CNL INCOME FUND XVIII LTD - 10-K Annual Report

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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, 2000

OR

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

For the transition period from to

Commission file number 0-24095

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

Florida 59-3295394
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

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

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

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

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

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

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

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

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

Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market for such Units. Each Unit was originally sold at $10 per Unit.

DOCUMENTS INCORPORATED BY REFERENCE:
None

PART I

Item 1. Business

CNL Income Fund XVIII, Ltd. (the "Registrant" or the "Partnership") is
a limited partnership which was organized pursuant to the laws of the State of
Florida on February 10, 1995. The general partners of the Partnership are Robert
A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on September 20, 1996, the
Partnership offered for sale up to $35,000,000 of limited partnership interests
(the "Units") (3,500,000 Units at $10 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
August 11, 1995. The offering terminated on February 6, 1998, at which date the
maximum offering proceeds of $35,000,000 had been received from investors who
were admitted to the Partnership as limited partners (the "Limited Partners").

The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food, family-style and casual dining
restaurant chains (the "Restaurant Chains"). As of December 31, 1998, net
proceeds to the Partnership from its offering of Units, after deduction of
organizational and offering expenses, totalled $30,810,000. During 1998, the
Partnership had invested approximately $29,859,000 of the proceeds to acquire 24
Properties (which included one Property owned by a joint venture in which the
Partnership is a co-venturer) and to pay acquisition fees and certain
acquisition expenses. In February 1999, the Partnership invested in a joint
venture arrangement, CNL Portsmouth Joint Venture, with CNL Income Fund XI,
Ltd., an affiliate of the General Partners to hold and purchase one Property and
used the remaining amounts to establish a working capital reserve for
Partnership purposes. In December 1999, the Partnership sold one Property in
Atlanta, Georgia. In June 2000, the Partnership reinvested the net sales
proceeds from the sale of the Property in Atlanta, Georgia in a joint venture
arrangement, TGIF Pittsburgh Joint Venture, with CNL Income Fund VII, Ltd., CNL
Income Fund XV, Ltd., and CNL Income Fund XVI, Ltd., each an affiliate of the
General Partners, to purchase one Property in Homestead, Pennsylvania. As a
result of the above transactions, as of December 31, 2000, the Partnership owned
25 Properties, including 22 wholly owned Properties and interests in three
Properties owned by joint ventures in which the Partnership is a co-venturer. In
January 2001, the Partnership sold a portion of its interest in TGIF Pittsburgh
Joint Venture to CNL Income Fund VII, Ltd., a Florida limited partnership and an
affiliate of the General Partners, for approximately $500,000. The Partnership
intends to use the net sales proceeds to pay other liabilities and to meet the
Partnership's working capital and other needs. The Properties are generally
leased on a triple-net basis with the lessees responsible for all repairs and
maintenance, property taxes, insurance and utilities.

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

Description of Leases

The leases of the Properties provide for initial terms ranging from 15
to 20 years (the average being 19 years) and expire between 2012 and 2020. All
leases are generally on a triple-net basis, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. The leases
provide for minimum base annual rental payments (payable in equal monthly
installments) ranging from approximately $58,400 to $259,900. The majority of
the leases provide for percentage rent based on sales in excess of a specified
amount. In addition, the majority of the leases provide that, commencing in
specified lease years (generally the sixth lease year), the annual base rent
required under the terms of the lease will increase.

Generally, the leases provide for two to five five-year renewal options
subject to the same terms and conditions as the initial lease. Lessees of 17 of
the Partnership's 25 Properties also have been granted options to purchase the
Properties after a specified portion of the lease term has elapsed. The option
purchase price is equal to the Partnership's original cost of the Property
(including acquisition costs), plus a specified percentage or the Property's
fair market value at the time the purchase option is exercised, whichever is
greater. Fair market value will be determined through an appraisal by an
independent appraisal firm.

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

In October 1998, the tenants of three Boston Market properties, Boston
Chicken, Inc., Finest Foodservice, L.L.C., and WMJ Texas, Inc., filed for
bankruptcy, rejected one of their three leases and ceased making rental payments
to the Partnership on the rejected lease. In June 2000, the two remaining leases
were rejected and the tenant ceased making rental payments on these Properties.
The Partnership will not recognize any rental and earned income from this
Property until a new tenant for the Property is located, or until the Property
is sold and the proceeds from such sale are reinvested in an additional
Property. The lost revenues resulting from the leases that were rejected, as
described above, could have an adverse affect on the results of operations of
the Partnership if the Partnership is unable to re-lease this Property in a
timely manner. The General Partners are currently seeking either new tenants or
purchasers for the rejected Properties.

In June 2000, the tenant of the Property in San Antonio, Texas closed
the store and ceased restaurant operations. The Partnership is currently seeking
a new tenant or purchaser for this Property.

In October 2000, the Partnership terminated the lease with the tenant
of the Property in Raleigh, North Carolina, due to financial difficulties the
tenant was experiencing. The Partnership received a termination fee in
consideration for the termination. The Partnership is currently seeking a new
tenant or purchaser for this Property.

Major Tenants

During 2000, two lessees of the Partnership, Golden Corral Corporation
and Jack in the Box Inc., each contributed 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). As of December 31, 2000,
Golden Corral Corporation and Jack in the Box, Inc. were each the lessee under
leases relating to four restaurants. It is anticipated that based on the minimum
rental payments required by the leases, that each of these lessees will continue
to contribute more than ten percent of the Partnership's total rental income
rental and earned income (including the Partnership's share of total rental and
earned income from joint ventures) in 2001. In addition, two Restaurant Chains,
Golden Corral Family Steakhouse Restaurants ("Golden Corral"), and Jack in the
Box, each accounted for more than ten percent of the Partnership's total rental
income rental and earned income (including the Partnership's share of total
rental and earned income from joint ventures) for 2000. In 2001, it is
anticipated that these two Restaurant Chains each will contribute more than ten
percent of the Partnership's rental and earned income (including the
Partnership's share of total rental and earned income from joint ventures) to
which the Partnership is entitled under the terms of the leases. Any failure of
such lessees or Restaurant Chains could materially adversely affect the
Partnership's income if the Partnership is not able to re-lease the Properties
in a timely manner. As of December 31, 2000, Golden Corral Corporation leased
Properties with an aggregate carrying value in excess of 20 percent of the total
assets of the Partnership.

Joint Venture Arrangements

In August 1998, the Partnership entered into a joint venture
arrangement, Columbus Joint Venture, with CNL Income Fund XII, Ltd. and CNL
Income Fund XVI, Ltd., affiliates of the General Partners, to construct and hold
one Property. Each of the affiliates is a limited partnership organized pursuant
to the laws of the State of Florida. The joint venture arrangement provides for
the Partnership and its joint venture partners to share in all costs and
benefits associated in the joint venture in proportion to each partner's
percentage interest in the joint venture. The Partnership has a 39.93% interest
in Columbus Joint Venture. The Partnership and its joint venture partners are
also jointly and severally liable for all debts, obligations and other
liabilities of the joint venture.

