant:
       Clinton, North Carolina              -              $138,382       $676,588           -         -   
                                                       ============  =============  ==========  ======== 


Property in Which the Partner-
   ship has a 23.04% Interest
   as Tenants-in-Common and
   has Invested in Under an
   Operating Lease:

     Chevy's Fresh Mex Restaurant:
       Vancouver, Washington                -              $875,659     $1,389,366           -         -   
                                                       ============  =============  ==========  ======== 

Property in Which Partnership
   has a 46.20% Interest as
   Tenants-in-Common has
   Invested in Under an
   Operating Lease:

     IHOP Restaurant:
       Memphis, Tennessee                   -              $678,890       $825,076           -         -   
                                                       ============  =============  ==========  ======== 

Property of Joint Venture
   in Which the Partnership
   has a 50% Interest and
   has Invested in Under an
   Operating Lease:

     5 & Diner Restaurant:
       Melbourne, Florida                   -              $439,281       $603,584           -         -   
                                                       ============  =============  ==========  ======== 

Property in Which the Partnership
   has a 85% Interest as
   Tenants-in-Common and
   has Invested in Under an
   Operating Lease:

     Bennigan's Restaurant:
       Fort Myers, Florida                  -              $638,026              -           -         -   
                                                       ============  =============  ==========  ========

Property of Joint Venture
   in Which the Partnership
   has a 64.29% Interest and
   has Invested in Under an
   Operating Lease:

     IHOP Restaurant:
       Warren,nMichiganan                   -              $507,965       $889,080           -         -   
                                                       ============  =============  ==========  ======== 



Properties the Partnership
   has Invested in Under
   Direct Financing Leases:

     Denny's Restaurant:
       Cheyenne, Wyoming                    -              $162,209       $648,839           -         -   
       Broken Arrow, Oklahoma               -               164,640        559,972           -         -   

     IHOP:
       Elgin, Illinois                      -                -           1,057,282           -         -   

     Hardee's Restaurant:
       Waynesburg, Ohio                     -               136,242        441,299           -         -   

     Jack in the Box Restaurant:
       San Antonio, Texas                   -                     -        420,568           -         -   

     Other:
       Chester, Pennsylvania (g)            -                98,009              -     495,472         -   
                                                       ------------  -------------  ----------  --------

                                            -              $561,100     $3,127,960    $495,472         -
                                                       ============  =============  ==========  ========

Property of Joint Venture in
   Which the Partnership has a
   3.9% Interest and has
   Invested in Under a Direct
   Financing Lease:

     KFC Restaurant:
       Auburn, Massachusetts                -                     -              -    $434,947         -   
                                                       ============  =============  ==========  ======== 

Property of Joint Venture
   in Which the Partnership
   has a 36% Interest and
   has Invested in Under
   a Direct Financing Lease

     Darryl's Restaurant:
       Greensboro, North Carolina           -                     -              -    $521,400         -   
                                                       ============  =============  ==========  ======== 

Property in Which the Partnerhsip
   has a 34.74% Interest as
   Tenants-in-Common and
   has Invested in Under
   a Direct Financing Lease:

     IHOP Restaurant:
       Overland Park, Kansas                -              $335,374     $1,273,134           -         -   
                                                       ============  =============  ==========  ======== 

Property in Which the Partnership
   has a 85% Interest as
   Tenants-in-Common and
   has Invested in Under
   a Direct Financing Lease:

     Bennigan's Restaurant:
       Fort Myers, Florida                  -                     -       $831,741           -         -   
                                                       ============  =============  ==========  ======== 




                                                                                      
            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     
 ------------  ------------  ------------ -----------  ---------  --------   -------------  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $399,885      $712,762    $1,112,647      $43,911    1993       02/97          (b)   
                                                                                      
                                                                                      
    352,845       609,006       961,851      182,479    1986       01/90          (b)   
    370,839       563,193       934,032      168,495    1986       01/90          (b)   
    421,258       539,964       961,222      161,792    1985       01/90          (b)   
    318,817       642,538       961,355      192,527    1988       01/90          (b)   
                                                                                      
                                                                                      
                                                                                      
    177,440       270,985       448,425       78,375    1985       04/90          (b)   
                                                                                      
                                                                                      
                                                                                      
