Preheat oven to 350 degrees F.
Melt butter in nonstick 10-inch cast-iron skillet with ovenproof handle over medium-high heat. (If handle is not ovenproof, wrap well in aluminum foil.) Stir in apple, water, 1 tablespoon sugar and cinnamon. Reduce heat to medium-low; cook until liquid evaporates and apples are tender, about 10 minutes. Remove skillet from heat.
While apples are cooking, prepare pancake batter according to package directions, adding the specified amounts of low-fat (1percent) milk, oil and egg. Stir in shredded cheddar and the remaining 1 tablespoon sugar just until blended.
Spoon pancake batter evenly over apples in the skillet.
Bake pancake in preheated 350 degree F oven until pancake is set and springs back when lightly touched with fingertips, about 10 to 12 minutes. Carefully remove skillet from oven and place on trivet. Cut the pancake into 8 wedges to serve.