In addition, in February 1999, the Partnership entered into a joint
venture arrangement, CNL Portsmouth Joint Venture, with CNL Income Fund XI,
Ltd., an affiliate of the General Partners, to purchase and hold one restaurant
Property. The affiliate is a limited partnership organized pursuant to the laws
of the State of Florida. The joint venture agreement provides for the
Partnership and its joint venture partner to share in all costs and benefits
associated with the joint venture in proportion to each partner's percentage
interest in the joint venture. The Partnership owns 57.2% interest in the
profits and losses of the joint venture.

In addition, in June 2000, the Partnership entered into a joint venture
arrangement, TGIF Pittsburgh Joint Venture, with CNL Income Fund VII, Ltd., CNL
Income Fund XV, Ltd. and CNL Income Fund XVI, Ltd., affiliates of the General
Partners, to purchase and hold one restaurant Property. Each of the affiliate's
is a limited partnership organized pursuant to the laws of the State of Florida.
The joint venture agreement provides for the Partnership and its joint venture
partners to share in all costs and benefits associated with the joint venture in
proportion to each partner's percentage interest in the joint venture. As of
December 31, 2000, the Partnership owned a 39.5% interest in the profits and
losses of the joint venture. In January 2001, the Partnership sold a portion of
its interest in TGIF Pittsburgh Joint Venture to CNL Income Fund VII, Ltd., a
Florida limited partnership and an affiliate of the General Partners, for
approximately $500,000. The Partnership intends to use the net sales proceeds to
pay other liabilities and to meet the Partnership's working capital and other
needs.

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

The Partnership shares management control equally with affiliates of
the General Partners for each of the joint ventures. 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
partners, either upon such terms and conditions as to which the venturers may
agree or, in the event the venturers cannot agree, on the same terms and
conditions as any offer from a third party to purchase such joint venture
interest.

Net cash flow from operations of Columbus Joint Venture, CNL Portsmouth
Joint Venture and TGIF Pittsburgh Joint Venture are distributed 39.93%, 57.2%
and 39.5%, respectively, to the Partnership and the balance is distributed to
the respective 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 use of joint venture arrangements allows the Partnership to fully
invest its available funds at times at which it would not have sufficient funds
to purchase an additional property, or at times when a suitable opportunity to
purchase an additional property is not available. The use of joint venture
arrangements also provides the Partnership with increased diversification of its
portfolio among a greater number of properties.

Management Services

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

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

Competition

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

Employees

The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of APF, the parent company 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 Financial Group, Inc., a diversified real estate
company, and its affiliates, who may also perform certain services for the
Partnership.

Item 2. Properties

As of December 31, 2000, the Partnership owned 25 Properties. Of the 25
Properties, 22 are owned by the Partnership in fee simple and three are owned
through joint venture arrangements. See Item 1. Business - Joint Venture
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.

Description of Properties

Land. As of December 31, 2000, the Partnership's Property sites ranged
from approximately 24,400 to 120,400 square feet depending upon building size
and local demographic factors. Sites purchased by the Partnership are in
locations zoned for commercial use which have been reviewed for traffic patterns
and volume.

The following table lists the Properties owned by the Partnership as of
December 31, 2000 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation for the year ended December 31, 2000.

State Number of Properties

Arizona 1
California 2
Florida 2
Illinois 1
Kentucky 1
Maryland 1
Minnesota 1
North Carolina 3
Nevada 1
New York 1
Ohio 2
Pennsylvania 1
Tennessee 1
Texas 6
Virginia 1
--------------
TOTAL PROPERTIES 25
==============

Buildings. The Properties owned by the Partnership as of December 31,
2000, include a building that is one of a Restaurant Chain's approved designs.
The buildings generally are rectangular and constructed from various
combinations of stucco, steel, wood, brick and tile. Building sizes range from
approximately 2,100 to 9,700 square feet. All buildings on Properties acquired
by the Partnership are freestanding and surrounded by paved parking areas.
Buildings are suitable for conversion to various uses, although modifications
may be required prior to use for other than restaurant operations. As of
December 31, 2000, the Partnership had no plans for renovation of the
Properties. Depreciation expense is computed for buildings and improvements
using the straight line method using a depreciable life of 40 years for federal
income tax purposes.

As of December 31, 2000, the aggregate cost of the Properties owned by
the Partnership and joint ventures for federal income tax purposes was
$26,932,200 and $3,925,143, respectively.

The following table lists the Properties owned by the Partnership as of
December 31, 2000 by Restaurant Chain.

Restaurant Chain Number of Properties

Arby's 2
Bennigan's 1
Boston Market 4
Burger King 1
Chevy's Fresh Mex 1
Golden Corral 4
Ground Round 1
IHOP 2
Jack in the Box 4
NI's International Buffet 1
On the Border 1
Taco Bell 1
TGIF 1
Wendy's 1
--------------
TOTAL PROPERTIES 25
==============

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

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

Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food, family-style and casual dining restaurant
chains. The leases are generally on a long-term "triple net" basis, meaning that
the tenant is responsible for repairs, maintenance, property taxes, utilities
and insurance. 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. The terms of
the leases of the Properties owned by the Partnership are described in Item 1.
Business - Leases.

At December 31, 2000, 1999, 1998, 1997 and 1996 the Properties were 80
percent, 96 percent, 96 percent, 100 percent and 100 percent occupied. The
following is a schedule of the average rent per Property for each of the years
ended December 31:

2000 1999 1998 1997 1996
------------- ------------- --------------- -------------- ----------

Rental Revenues (1) $ 2,888,408 $ 3,141,240 $ 2,953,285 $1,290,621 $1,374
Properties (3) 20 23 24 22 2
Average Rent per
Property $ 144,420 $ 136,576 $ 123,054 $ 58,665 $ 687

(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements. Rental
revenues have been adjusted, as applicable, for any amounts for which
the Partnership has established an allowance for doubtful accounts.

(2) Operations did not commence until October 12, 1996, the date following
the date on which the Partnership received the minimum offering
proceeds of $1,500,000, and such proceeds were released from escrow.
The Partnership acquired two Properties in December 1996, of which only
one was operational as of December 31, 1996.

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

The following is a schedule of lease expirations for leases in place as
of December 31, 2000 for the next ten years and thereafter.

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

2001 -- -- --
2002 -- -- --
2003 -- -- --
2004 -- -- --
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 -- -- --
2009 -- -- --
2010 -- -- --
Thereafter 20 3,136,500 100.00%
---------- ------------- -------------
Total (1) 20 $ 3,136,500 100.00%
========== ============= =============

(1) Excludes five Properties which were vacant at December 31, 2000.

Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants, as of December 31, 2000 (See Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Description of Leases.

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

Jack in the Box Inc. leases four Jack in the Box restaurants. The
initial term of each lease is 18 years (expiring in 2015) and the average
minimum base annual rent is approximately $112,100 (ranging from approximately
$77,900 to $132,200).
Item 3. Legal Proceedings

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

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

Not applicable.