    717,708     1,018,823     1,736,531      306,211    1989       12/89          (b)   
    773,627       908,171     1,681,798      272,949    1989       12/89          (b)   
    559,095       838,642     1,397,737      252,052    1989       12/89          (b)   
    670,916       837,317     1,508,233      234,984    1990       04/90          (b)   
                                                                                      
                                                                                      
    222,559       640,529       863,088      163,799    1989       07/89          (b)   
    203,159       413,221       616,380      111,777    1990       11/90          (b)   
                                                                                      
                                                                                      
    426,831            (f)      426,831            -    1997       12/97          (d)   
    366,992       759,788     1,126,780       25,462    1986       12/97          (b)   
                                                                                      
                                                                                      
    272,300            (f)      272,300            -    1990       08/90          (d)   
                                                                                      
                                                                                      
    150,804       373,558       524,362      108,955    1990       03/90          (b)   
    321,789       287,429       609,218       78,249    1985       11/90          (b)   
                                                                                      
                                                                                      
                                                                                      
    121,901       314,168       436,069       89,255    1985       04/90          (b)   
    141,356       318,077       459,433       90,519    1985       04/90          (b)   
     83,542       400,791       484,333      111,260    1990       04/90          (b)   
     93,914       321,942       415,856       89,634    1985       04/90          (b)   
    116,019       411,773       527,792      115,033    1985       04/90          (b)   
                                                                                      
                                                                                      
    320,540       531,507       852,047      164,623    1988       09/89          (b)   
                                                                                      
                                                                                      
    171,240       385,709       556,949      114,832    1990       01/89          (b)   
                                                                                      
                                                                                      
    130,499       268,580       399,079       80,304    1988       01/90          (b)   
    119,533       236,219       355,752       70,628    1987       01/90          (b)   
    141,627       263,021       404,648       78,354    1986       01/90          (b)   
                                                                                      
                                                                                      
    391,156       720,026     1,111,182      199,627    1990       02/90          (b)   
-----------  ------------  ------------  -----------                                  
                                                                                      
$8,558,191   $13,587,739   $22,145,930   $3,586,086                                   
===========  ============  ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $261,013            (f)     $261,013            -     1974      06/97          (d)   
===========                ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $484,362            (f)     $484,362            -    1989       01/90          (d)   
===========                ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $438,695      $450,432      $889,127     $116,948    1986       03/91          (b)   
===========  ============  ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $138,382      $676,588      $814,970      $66,274    1996       01/96          (b)   
===========  ============  ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $875,659    $1,389,366    $2,265,025      $46,437    1994       12/97          (b)   
===========  ============  ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $678,890      $825,076    $1,503,966      $26,642     -         01/98          (b)   
===========  ============  ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $439,281      $603,584    $1,042,865         $937     -         04/98          (b)   
===========  ============  ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $638,026            (f)     $638,026            -     -         06/98          (d)   
===========                ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $507,965      $889,080    $1,397,045       $8,769     -         09/98          (b)   
===========  ============  ============  ===========                                  
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
         (f)           (f)           (f)          (e)   1980       12/89          (e)   
         (f)           (f)           (f)          (e)   1982       08/95          (e)   
                                                                                      
                                                                                      
          -            (f)           (f)          (e)   1997       12/97          (e)   
                                                                                      
                                                                                      
         (f)           (f)           (f)          (e)   1990       11/90          (e)   
                                                                                      
                                                                                      
          -            (f)           (f)          (d)   1990       08/90          (d)   
                                                                                      
                                                                                      
         (f)           (f)           (f)          (e)   1991       12/89          (e)   
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
          -            (f)           (f)          (d)   1989       01/90          (d)   
===========                                                                           
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
          -            (f)           (f)          (d)   1974       06/97          (d)   
===========                                                                           
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
   $335,374    $1,273,134            (f)          (d)    -         01/98          (d)   
===========  ============                                                             
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
          -            (f)           (f)          (d)    -         06/98          (d)   
===========                                                                           
                                                                                      

</TABLE>

<PAGE>




                            CNL INCOME FUND VI, 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>

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

                        Balance, December 31, 1995                         $  25,328,432     $ 2,717,746
                        Dispositions                                            (980,904 )       (34,279 )
                        Depreciation expense                                          --         481,683
                                                                         ----------------  --------------