PART II

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

(a) As of March 15, 2001, there were 1,559 holders of record of the Units.
There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. During
2000, Limited Partners who wished to sell their Units may have offered
the Units for sale pursuant to the Partnership's distribution
reinvestment plan (the "Plan"), and Limited Partners who wished to have
their distributions used to acquire additional Units (to the extent
Units were available for purchase), may have done so pursuant to such
Plan. The General Partners had the right to prohibit transfers of
Units. The price paid for any Unit transferred pursuant to the Plan
through December 31, 2000 range from $8.57 to $9.50 per Unit. The price
paid for any Unit transferred other than pursuant to the Plan was
subject to negotiation by the purchaser and the selling Limited
Partner. The Partnership will not redeem or repurchase Units.

The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 2000 and 1999 other than
pursuant to the Plan, net of commissions

2000 1999(1)
-------------------------------------- ------------------------------------------
High Low Average High Low Average
--------- --------- ------------ ----------- --------- -------------

First Quarter $9.30 $ 7.45 $ 8.73 (2) (2) (2)
Second Quarter 6.65 6.65 6.65 (2) (2) (2)
Third Quarter 7.27 7.27 7.27 $ 10.00 $ 10.00 $ 10.00
Fourth Quarter 6.47 6.47 6.47 9.01 9.01 9.01

(1) A total of 10,290 and 6,400 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2000 and 1999,
respectively.

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

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

For the years ended December 31, 2000 and 1999, the Partnership
declared cash distributions of $2,800,000 and $2,799,998, respectively, to the
Limited Partners. No amounts distributed to partners for the years ended
December 31, 2000 and 1999, are required to be or have been treated by the
Partnership as a return of capital for purposes of calculating the Limited
Partners' return on their adjusted capital contributions. No distributions have
been made to the General Partners to date. As indicated in the chart below,
these distributions were declared following the close of each of the
Partnership's calendar quarters. These amounts include monthly distributions
made in arrears for the Limited Partners electing to receive such distributions
on this basis.

Quarter Ended 2000 1999
-------------------- -------------------- ---------------------

March 31 $ 700,000 $ 699,999
June 30 700,000 699,999
September 30 700,000 700,000
December 31 700,000 700,000

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.

(b) Not applicable.

Item 6. Selected Financial Data

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

Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2000 1999 1998 1997 1996
---------------- --------------- --------------- ---------------- ---------------

Revenues (1) $ 2,781,113 $ 3,192,371 $ 3,097,757 $ 1,453,242 $ 31,614
Net income (4)(5)(6) 1,117,197 2,515,356 2,302,322 1,154,760 26,910
Cash distributions
declared (2) 2,800,000 2,799,998 2,657,764 1,310,885 57,846
Net income per Unit .32 .72 .66 .51 .05
Cash distributions
declared per Unit (2) .80 .80 .76 .57 .11
Weighted average number
of Limited Partner
Unitsoutstanding (3) 3,500,000 3,500,000 3,495,278 2,279,801 503,436

2000 1999 1998 1997 1996
---------------- --------------- --------------- ---------------- ----------------
At December 31:
Total assets $ 29,385,297 $30,866,006 $31,112,617 $31,807,255 $ 7,240,324
Total partners' 28,573,997 29,983,855 30,268,497 29,846,580 6,996,213
capital

(1) Revenues include equity in earnings of joint ventures and adjustments
to accrued rental income due to the tenants of certain Properties
terminating their leases.

(2) Approximately 50 percent, 10 percent, and 13 percent of cash
distributions ($0.40, $0.08, and $0.06 per Unit, respectively) for the
years ended December 31, 2000, 1999, and 1998, respectively, represents
a return of capital in accordance with generally accepted accounting
principles ("GAAP"). Cash distributions treated as a return of capital
on a GAAP basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. The Partnership has not treated
such amounts as a return of capital for purposes of calculating the
Limited Partners' return on their invested capital contributions.

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

(4) Net income for the year ended December 31, 1998, includes $197,466 from
provision for loss on assets. Net income for the year ended December
31, 2000, includes $580,221 from provision for loss on assets.

(5) Net income for the year ended December 31, 1999, include $46,300 from
gains on sale of land and building.

(6) Net income for the year ended December 31, 2000, includes $100,000 from
lease termination income.

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

The Partnership was organized on February 10, 1995, to acquire for
cash, either directly or through joint venture arrangements, both newly
constructed and existing restaurant Properties, as well as land upon which
restaurants were to be constructed, which are leased primarily to operators of
selected national and regional fast-food, family-style and casual dining
Restaurant Chains. The leases are generally triple-net leases, with the lessees
generally responsible for all repairs and maintenance, property taxes, insurance
and utilities. As of December 31, 2000, the Partnership owned 25 Properties,
either directly or through joint venture arrangements.

Capital Resources

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

As of December 31, 1998, net proceeds to the Partnership from its
offering of Units, after deduction of organizational and offering expenses,
totalled $30,810,000. During 1997, the Partnership acquired 20 additional
Properties (one of which was under construction as of December 31, 1997) and
completed construction of a Property under construction as of December 31, 1996.
During 1998, the Partnership completed construction of the Property under
construction as of December 31, 1997, acquired one additional Property and
entered into one joint venture arrangement, Columbus Joint Venture. During 1999,
the Partnership used the remaining net proceeds to enter into one joint venture
arrangement, CNL Portsmouth Joint Venture, and to establish a working capital
reserve for Partnership purposes. In addition, during 1999, the Partnership sold
one Property in Atlanta, Georgia, as described below. During 2000, the
Partnership used the net proceeds from the sale of the Property in Atlanta,
Georgia to enter into one joint venture arrangement, TGIF Pittsburgh Joint
Venture in Homestead, Pennsylvania as described below. As a result of the above
transactions, as of December 31, 2000, the Partnership had invested the net
proceeds in 25 Properties, including three Properties owned by joint ventures in
which the Partnership is a co-venturer, and to pay acquisition fees and
miscellaneous acquisition expenses. As of December 31, 2000, the Partnership had
paid $1,575,000 in acquisition fees to an affiliate of the General Partners.

In August 1998, the Partnership entered into a joint venture
arrangement, Columbus Joint Venture, with CNL Income Fund XII, Ltd. and CNL
Income Fund XVI, Ltd., each a Florida limited Partnership and affiliate of the
General Partners, to own and lease one restaurant property. During the year
ended December 31, 1999, the Partnership made additional contributions of
approximately $195,700 to Columbus Joint Venture to pay property construction
costs. As of December 31, 2000, the Partnership had a total contribution of
approximately $362,000 to the joint venture and owned a 39.93% interest in this
joint venture.

In February 1999, the Partnership entered into a joint venture
arrangement, CNL Portsmouth Joint Venture, with CNL Income Fund XI, Ltd., each a
Florida limited Partnership and affiliate of the General Partners, to own and
lease one restaurant property. As of December 31, 2000, the Partnership had
contributed approximately $330,500 to the joint venture and owned a 57.2%
interest in this joint venture.