                        Balance, December 31, 1996                            24,347,528       3,165,150
                        Acquisitions                                           2,791,258              --
                        Dispositions                                          (2,748,363 )      (309,754 )
                        Depreciation expense                                          --         471,938
                                                                         ----------------  --------------

                        Balance, December 31, 1997                            24,390,423       3,327,334
                        Dispositions                                          (2,244,493 )      (198,206 )
                        Depreciation expense                                          --         456,958
                                                                         ----------------  --------------

                        Balance, December 31, 1998                         $  22,145,930     $ 3,586,086
                                                                         ================  ==============

                Property of Joint Venture in Which the
                    Partnership  has a 36% Interest and
                    has Invested in Under an
                    Operating lease:

                        Balance, December 31, 1995                           $   721,893      $  147,919
                        Depreciation expense                                          --          20,846
                                                                         ----------------  --------------

                        Balance, December 31, 1996                               721,893         168,765
                        Acquisitions                                             261,013              --
                        Dispositions                                            (721,893 )      (170,478 )
                        Depreciation expense                                          --           1,713
                                                                         ----------------  --------------

                        Balance, December 31, 1997                               261,013              --
                        Depreciation expense (d)                                      --              --
                                                                         ----------------  --------------

                        Balance, December 31, 1998                           $   261,013        $     --
                                                                         ================  ==============
</TABLE>


<PAGE>


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

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

                                December 31, 1998
<TABLE>
<CAPTION>

                                                                                               Accumulated
                                                                              Cost             Depreciation
                                                                         ----------------      ----------------
<S> <C>
                    Property of joint venture in Which the
                        Partnership has a 3.9% Interest and
                        has Invested in Under an Operating
                        Lease:

                        Balance, December 31, 1995                           $   484,362              $    --
                        Depreciation expense (d)                                      --                   --
                                                                         ----------------      ----------------

                        Balance, December 31, 1996                               484,362                    --
                        Depreciation expense (d)                                       --                    --
                                                                         ----------------      ----------------

                        Balance, December 31, 1997                               484,362                    --
                        Depreciation expense (d)                                       --                    --
                                                                         ----------------      ----------------

                        Balance, December 31, 1998                           $   484,362             $     --
                                                                         ================      ================

                    Property of Joint  Venture  in Which
                        the  Partnership  has a
                        14.46%  Interest  and has
                        Invested in Under an Operating
                        Lease:

                          Balance, December 31, 1995                         $   889,127            $  71,905
                          Depreciation expense                                        --               15,014
                                                                         ----------------      ----------------

                          Balance, December 31, 1996                             889,127               86,919
                          Depreciation expense                                        --               15,014
                                                                         ----------------      ----------------

                          Balance, December 31, 1997                             889,127              101,933
                          Depreciation expense                                        --               15,015
                                                                         ----------------      ----------------

                          Balance, December 31, 1998                          $  889,127           $  116,948
                                                                         ================      ================

                    Property of Joint  Venture  in Which
                        the  Partnership  has a
                        64.29%  Interest  and has
                        Invested in Under an Operating
                        Lease:

                          Balance, December 31, 1997                             $    --              $    --
                          Acquisitions                                         1,397,045                   --
                          Depreciation expense                                        --                8,769
                                                                         ----------------      ----------------

                          Balance, December 31, 1998                         $ 1,397,045            $   8,769
                                                                         ================      ================
</TABLE>



<PAGE>


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

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

                                December 31, 1998
<TABLE>
<CAPTION>

                                                                                                Accumulated
                                                                               Cost             Depreciation
                                                                          ---------------       --------------
<S> <C>
                    Property in Which the  Partnership
                      has an 18%  Interest  as
                      Tenants-in-Common  and has
                      Invested in Under an Operating
                      Lease:

                         Balance, December 31, 1995                               $    --             $    --
                         Acquisitions                                             814,970                  --
                         Depreciation expense                                          --              21,168
                                                                          ---------------       --------------

                         Balance, December 31, 1996                            $  814,970          $   21,168
                         Depreciation expense                                          --              22,427
                                                                          ---------------       --------------

                         Balance, December 31, 1997                               814,970              43,595
                         Depreciation expense                                          --              22,679
                                                                          ---------------       --------------

                         Balance, December 31, 1998                            $  814,970          $   66,274
                                                                          ===============       ==============