In December 1999, the Partnership sold its Property in Atlanta,
Georgia, and received net sales proceeds of $688,997, resulting in a gain of
$46,300 for financial reporting purposes. This Property was originally acquired
by the Partnership in 1997, and had a cost of approximately $617,600, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the Property for approximately $71,400 in excess of its
original purchase price. In June 2000, the Partnership reinvested the net sales
proceeds from this sale into a joint venture arrangement, TGIF Pittsburgh Joint
Venture, with CNL Income Fund VII, Ltd., CNL Income Fund XV, Ltd., and CNL
Income Fund XVI, Ltd., each a Florida Limited Partnership and affiliate of the
General Partners, to own and lease one restaurant property. As of December 31,
2000, the Partnership had contributed approximately $1,002,000 to the joint
venture and owned a 39.5% interest in this joint venture. In January 2001, the
Partnership sold a portion of its interest in TGIF Pittsburgh Joint Venture to
CNL Income Fund VII, Ltd., a Florida limited partnership and an affiliate of the
General Partners, for approximately $500,000. The Partnership intends to use the
net sales proceeds to pay other liabilities and to meet the Partnership's
working capital and other needs.

Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, interest received and
distributions from joint ventures, less cash paid for expenses). Cash from
operations was $2,310,051, $2,797,040, and $2,831,738, for the years ended
December 31, 2000, 1999, and 1998, respectively. The decrease in cash from
operations for 2000, as compared to 1999, was primarily a result of changes in
income and expenses as described in "Results of Operations" below, and the
decrease in cash from operations for 1999, as compared to 1998, was primarily a
result of changes in the Partnership's working capital.

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

Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments such as
demand deposit accounts at commercial banks, money market accounts and
certificates of deposit with less than a thirty day maturity date, pending the
Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At December 31, 2000, the Partnership had
$479,603 invested in such short-term investments, as compared to $1,282,113 at
December 31, 1999. The decrease cash and cash equivalents was primarily a result
of the Partnership investing in joint venture, TGIF Pittsburgh Joint Venture in
June 2000, as described above. As of December 31, 2000, the average interest
rate earned on the rental income deposited in demand deposit accounts at
commercial banks was approximately 4.01% annually. The funds remaining at
December 31, 2000 will be used to pay distributions and other liabilities and to
meet the Partnership's working capital and other needs.

Short-Term Liquidity

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

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

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

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

The Partnership generally distributes cash from operations remaining
after the payment of the operating expenses of the Partnership, to the extent
that the General Partners determine that such funds are available for
distribution. Based on cash from operations, and for the years ended December
31, 2000 anticipated future cash from operations, the Partnership declared
distributions to the Limited Partners of $2,800,000, $2,799,998, and $2,657,764,
for the years ended December 31, 2000, 1999, and 1998, respectively. This
represents distributions of $0.80, $0.80, and $0.76 per Unit, for the years
ended December 31, 2000, 1999 and 1998, respectively, based on the weighted
average number of Units outstanding during the period the Partnership was
operational. No distributions were made to the General Partners for the years
ended December 31, 2000, 1999, or 1998. No amounts distributed or to be
distributed to the Limited Partners for the years ended December 31, 2000, 1999
or 1998, are required to be or have been treated by the Partnership as a return
of capital for purposes of calculating the Limited Partners' return on their
adjusted capital contributions. The Partnership intends to continue to make
distributions of cash available for distribution to the Limited Partners on a
quarterly basis, although some Limited Partners, in accordance with their
election, receive monthly distributions, for an annual fee.

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

During the year ended December 31, 1998, affiliates of the General
Partners incurred on behalf of the Partnership $35,842 for certain acquisition
expenses. As of December 31, 2000 and 1999, the Partnership owed $53,181 and
$36,737, respectively, to related parties for operating expenses and accounting
and administrative services. As of March 15, 2001, the Partnership had
reimbursed the affiliates all such amounts. Other liabilities, including
distributions payable, decreased to $758,119 at December 31, 2000, as compared
to $845,414 at December 31, 1999. Liabilities at December 31, 2000, to the
extent they exceed cash and cash equivalents at December 31, 2000, will be paid
from future cash from operations or from anticipated future General Partners
contributions.

Long-Term Liquidity

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

Results of Operations

During 1998, the Partnership owned and leased 23 wholly owned
Properties. During 1999, the Partnership owned and leased 25 wholly owned
Properties (including one Property which was sold in 1999). During 2000, the
Partnership owned and leased 22 wholly owned Properties. In addition, during
1998, 1999, and 2000, the Partnership was a co-venturer in one, two, and three
joint ventures, respectively, they each owned and leased one Property. As of
December 31, 2000, the Partnership owned, either directly or through a joint
venture arrangement, 25 Properties, which are generally subject to long-term
triple-net leases. The leases of the Properties provide for minimum base annual
rental payments (payable in monthly installments) ranging from approximately
$58,400 to $259,900. The majority of the leases provide for percentage rent
based on sales in excess of a specified amount. In addition, the majority of the
leases provide that, commencing in specified lease years (generally the sixth
lease year), the annual base rent required under the terms of the lease will
increase. For a further description of the Partnership's leases and Properties,
see Item 1. Business - Leases and Item 2. Properties.

During the years ended December 31, 2000, 1999, and 1998, the
Partnership earned $2,632,478, $3,071,229, and $2,953,285, respectively, in
rental income from operating leases (net of adjustments to accrued rental
income) and earned income from direct financing leases. The decrease in rental
and earned income during 2000, as compared to 1999, and the increase during
1999, as compared to 1998, was partially offset by, a decrease in rental and
earned income due to the fact that the tenants of three Boston Market
Properties, Boston Chicken, Inc., Finest Foodservice, L.L.C. and WMJ Texas,
Inc., filed for bankruptcy in 1998. During 1998, one of these tenants rejected
the lease relating to one of the Partnership's Properties and ceased making
rental payments to the Partnership for this lease. The Partnership continued
receiving rental payments relating to the leases that were not rejected. In June
2000, the other two tenants rejected the leases relating to two remaining
Properties and ceased making rental payments. In conjunction with the rejected
leases during 2000, the Partnership reversed $92,314 of accrued rental income.
The accrued rental income was the accumulated amount of non-cash accounting
adjustments previously recorded in order to recognize future scheduled rent
increases as income evenly over the term of the lease. The Partnership will not
recognize any rental and earned income from these Properties until new tenants
for the Properties are located, or until the Properties are sold and the
proceeds from such sales are reinvested in additional Properties. The lost
revenues resulting from the rejected leases, could have an adverse affect on the
results of operations of the Partnership if the Partnership is not able to
re-lease these Properties in a timely manner. The General Partners are currently
seeking either new tenants or purchasers for the rejected Properties.

Rental and earned income also decreased during 2000 as compared to
1999, by approximately $78,400, due to the fact that in June 2000, the tenant of
the Property in San Antonio, Texas defaulted under the terms of its lease,
vacated the Property and discontinued making rental payments. As a result, the
Partnership reclassified the asset from net investment in direct financing
leases to land and buildings on operating leases. In accordance with Statement
of Financial Accounting standards No. 13, "Accounting for Leases," the
Partnership recorded the reclassified assets at the lower of original cost,
present fair value, or present carrying value. No loss on termination of direct
financing leases was recorded. During 2000, the Partnership established an
allowance for doubtful accounts of approximately $92,600 for past due rental
amounts relating to this Property. No such allowance were recorded during 1999
or 1998. The Partnership is currently seeking a new tenant or purchaser for this
Property. The Partnership will not recognize any rental income relating to this
Property until a new tenant for the Property is located or until the Property is
sold and the proceeds from such sale are reinvested in an additional Property.

Rental and earned income also decreased during 2000 as compared to
1999, by approximately $57,200, due to the fact that in October 2000, the
Partnership terminated the lease with the tenant of the Property in Raleigh,
North Carolina, due to financial difficulties the tenant was experiencing. The
Partnership is currently seeking a new tenant or purchaser for this Property.
The Partnership will not recognize any rental income relating to this Property
until a new tenant for the Property is located or until the Property is sold and
the proceeds from such sale are reinvested in an additional Property.

The decrease in rental income during 2000, was also partially due to
the sale of the Property in Atlanta, Georgia, in December 1999. The decrease
during 2000 and the increase during 1999, was also partially attributable to the
fact that during 1999, the Partnership collected and recognized as income
approximately $47,400 for a portion of past due rental amounts for which the
Partnership had previously established an allowance for doubtful accounts
relating to the Property in Stow, Ohio.

During the years ended December 31, 2000 and 1999, the Partnership also
earned $112,863 and $61,656, 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 2000 and 1999, each as compared to the
previous year, was primarily attributable to the Partnership entering into TGIF
Pittsburgh Joint Venture during 2000; CNL Portsmouth Joint Venture in February
1999; and Columbus Joint Venture during 1998, each as described above in
"Capital Resources."

During the year ended December 31, 2000, two lessees of the
Partnership, Golden Corral Corporation and Jack in the Box Inc., each
contributed more than ten percent of the Partnership's total rental and earned
income (including the Partnership's share of rental and earned income from joint
ventures). As of December 31, 2000, Golden Corral Corporation and Jack in the
Box Inc. were each the lessee under leases relating to four restaurants. It is
anticipated that, based on the minimum rental payments required by the leases,
these lessees each will continue to contribute more than ten percent of the
Partnership's total rental and earned income (including the Partnership's share
of rental and earned income from joint ventures) in 2001. In addition, during
the year ended December 31, 2000, two Restaurant Chains, Golden Corral and Jack
in the Box each accounted for more than ten percent of the Partnership's total
rental and earned income (including the Partnership's share of rental and earned
income from joint ventures). In 2001, it is anticipated that these two
Restaurant Chains each will continue to account for more than ten percent of the
total rental and earned income (including the Partnership's share of rental and
earned income from joint ventures) to which the Partnership is entitled under
the terms of the leases. Any failure of such lessees or Restaurant Chains could
materially adversely affect the Partnership's income if the Properties are not
re-leased in a timely manner.

During the years ended December 31, 2000, 1999 and 1998, the
Partnership earned $35,772, $59,486 and $144,472, respectively, in interest and
other income. The decrease in interest and other income during 2000 and 1999,
each as compared to the previous year, was primarily attributable to the
decrease in the amount of funds invested in cash and cash equivalents due to the
acquisition of an additional Property in 1999 and the investment in joint
venture arrangements during 2000 and 1999.

Operating expenses, including depreciation and amortization expense,
were $825,877, $723,315 and $597,969 during the years ended December 31, 2000,
1999 and 1998, respectively. The increase in operating expenses during 2000, as
compared to 1999, was partially attributable to an increase in depreciation
expense as the result of the fact that the Properties acquired during 1999, and
the fact that during 2000, the Partnership reclassified the lease relating to
the Property in San Antonio, Texas from direct financing lease to operating
lease.

Operating expenses were higher during 1999, as compared to 2000 and
1998, primarily due to the amount of transaction costs the Partnership incurred
relating to the General Partners retaining financial and legal advisors to
assist them in evaluating and negotiating the proposed and terminated Merger
with APF, as described below in "Termination of Merger."

The increase in operating expenses for 2000 and 1999, each as compared
to the previous year, was also partially due to the fact that the Partnership
incurred expenses such as insurance, repairs and maintenance and real estate
taxes relating to the five vacant Properties described above. The Partnership
will continue to incur such costs until the Partnership finds replacement
tenants or purchasers for these Properties.

As a result of the sale of the Property in Atlanta, Georgia, as
described above in "Capital Resources," the Partnership recognized a gain of
$46,300 for financial reporting purposes for the year ended December 31, 1999.
No Properties were sold during 2000 or 1998.

During the year ended December 31, 1998, the Partnership established an
allowance for loss on land of $197,466 for financial reporting purposes relating
to the Property in Minnetonka, Minnesota. The tenant of this Boston Market
Property declared bankruptcy and rejected the lease relating to this Property.
The loss represented the difference between the Property's carrying value at
December 31, 1998 and the estimated of net realizable value. No such allowance
was established during the years ended December 31, 2000 and 1999.

During the year ended December 31, 2000, the Partnership recorded a
provision for loss on the building in the amount of $299,849 for financial
reporting purposes relating to the Property in San Antonio, Texas. The allowance
represents the difference between the carrying value of the net investment in
direct financing lease relating to the Property. The tenants of this Property
closed the store and ceased operation during 2000. The allowance represented the
difference between the carrying value of the Properties at December 31, 2000,
and the estimated net realizable value for this Property. No such allowance was
established during the year ended December 31, 1999 and 1998.

During the year ended December 31, 2000 and 1998, the Partnership
established an allowance for loss on assets of $553,317 and $197,466,
respectively, for financial reporting purposes relating to the Properties in
Timonium, Maryland; Raleigh, North Carolina; and Minnetonka, Minnesota. The
tenant of the Timonium and Minnetonka Properties declared bankruptcy and
rejected the leases relating to these Properties. The tenant of the San Antonio
Property defaulted under the terms of its lease, vacated the Property and ceased
restaurant operations. The loss represented the difference between the
Properties' carrying values and the estimated net realizable value. No such
allowance was established during the year ended December 31, 1999.

The lease termination refund to tenant of $84,873 during 2000, was due
to lease termination negotiations related to the 1999 sale of the Property in
Atlanta, Georgia, as described in "Capital Resources." No such amounts were
incurred during 1999 or 1998. The Partnership does not anticipate incurring any
additional costs related to the sale of this Property.