                    Property in Which the  Partnership
                      has a 23.04% Interest as
                      Tenants-in-Common  and has
                      Invested in Under an Operating
                      Lease:

                         Balance, December 31, 1996                               $    --             $    --
                         Acquisition                                            2,265,025                  --
                         Depreciation expense                                          --                 127
                                                                          ---------------       --------------

                         Balance, December 31, 1997                           $ 2,265,025            $    127
                         Depreciation expense                                          --              46,310
                                                                          ---------------       --------------

                         Balance, December 31, 1998                           $ 2,265,025           $  46,437
                                                                          ===============       ==============

                    Property in Which the  Partnership
                      has a 46.20% Interest as
                      Tenants-in-Common  and has
                      Invested in Under an Operating
                      Lease:

                         Balance, December 31, 1997                               $    --              $   --
                         Acquisitions                                           1,503,966                  --
                         Depreciation expense                                          --              26,642
                                                                          ---------------       --------------

                         Balance, December 31, 1998                           $ 1,503,966            $ 26,642
                                                                          ===============       ==============
</TABLE>



<PAGE>


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

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

                                December 31, 1998
<TABLE>
<CAPTION>

                                                                                                Accumulated
                                                                               Cost             Depreciation
                                                                          ---------------       --------------
<S> <C>
                    Property of Joint Venture in Which
                        the Partnership has a 50%
                        Interest and has Invested in
                        Under an Operating Lease:

                            Balance, December 31, 1997                            $   --                $  --
                            Acquisition                                        1,042,865                   --
                            Depreciation expense                                      --                  937
                                                                          ---------------       --------------

                            Balance, December 31, 1998                       $ 1,042,865             $    937
                                                                          ===============       ==============

                    Property in Which  the  Partnership
                        has a 85%  Interest  as
                        Tenants-in-Common and has Invested
                        in Under an Operating
                        Lease:

                            Balance, December 31, 1997                            $   --                $  --
                            Acquisition                                          638,026                   --
                            Depreciation expense                                      --                   --
                                                                          ---------------       --------------

                            Balance, December 31, 1998                        $  638,026                $  --
                                                                          ===============       ==============
</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 its  consolidated  joint venture,  and the
             unconsolidated joint ventures (including the two Properties held as
             tenants-in-common)  for federal income tax purposes was $25,492,208
             and  $12,463,859,  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 lease. The
             cost of the building has been included in net  investment in direct
             financing leases; therefore, depreciation is not applicable.

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

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



<PAGE>


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

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

                                December 31, 1998


  (g)        The tenant of this Property,  Restaurant Management Services,  Inc.
             subleased  this Property to a franchisee  of a regional  restaurant
             chain.  The franchisee  vacated the Property;  however,  Restaurant
             Management Services, Inc. continues to be responsible for complying
             with all of the terms of the lease  agreement  and is continuing to
             pay rent on this Property, subject to certain rent concessions,  to
             the Partnership.



<PAGE>






                                    EXHIBITS


<PAGE>







                                  EXHIBIT INDEX


Exhibit Number

      3.1         Certificate of Limited Partnership of CNL Income Fund VI, Ltd.
                  (Included  as  Exhibit  3.3  to  Registration   Statement  No.
                  33-23892 on Form S-11 and incorporated herein by reference.)

      4.1         Certificate of Limited Partnership of CNL Income Fund VI, Ltd.
                  (Included  as  Exhibit  4.2  to  Registration   Statement  No.
                  33-23892 on Form S-11 and incorporated herein by reference.)

      4.2         Agreement and Certificate of Limited Partnership of CNL Income
                  Fund VI, Ltd. (Included as Exhibit 4.2 to Form 10-K filed with
                  the Securities  and Exchange  Commission on April 1, 1996, and
                  incorporated herein by reference.)

     10.1         Management  Agreement  (Included  as Exhibit 10.1 to Form 10-K
                  filed with the Securities and Exchange Commission on March 31,
                  1994, and incorporated herein by reference.)

     10.2         Assignment of Management Agreement from CNL Investment Company
                  to CNL Income Fund Advisors, Inc. (Included as Exhibit 10.2 to
                  Form 10-K filed with the Securities and Exchange Commission on
                  March 30, 1995, and incorporated herein by reference.)

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

     27           Financial Data Schedule (Filed herewith.)