The Partnership's leases are on a triple-net basis and contain
provisions that management believes will mitigate the adverse effect of
inflation. Such provisions include clauses requiring the payment of percentage
rent based on certain restaurant sales above a specified level and/or automatic
increases in base rent at specified times during the term of the lease.
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.

In December 1999, the Securities and Exchange Commission released SAB
101, which provides the staff's view in applying generally accepted accounting
principles to selected revenue recognition issues. SAB 101 requires the
Partnership to defer recognition of certain percentage rental income until
certain defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material impact on the
Partnership's results of operations.

In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments, embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The Statement requires that an entity
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. In June 1999, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, an Amendment of FASB
Statement No. 133." FAS 137 deferred the effective date of FAS 133 for one year.
FAS 133, as amended, is now effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The Partnership has reviewed both
statements and has determined that both FAS 133 and FAS 137 do not apply to the
Partnership as of December 31, 2000.

Termination of Merger

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. Subsequent to entering into the Merger agreement, the
General Partners received a number of comments from brokers who sold the
Partnership's units concerning the loss of passive income treatment in the event
the Partnership merged with APF. On June 3, 1999, the General Partners, on
behalf of the Partnership, and APF agreed that it would be in the best interests
of the Partnership and APF that APF not attempt to acquire the Partnership in
the acquisition. Therefore in June 1999, APF entered into a termination
agreement with the General Partners of the Partnership.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

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

CONTENTS

Page

Report of Independent Certified Public Accountants 16

Financial Statements:

Balance Sheets 17

Statements of Income 18

Statements of Partners' Capital 19

Statements of Cash Flows 20-21

Notes to Financial Statements 22-39

Report of Independent Certified Public Accountants

To the Partners
CNL Income Fund XVIII, Ltd.

In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XVIII, Ltd. (a Florida limited partnership) at December 31,
2000 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedules listed in the index
appearing under item 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 auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Orlando, Florida
February 2, 2001

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

BALANCE SHEETS

December 31,
2000 1999
------------------- ------------------
ASSETS

Land and buildings on operating leases, less
accumulated depreciation and allowance for
loss on assets $ 22,421,426 $22,514,872
Net investment in direct financing leases 3,984,296 5,209,759
Investment in joint ventures 1,762,821 688,113
Cash and cash equivalents 479,603 1,282,113
Restricted cash -- 690,885
Receivables, less allowance for doubtful accounts of
$123,993 and $11,172,
respectively 346 28,037
Prepaid expenses 22,399 9,341
Accrued rental income 440,148 383,725
Other assets 1,313 59,161
------------------- ------------------

$ 29,112,352 $30,866,006
=================== ==================

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable $ 33,559 $ 86,294
Accrued and Escrowed real estate taxes payable 11,788 --
Distributions payable 700,000 700,000
Due to related parties 53,181 36,737
Rents paid in advance 7,474 13,969
Deferred rental income 5,298 45,151
------------------- ------------------
Total liabilities 811,300 882,151

Partners' capital 28,301,052 29,983,855
------------------- ------------------

$ 29,112,352 $30,866,006
=================== ==================
See accompanying notes to financial statements.

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

STATEMENTS OF INCOME

Year Ended December 31,
2000 1999 1998
------------------ --------------- ---------------
Revenues:
Rental income from operating leases $ 2,327,142 $ 2,444,692 $ 2,396,215
Adjustments to accrued rental income (140,012 ) -- --
Earned income from direct financing leases 445,348 626,537 557,070
Interest and other income 35,772 59,486 144,472
------------------ --------------- ---------------
2,668,250 3,130,715 3,097,757
------------------ --------------- ---------------
Expenses:
General operating and administrative 229,811 142,554 145,661
Bad debt expense 2,973 -- --
Professional services 35,304 61,288 25,670
Management fees to related party 27,875 30,235 28,038
Real estate taxes 87,603 -- --
State and other taxes 17,604 21,983 8,605
Depreciation and amortization 397,175 392,521 374,473
Transaction costs 27,532 74,734 15,522
------------------ --------------- ---------------
825,877 723,315 597,969
------------------ --------------- ---------------

Income Before Equity in Earnings of Joint Ventures,
Gain on Sale of Asset, Provision for Loss on
Assets, Termination Refund to Tenant and Lease
Termination Income 1,842,373 2,407,400 2,499,788

Equity in Earnings of Joint Ventures 112,863 61,656 --

Gain on Sale of Asset -- 46,300 --

Provision for Loss on Assets (853,166 ) -- (197,466 )

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

Lease Termination Income 100,000 -- --
------------------ --------------- ---------------

Net Income $ 1,117,197 $ 2,515,356 $ 2,302,322
================== =============== ===============

Allocation of Net Income:
General partners $ -- $ (3,309 ) $ (1,582 )
Limited partners 1,117,197 2,518,665 2,303,904
------------------ --------------- ---------------

$ 1,117,197 $ 2,515,356 $ 2,302,322
================== =============== ===============

Net Income Per Limited Partner Unit $ 0.32 $ 0.72 $ 0.66
================== =============== ===============

Weighted Average Number of
Limited Partner Units Outstanding 3,500,000 3,500,000 3,495,278
================== =============== ===============

See accompanying notes to financial statements.

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

STATEMENTS OF PARTNERS' CAPITAL

Years Ended December 31, 2000, 1999 and 1998

General Partners
---------------------------------------
Accumulated
Contributions Earnings
----------------- -----------------

Balance, December 31, 1997 1,000 (1,428 )

Contributions from limited partners -- --
Distributions to limited partners
($0.76 per limited partner unit) -- --
Syndication costs -- --
Net income -- (1,582 )
----------------- -----------------

Balance, December 31, 1998 1,000 (3,010 )

Distributions to limited partners
($0.80 per limited partner unit) -- --
Net income -- (3,309 )
----------------- -----------------

Balance, December 31, 1999 $ 1,000 $ (6,319 )

Contributions from limited partners
Distributions to limited partners
($0.80 per limited partner unit) -- --
Net income -- --
----------------- -----------------

Balance, December 31, 2000 $ 1,000 $ (6,319 )
================= =================

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

34,145,759 (1,368,731 ) 1,183,098 (4,113,118 ) 29,846,580

854,241 -- -- -- 854,241

-- (2,657,764 ) -- -- (2,657,764 )
-- -- -- (76,882 ) (76,882 )
-- -- 2,303,904 -- 2,302,322
- ----------------- --------------- ---------------- --------------- -------------

35,000,000 (4,026,495 ) 3,487,002 (4,190,000 ) 30,268,497

-- (2,799,998 ) -- -- (2,799,998 )
-- -- 2,518,665 -- 2,515,356
- ----------------- --------------- ---------------- --------------- -------------

$ 35,000,000 $ (6,826,493 ) $ 6,005,667 $ (4,190,000 ) $29,983,855

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

$ 35,000,000 $ (9,626,493 ) $ 7,122,864 $ (4,190,000 ) $28,301,052
================= =============== ================ =============== =============

CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS

Year Ended December 31,
2000 1999 1998
--------------- -------------- ---------------

Increase (Decrease) in Cash and Cash Equivalents:

Cash Flows from Operating Activities:
Cash received from tenants $ 2,738,192 $ 2,930,415 $ 2,884,620
Distributions from joint ventures 97,264 60,076 5,630
Interest received 41,937 53,448 141,408
Cash paid for expenses (482,469 ) (246,899 ) (199,920 )
Lease termination refund (84,873 ) -- --
--------------- -------------- ---------------

Net cash provided by operating activities 2,310,051 2,797,040 2,831,738
--------------- -------------- ---------------

Cash Flows from Investing Activities:
Proceeds from sale of asset -- 688,997 --
Additions to land and buildings on operating
leases -- (25,792 ) (3,134,046 )
Investment in direct financing leases -- -- (12,945 )
Investment in joint ventures (1,001,558 ) (526,138 ) (166,025 )
Decrease (increase) in restricted cash 688,997 (688,997 ) --
Other -- (117 ) --
--------------- -------------- ---------------

Net cash used in investing activities (312,561 ) (552,047 ) (3,313,016 )
--------------- -------------- ---------------

Cash Flows from Financing Activities:
Reimbursement of acquisition and syndication
costs paid by related parties on behalf of
the Partnership -- (2,495 ) (37,135 )
Contributions from limited partners -- -- 854,241
Distributions to limited partners (2,800,000 ) (2,799,998 ) (2,468,400 )
Payment of syndication costs -- -- (161,142 )
Other -- -- (10,000 )
--------------- -------------- ---------------

Net cash used in financing activities (2,800,000 ) (2,802,493 ) (1,822,436 )
--------------- -------------- ---------------

Net Decrease in Cash and Cash Equivalents (802,510 ) (557,500 ) (2,303,714 )

Cash and Cash Equivalents at Beginning of Year 1,282,113 1,839,613 4,143,327
--------------- -------------- ---------------

Cash and Cash Equivalents at End of Year $ 479,603 $ 1,282,113 $ 1,839,613
=============== ============== ===============
See accompanying notes to financial statements.

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

STATEMENTS OF CASH FLOWS - CONTINUED

Year Ended December 31,
2000 1999 1998
--------------- ---------------- ---------------

Reconciliation of Net Income to Net Cash
Provided by Operating Activities:

Net income $ 1,117,197 $ 2,515,356 $ 2,302,322
--------------- ---------------- ---------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 395,565 386,932 372,473
Amortization 1,610 5,589 2,000
Bad debt expense (2,973 )
Equity in earnings of joint ventures net
of distributions (15,599 ) (1,580 ) 5,630
Provision for loss on assets 853,166 -- 197,466
Decrease in net investment in direct
financing leases 70,178 38,556 81,211
Decrease (increase) in receivables 32,552 (29,925 ) 68,000
Increase in prepaid expenses (13,058 ) (5,688 ) (3,653 )
Increase in accrued rental income (56,423 ) (152,726 ) (119,132 )
Increase in other assets (1,313 ) -- --
Increase (decrease) in accounts payable
and (40,947 ) 83,736 2,102
accrued expenses
Increase in due to related parties,
excluding
acquisition costs paid on behalf of the 16,444 6,457 27,257
Partnership
Increase (decrease) in rents paid in
advance (6,495 ) 6,618 (20,926 )
Increase (decrease) in deferred rental (39,853 ) (56,285 ) (83,012 )
income
--------------- ---------------- ---------------
Total adjustments 1,192,854 281,684 529,416
--------------- ---------------- ---------------

Net Cash Provided by Operating Activities $ 2,310,051 $ 2,797,040 $ 2,831,738
=============== ================ ===============

Supplemental Schedule of Non-Cash Investing and
Financing Activities:

Related parties paid certain acquisition costs on behalf of the
Partnership as follows:
Acquisition costs $ -- $ -- $ 35,842
--------------- ---------------- ---------------
$ -- $ -- $ 35,842
=============== ================ ===============

Distributions declared and unpaid at December 31 $ 700,000 $ 700,000 $ 700,000
=============== ================ ===============
See accompanying notes to financial statements.

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

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2000, 1999, and 1998

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

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

The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 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
generally on a triple-net basis, whereby the tenant is generally
responsible for all operating expenses relating to the property,
including property taxes, insurance, maintenance and repairs. The
leases are accounted for using the direct financing or operating
methods. Such methods are described below:

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

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

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

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2000, 1999, and 1998

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

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

Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. In contrast, deferred
rental income represents the aggregate amount of scheduled
rental payments to date (including rental payments due during
construction and prior to the property being placed in
service) in excess of income recognized on a straight-line
basis over the lease term commencing on the date the property
is placed in service. 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
reverses 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 properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to the fair value. Although the general partners have made
their best estimate of these factors based on current conditions, it is
reasonably possible that changes could occur in the near term which
could adversely affect the general partners' estimate of net cash flows
expected to be generated from its properties and the need for asset
impairment write-downs.

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

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

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2000, 1999, and 1998

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

Investment in Joint Ventures - The Partnership's investments in
Columbus Joint Venture, CNL Portsmouth Joint Venture and TGIF
Pittsburgh Joint Venture are accounted for using the equity method
since the Partnership shares control with affiliates which have the
same general partners.

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

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

Organization Costs - Prior to January 1, 1999, organization costs were
being amortized over five years using the straight-line method.
Effective January 1, 1999, the Partnership adopted Statement of
Position 98-5 "Reporting on the Costs of Start-Up Activities". The
statement requires that an entity expense the costs of start-up
activities and organization costs as they are incurred. Adoption of
this statement did not have a material effect of the Partnership's
financial position or results of operations.

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

Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment (Note 7).

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

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2000, 1999, and 1998

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

Rents Paid in Advance - Rents paid in advance by lessees for future
periods are deferred upon receipt and are recognized as revenues during
the period in which the rental income is earned. Rents paid in advance
include "interim rent" payments required to be paid under the terms of
certain leases for construction properties equal to a pre-determined
rate times the amount funded by the Partnership during the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable. Once minimum annual rent becomes payable,
the "interim rent" payments are amortized and recorded as income either
(i) over the lease term so as to produce a constant periodic rate of
return for leases accounted for using the direct financing method, or
(ii) over the lease term using the straight-line method for leases
accounted for using the operating method, whichever is applicable.

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

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

Staff Accounting Bulletin No. 101 ("SAB 101") - In December 1999, the
Securities and Exchange Commission released SAB 101, which provides the
staff's view in applying generally accepted accounting principles to
selected revenue recognition issues. SAB 101 requires the Partnership
to defer recognition of certain percentage rental income until certain
defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material
impact on the Partnership results of operations.

Statement of Financial Accounting Standards No. 133 ("FAS 133") and
Statement of Financial Accounting Standards No. 137 ("FAS 137") - In
June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards for derivative instruments,
including

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

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2000, 1999, and 1998

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

certain derivative instruments, embedded in other contracts
(collectively referred to as derivatives), and for hedging activities.
The Statement requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. In June 1999, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, an Amendment
of FASB Statement No. 133." FAS 137 deferred the effective date of FAS
133 for one year. FAS 133, as amended, is now effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The
Partnership has reviewed both statements and has determined that both
FAS 133 and FAS 137 do not apply to the Partnership as of December 31,
2000.

2. Leases:
------

The Partnership leases its land and buildings to operators of national
and regional fast-food and family-style restaurants. The leases are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 13, "Accounting for Leases." Some of the Partnership's
leases are classified as operating leases and some of the leases have
been classified as direct financing leases. For the leases classified
as direct financing leases, the building portions of the property
leases are accounted for as direct financing leases while the land
portions of the majority of the leases are operating leases. The leases
have initial terms of 15 to 20 years and the majority of the leases
provide for minimum and contingent rentals. In addition, the tenant
generally pays all property taxes and assessments, fully maintains the
interior and exterior of the building and carries insurance coverage
for public liability, property damage, fire and extended coverage. The
lease options generally allow the tenants to renew the leases for two
to five successive five-year periods subject to the same terms and
conditions as the initial lease. Most leases also allow the tenant to
purchase the property at fair market value after a specified portion of
the lease has elapsed.

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

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2000, 1999, and 1998

3. Land and Buildings on Operating Leases:
--------------------------------------

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

2000 1999
-------------------- --------------------
Land $ 12,008,124 $ 12,008,124
Buildings 12,459,435 11,603,999
-------------------- --------------------
24,467,559 23,612,123
Less accumulated depreciation (1,295,350 ) (899,785 )
-------------------- --------------------
23,172,209 22,712,338
Less allowance for loss on
land and building (750,783 ) (197,466 )
-------------------- --------------------

$ 22,421,426 $ 22,514,872
==================== ====================

In December 1999, the Partnership sold its property in Atlanta,
Georgia, to a third party and received net sales proceeds of $688,997,
resulting in a gain of $46,300 for financial reporting purposes. This
property was originally acquired by the Partnership in 1997 at a cost
of approximately $617,600, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold this property for
a total of approximately $71,400 in excess of its original purchase
price.

During the year ended December 31, 2000, the Partnership recorded a
provision for loss on assets of $553,317 relating to the properties
located in Timonium, Maryland and Raleigh, North Carolina. The tenant
of the property in Timonium, Maryland declared bankruptcy in October
1998 and rejected the lease relating to this property in June 2000. In
October 2000, the tenant of the property in Raleigh, North Carolina
terminated its lease. The provisions for loss represented the
difference between the net carrying value of the properties at December
31, 2000, and the realizable value for the properties.

Generally, the leases provide for escalating guaranteed minimum rents
throughout the lease term. Income from these scheduled rent increases
is recognized on a straight-line basis over the terms of the leases.
For the years ended December 31, 2000, 1999 and 1998, the Partnership
recognized $195,700 (net of $140,012 in reversals), $196,020 and
$209,725, respectively, of such rental income.

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

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2000, 1999, and 1998

3. Land and Buildings on Operating Leases:
--------------------------------------

The following is a schedule of the future minimum lease payments to be
received on the noncancellable operating leases at December 31, 2000:

2001 $2,066,948
2002 2,121,036
2003 2,174,814
2004 2,186,416
2005 2,186,416
Thereafter 20,560,960
----------------

$31,296,590
================

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

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

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

2000 1999
----------------- -----------------

Minimum lease payments
receivable $ 7,689,932 $ 10,184,633
Estimated residual values 1,420,667 1,420,667
Less unearned income (5,126,303 ) (6,395,541 )
----------------- -----------------

Net investment in direct
financing leases $ 3,984,296 $ 5,209,759
================= =================

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

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2000, 1999, and 1998

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

During the year ended December 31, 2000, the Partnership recorded a
provision for loss on the building of $299,849 relating to the property
located in San Antonio, Texas. In June 2000, the tenant of this
property defaulted under the terms of its lease, vacated the property
and ceased operation. As a result, the Partnership reclassified the
related assets from net investment in direct financing leases to land
and building on operating leases. In accordance with Statement of
Financial Accounting Standards No. 13, "Accounting for Leases," the
Partnership recorded the reclassified asset at the lower of original
cost, present fair value, or present carrying value. No loss on
termination of direct financing leases was recorded for financial
reporting purposes during 1999 and 1998.

The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2000:

2001 $ 440,708
2002 446,711
2003 455,116
2004 455,116
2005 455,116
Thereafter 5,437,165
----------------

$7,689,932
================

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

5. Investment in Joint Ventures:
----------------------------

In August 1998, the Partnership entered into a joint venture
arrangement, Columbus Joint Venture, with affiliates of the general
partners, to construct and hold one restaurant property. During 1999
and 1998, the Partnership contributed $195,700 and $166,025,
respectively, to purchase land and pay construction costs relating to
the Property owned by the joint venture. As of December 31, 2000, the
Partnership had a 39.93% interest in the profits and losses of the
joint venture.

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

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2000, 1999, and 1998

5. Investment in Joint Venture - Continued:
---------------------------------------

In February 1999, the Partnership entered into a joint venture
arrangement, CNL Portsmouth Joint Venture, with CNL Income Fund XI,
Ltd., a Florida limited partnership and an affiliate of the general
partners, to own and lease one restaurant property. As of December 31,
2000, the Partnership had contributed approximately $330,500 to the
joint venture and owned a 57.2% interest in this joint venture.

In June 2000, the Partnership used the net sales proceeds from the 1999
sale of the property in Atlanta, Georgia, along with additional funds,
to invest in a joint venture arrangement, TGIF Pittsburgh Joint
Venture, with CNL Income Fund VII, Ltd., CNL Income Fund XV, Ltd., and
CNL Income Fund XVI, Ltd., each a Florida limited partnership and
affiliate of the general partners, to own and lease one restaurant
property. The Partnership accounts for this investment using the equity
method since the Partnership shared control with affiliates. As of
December 31, 2000, the Partnership had contributed approximately
$1,001,600 to the joint venture and owned a 39.5% interest in this
joint venture. In January 2001, the Partnership sold a portion of its
interest in TGIF Pittsburgh Joint Venture to CNL Income Fund VII, Ltd.,
a Florida limited partnership and an affiliate of the General Partners,
for approximately $500,000. The Partnership intends to use the net
sales proceeds to pay other liabilities and to meet the Partnership's
working capital and other needs (see Note 13).

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

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Years Ended December 31, 2000, 1999, and 1998

5. Investment in Joint Venture - Continued:
---------------------------------------

As of December 31, 2000, Columbus Joint Venture, CNL Portsmouth Joint
Venture, and TGIF Pittsburgh Joint Venture each owned and leased one
property, to operators of fast-food or family-style restaurants. The
following presents the combined, condensed financial information for
the joint ventures at December 31: