<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

   (X)              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                          OF THE SECURITIES EXCHANGE ACT of 1934

For the quarterly period ended                    September 30, 1999
                                       ---------------------------------------

                                       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
                                     0-21560
                         ------------------------------


                            CNL Income Fund XI, Ltd.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                Florida                                       59-3078854
------------------------------------------            --------------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No.)


450 South Orange Avenue
Orlando, Florida                                                32801
------------------------------------------            --------------------------
  (Address of principal executive offices)                    (Zip Code)


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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for 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
                                        -----    -----
<PAGE>

                                    CONTENTS



                                                                           Page
Part I.                                                                    ----

        Item 1.    Financial Statements:

                      Condensed Balance Sheets                             1

                      Condensed Statements of Income                       2

                      Condensed Statements of Partners' Capital            3

                      Condensed Statements of Cash Flows                   4

                      Notes to Condensed Financial Statements              5-8

        Item 2.    Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                  9-16

        Item 3.    Quantitative and Qualitative Disclosures About
                      Market Risk                                          16

Part II.

         Other Information                                                 17-18
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               September 30,             December 31,
                                                                    1999                     1998
                                                             -------------------      -------------------
<S>                                                          <C>                      <C>
                         ASSETS
                         ------

   Land and buildings on operating leases, less
       accumulated depreciation of $2,909,723 and
       $2,589,785, in 1999 and 1998, respectively                   $21,701,653             $ 21,683,785
   Net investment in direct financing leases                          7,400,695                6,786,286
   Investment in joint ventures                                       2,739,513                2,521,613
   Cash and cash equivalents                                          1,942,821                1,559,240
   Restricted cash                                                           --                1,640,936
   Receivables, less allowance for doubtful accounts
       of $5,820 in 1998                                                 26,399                  132,311
   Prepaid expenses                                                      10,222                   12,335
   Accrued rental income                                              1,745,681                1,645,062
   Other assets                                                         122,024                  122,024
                                                             -------------------      -------------------

                                                                    $35,689,008             $ 36,103,592
                                                             ===================      ===================

                  LIABILITIES AND PARTNERS' CAPITAL
                  ---------------------------------

   Accounts payable                                                  $  135,323               $   14,461
   Accrued and escrowed real estate taxes payable                        22,969                   15,138
   Distributions payable                                                875,006                  995,006
   Due to related parties                                                14,091                   25,446
   Rents paid in advance and deposits                                    54,312                   92,069
                                                             -------------------      -------------------
       Total liabilities                                              1,101,701                1,142,120

   Commitments and Contingencies (Note 5)

   Minority interest                                                    505,257                  503,860

   Partners' capital                                                 34,082,050               34,457,612
                                                             -------------------      -------------------

                                                                    $35,689,008             $ 36,103,592
                                                             ===================      ===================
</TABLE>

           See accompanying notes to condensed financial statements.

                                       1
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                   Quarter Ended                 Nine Months Ended
                                                                    September 30,                   September 30,
                                                                1999           1998             1999            1998
                                                             ---------      ----------       -----------     -----------
<S>                                                         <C>             <C>              <C>             <C>
Revenues:
    Rental income from operating leases                     $  646,209      $  672,887       $ 1,935,980     $ 2,023,869
    Earned income from direct financing leases                 238,460         195,141           713,558         608,546
    Contingent rental income                                    43,572          50,903            98,465         113,667
    Interest and other income                                   20,847          16,421            62,902         114,469
                                                            ----------      ----------       -----------     -----------
                                                               949,088         935,352         2,810,905       2,860,551
                                                            ----------      ----------       -----------     -----------

Expenses:
    General operating and administrative                        39,838          43,130           111,787         117,587
    Professional services                                        3,988           9,699            26,460          23,892
    Management fees to related party                             9,810           9,923            29,010          28,975
    Real estate taxes                                               --           2,179                --           2,179
    State and other taxes                                           20              --            28,366          24,370
    Depreciation and amortization                              106,646         114,665           319,938         343,995
    Transaction costs                                           63,691              --           183,788              --
                                                            ----------      ----------       -----------     -----------
                                                               223,993         179,596           699,349         540,998
                                                            ----------      ----------       -----------     -----------
Income Before Minority Interests in Income of
    Consolidated Joint Ventures and Equity in
    Earnings of Unconsolidated Joint Ventures                  725,095         755,756         2,111,556       2,319,553

Minority Interests in Income of Consolidated
    Joint Ventures                                             (16,943)        (16,760)          (50,149)        (50,684)

Equity in Earnings of Unconsolidated Joint
    Ventures                                                    64,914          58,730           188,049         156,335
                                                            ----------      ----------       -----------     -----------

Net Income                                                  $  773,066      $  797,726       $ 2,249,456     $ 2,425,204
                                                            ==========      ==========       ===========     ===========

Allocation of Net Income:
    General partners                                        $    7,731      $    7,977       $    22,495     $    24,252
    Limited partners                                           765,335         789,749         2,226,961       2,400,952
                                                            ----------      ----------       -----------     -----------

                                                            $  773,066      $  797,726       $ 2,249,456     $ 2,425,204
                                                            ==========      ==========       ===========     ===========

Net Income Per Limited Partner Unit                         $     0.19      $     0.20       $      0.56     $      0.60
                                                            ==========      ==========       ===========     ===========

Weighted Average Number of Limited Partner
    Units Outstanding                                        4,000,000       4,000,000         4,000,000       4,000,000
                                                            ==========      ==========       ===========     ===========
</TABLE>

           See accompanying notes to condensed financial statements.

                                       2
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL

<TABLE>
<CAPTION>
                                                       Nine Months Ended               Year Ended
                                                         September 30,                December 31,
                                                              1999                        1998
                                                    -------------------------    -----------------------
<S>                                                 <C>                          <C>
General partners:
    Beginning balance                                        $    211,047               $    176,232
    Net income                                                     22,495                     34,815
                                                        ------------------         ------------------
                                                                  233,542                    211,047
                                                        ------------------         ------------------

Limited partners:
    Beginning balance                                          34,246,565                 34,132,000
    Net income                                                  2,226,961                  3,774,589
    Distributions ($0.66 and $0.92 per
       limited partner unit, respectively)                     (2,625,018 )               (3,660,024 )
                                                        ------------------         ------------------
                                                               33,848,508                 34,246,565
                                                        ------------------         ------------------

Total partners' capital                                      $ 34,082,050               $ 34,457,612
                                                        ==================         ==================
</TABLE>

           See accompanying notes to condensed financial statements.

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                        Nine Months Ended
                                                                          September 30,
                                                                     1999               1998
                                                                ---------------    ----------------
<S>                                                             <C>                <C>
Increase (Decrease) in Cash and Cash Equivalents

    Net Cash Provided by Operating Activities                      $ 2,826,757         $ 2,934,890
                                                                ---------------    ----------------

    Cash Flows from Investing Activities:
       Additions to land and buildings on operating
          leases                                                      (337,806)                 --
       Investment in direct financing leases                          (694,610)                 --
       Investment in joint venture                                    (247,286)                 --
       Decrease in restricted cash                                   1,630,296                  --
                                                                ---------------    ----------------
          Net cash provided by investing activities                    350,594                  --
                                                                ---------------    ----------------

    Cash Flows from Financing Activities:
       Distributions to limited partners                            (2,745,018)         (2,665,018)
       Distributions to holders of minority interests                  (48,752)            (50,170)
                                                                ---------------    ----------------
          Net cash used in financing activities                     (2,793,770)         (2,715,188)
                                                                ---------------    ----------------

Net Increase in Cash and Cash Equivalents                              383,581             219,702

Cash and Cash Equivalents at Beginning of Period                     1,559,240           1,272,386
                                                                ---------------    ----------------

Cash and Cash Equivalents at End of Period                           1,942,821         $ 1,492,088
                                                                ===============    ================

Supplemental Schedule of Non-Cash Investing and
  Financing Activities:

       Land and building under operating lease
          exchanged for land and building under
          operating lease                                          $        --         $   850,381
                                                                ===============    ================

       Distributions declared and unpaid at end of
          period                                                   $   875,006         $   875,006
                                                                ===============    ================
</TABLE>

           See accompanying notes to condensed financial statements.

                                       4
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 1999 and 1998


1.       Basis of Presentation:
         ---------------------

         The accompanying unaudited condensed financial statements have been
         prepared in accordance with the instructions to Form 10-Q and do not
         include all of the information and note disclosures required by
         generally accepted accounting principles. The financial statements
         reflect all adjustments, consisting of normal recurring adjustments,
         which are, in the opinion of management, necessary to a fair statement
         of the results for the interim periods presented. Operating results for
         the quarter and nine months ended September 30, 1999 may not be
         indicative of the results that may be expected for the year ending
         December 31, 1999. Amounts as of December 31, 1998, included in the
         financial statements, have been derived from audited financial
         statements as of that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund XI, Ltd. (the "Partnership") for the year ended December
         31, 1998.

         The Partnership accounts for its 85 percent interest in Denver Joint
         Venture and its 77.33% interest in CNL/Airport Joint Venture using the
         consolidation method. Minority interests represent the minority joint
         venture partners' proportionate share of the equity in the
         Partnership's consolidated joint ventures. All significant intercompany
         accounts and transactions have been eliminated.

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

         In January 1999, the Partnership reinvested a portion of the net sales
         proceeds it received from the 1998 sale of the property in Nashua, New
         Hampshire in a Burger King property located in Yelm, Washington, at an
         approximate cost of $1,032,400. In accordance with Statement of
         Financial Accounting Standards No. 13, "Accounting for Leases," the
         land portion of this property was classified as an operating lease
         while the building portion was classified as a capital lease.

3.       Investment in Joint Ventures:
         ----------------------------

         In February 1999, the Partnership reinvested a portion of the remaining
         net sales proceeds it received from the 1998 sale of the property in
         Nashua, New Hampshire in a joint venture arrangement, Portsmouth Joint
         Venture, with CNL Income Fund XVIII, Ltd., a Florida limited
         partnership and an affiliate of the general partners, to purchase and
         hold one restaurant property. As of September 30, 1999, the Partnership
         had contributed approximately $247,300 to the joint venture and owned a
         42.8% interest in the profits and losses of this joint venture. The
         Partnership accounts for its investment in this joint venture under the
         equity method since the Partnership shares control with this affiliate.

                                       5
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 1999 and 1998


3.       Investment in Joint Ventures - Continued:
         ----------------------------------------

         The following presents the combined, condensed financial information
         for the joint ventures and the property held as tenants-in-common with
         an affiliate at:

<TABLE>
<CAPTION>
                                                            September 30,      December 31,
                                                                1999               1998
                                                           ---------------    --------------
                <S>                                        <C>                <C>
                Land and buildings on operating
                    leases, less accumulated
                    depreciation                              $ 3,618,857     $ 3,427,681
                Net investment in direct
                    financing lease                               321,804              --
                Cash                                                  797           1,109
                Prepaid expenses                                    3,364           8,290
                Accrued rental income                             159,517         130,585
                Liabilities                                           691              --
                Partners' capital                               4,103,648       3,567,665
                Revenues                                          353,965         399,305
                Net income                                        279,438         300,036
</TABLE>

         The Partnership recognized income totalling $188,049 and $156,335 for
         the nine months ended September 30, 1999 and 1998, respectively, from
         these joint ventures, $64,914 and $58,730 of which was earned during
         the quarters ended September 30, 1999 and 1998, respectively.

4.       Related Party Transactions:
         --------------------------

         On September 1, 1999, CNL American Properties Fund, Inc. ("APF"), an
         affiliate of the general partners, acquired CNL Fund Advisors, Inc.
         ("CFA"), an affiliate who provides certain services relating to
         management of the Partnership and its properties pursuant to a
         management agreement with the Partnership. As a result of this
         acquisition, CFA became a wholly owned subsidiary of APF; however, the
         terms of the management agreement between the Partnership and CFA
         remain unchanged and in effect.

                                       6
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 1999 and 1998


5.       Commitments and Contingencies:
         -----------------------------

         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 2,197,098 shares of its common stock, par value $0.01 per share
         (the "APF Shares"). 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 fair value of
         the Partnership's property portfolio and assets was $43,333,961 as of
         December 31, 1998. 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 first quarter of 2000, 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. 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.

         On May 11, 1999, four limited partners in several of the CNL Income
         Funds served a lawsuit against the general partners and APF in
         connection with the proposed Merger. On July 8, 1999 the plaintiffs
         amended the complaint to add three additional limited partners as
         plaintiffs. Additionally, on June 22, 1999, a limited partner in
         certain of the CNL Income Funds served a lawsuit against the general
         partners, APF, CNL Fund Advisors, Inc. and certain of its affiliates in
         connection with the proposed Merger. On September 23, 1999, the judge
         assigned to the two lawsuits entered an order consolidating the two
         cases. Pursuant to this order, the plaintiffs in these cases filed a
         consolidated and amended complaint on November 8, 1999. The various
         defendants, including the general partners, have 45 days to respond to
         that consolidated complaint. The general partners and APF believe that
         the lawsuits are without merit and intend to defend vigorously against
         the claims. See Part II - Item 1. Legal Proceedings.

                                       7
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 1999 and 1998


6.       Subsequent Events:
         -----------------


         In October 1999, the Partnership used a portion of the net sales
         proceeds from the sale of the property in Nashua, New Hampshire to
         invest in a property in Round Rock, Texas, with CNL Income Fund VI,
         Ltd., a Florida limited partnership and affiliate of the general
         partners as tenants-in-common for a 23 percent interest in the
         property. The Partnership will account for its investment in this
         property using the equity method since the Partnership will share
         control with an affiliate.

                                       8
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     CNL Income Fund XI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 20, 1991 to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, 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 and family-style restaurant chains. The leases
are, in general, triple-net leases, with the lessees responsible for all repairs
and maintenance, property taxes, insurance, and utilities. As of September 30,
1999, the Partnership owned 40 Properties, which included interests in five
Properties owned by joint ventures in which the Partnership is a co-venturer and
one Property owned with an affiliate of the general partners as
tenants-in-common.

Capital Resources
-----------------

     The Partnership's primary source of capital for the nine months ended
September 30, 1999 and 1998 was cash from operations (which includes cash
received from tenants, distributions from joint ventures, and interest and other
income received, less cash paid for expenses). Cash from operations was
$2,826,757 and $2,934,890 for the nine months ended September 30, 1999 and 1998,
respectively. The decrease in cash from operations for the nine months ended
September 30, 1999, 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.

     Other sources and uses of capital included the following during the nine
months ended September 30, 1999.

     In January 1999, the Partnership reinvested a portion of the net sales
proceeds it received from the 1998 sale of the Property in Nashua, New Hampshire
in a Burger King Property located in Yelm, Washington, at an approximate cost of
$1,032,400. In addition, in February 1999, the Partnership reinvested a portion
of the remaining net sales proceeds in a joint venture arrangement, Portsmouth
Joint Venture, with CNL Income Fund XVIII, Ltd., a Florida limited partnership
and an affiliate of the general partners, to purchase and hold one restaurant
Property. The Partnership contributed approximately $247,300 and had a 42.8%
interest in the profits and losses of the joint venture as of September 30,
1999. The Partnership intends to invest the remaining net sales proceeds in an
additional Property.

     Currently, rental income from the Partnership's Properties and net sales
proceeds from the sale of a Property pending reinvestment in an additional
Property, are invested in money market accounts or other short-term, highly
liquid investments such as demand deposit accounts, certificates of deposit, and
money market accounts with less than a 30-day maturity date, pending the
Partnership's use of such funds to pay Partnership expenses, to make
distributions to the partners and to invest in an additional Property. At
September 30, 1999, the Partnership had $1,942,821 invested in such short-term
investments, as compared to $1,559,240 at December 31, 1998. The increase in
cash and cash equivalents during the nine months ended September 30, 1999, is
primarily attributable to the release of a portion of the funds held in escrow
at December 31, 1998, relating to the sale of the Property in Nashua, New
Hampshire during 1998, net of amounts reinvested in Properties, as described
above. The funds remaining at September 30,

                                       9
<PAGE>

1999, after payment of distributions and other liabilities, will be used to
invest in an additional Property and to meet the Partnership's working capital
and other needs.

     In October 1999, the Partnership used a portion of the net sales proceeds
from the sale of the Property in Nashua, New Hampshire to invest in a Property
in Round Rock, Texas with CNL Income Fund VI, Ltd. a Florida limited partnership
and affiliate of the general partners as tenants-in-common for a 23 percent
interest, in the property. The Partnership will account for its investment in
this Property using the equity method since the Partnership will share control
with an affiliate. The Partnership will distribute amounts sufficient to enable
the limited partners to pay federal and state income taxes, if any, (at a level
reasonably assumed by the general partners) resulting from the sale.

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 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.

     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 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 nine months ended September 30, 1998,
accumulated excess operating reserves, the Partnership declared distributions to
limited partners of $2,625,018 and $2,665,018 for the nine months ended
September 30, 1999 and 1998, respectively ($875,006 for each of the quarters
ended September 30, 1999 and 1998). This represents distributions of $0.66 and
$0.67 per unit for the nine months ended September 30, 1999 and 1998,
respectively ($0.22 per unit for each of the quarters ended September 30, 1999
and 1998). No distributions were made to the general partners for the quarters
and nine months ended September 30, 1999 and 1998. No amounts distributed to the
limited partners for the nine months ended September 30, 1999 and 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.

     Total liabilities of the Partnership, including distributions payable,
decreased to $1,101,701 at September 30, 1999, from $1,142,120 at December 31,
1998, primarily as a result of the payment in January 1999 of a special
distribution accrued at December 31, 1998, of $120,000, representing cumulative
excess operating reserves. The decrease was partially offset by an increase in
accounts payable at September 30, 1999, as compared to December 31, 1998, due to
the Partnership accruing transaction costs relating to the proposed merger with
CNL

                                       10
<PAGE>

American Properties Fund, Inc. ("APF"), as described below. The general partners
believe that the Partnership has sufficient cash on hand to meet its current
working capital needs.

Long-Term Liquidity
-------------------

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

Results of Operations
---------------------

     During the nine months ended September 30, 1998, the Partnership and its
consolidated joint ventures, Denver Joint Venture and CNL/Airport Joint Venture,
owned and leased 37 wholly owned Properties (including one Property in Columbus,
Ohio, one Property in Danbury, Connecticut received in exchange for the Property
in Columbus, Ohio, and one Property which was sold in October 1998), and during
the nine months ended September 30, 1999, the Partnership and its consolidated
joint ventures owned and leased 36 wholly owned Properties to operators of
fast-food and family-style restaurant chains. During the nine months ended
September 30, 1999 and 1998, the Partnership, Denver Joint Venture and
CNL/Airport Joint Venture earned $2,649,538 and $2,632,415, respectively, in
rental income from operating leases and earned income from direct financing
leases, $884,669 and $868,028 of which was earned during the quarters ended
September 30, 1999 and 1998, respectively. In addition, during the nine months
ended September 30, 1999 and 1998, the Partnership earned $98,465 and $113,667,
respectively, in contingent rental income, $43,572 and $50,903 of which was
earned during the quarters ended September 30, 1999 and 1998, respectively.

     In addition, during the nine months ended September 30, 1998, the
Partnership owned and leased two Properties indirectly through other joint
venture arrangements and owned and leased one Property with an affiliate as
tenants-in-common. During the nine months ended September 30, 1999, the
Partnership owned and leased three Properties indirectly through other joint
venture arrangements and owned and leased one Property with an affiliate as
tenants-in-common. In connection therewith, during the nine months ended
September 30, 1999 and 1998, the Partnership earned $188,049 and $156,335,
respectively, $64,914 and $58,730 of which was earned during the quarters ended
September 30, 1999 and 1998, respectively. Net income earned by unconsolidated
joint ventures increased during the quarter and nine months ended September 30,
1999, as compared to the quarter and nine months ended September 30, 1998, as a
result of the fact that in February 1999, the Partnership reinvested a portion
of the net sales proceeds from the 1998 sale of the Property in Nashua, New
Hampshire, in Portsmouth Joint Venture, with CNL Income Fund XVIII, Ltd., a
Florida limited partnership and an affiliate of the general partners. In
addition, net income earned by joint ventures during the nine months ended
September 30, 1998, was less than that earned during the nine months ended
September 30, 1999, partially due to the fact that Ashland Joint Venture
adjusted estimated contingent rental amounts accrued at December 31, 1997, to
actual amounts during the nine months ended September 30, 1998.

     During the nine months ended September 30, 1999 and 1998, the Partnership
earned $62,902 and $114,469, respectively, in interest and other income, $20,847
and $16,421 of which was earned during the quarters ended September 30, 1999 and
1998, respectively. Interest and other income earned during the nine months
ended September 30, 1998, was more than that

                                       11
<PAGE>

earned during the nine months ended September 30, 1999, primarily because the
Partnership collected and recognized $60,000 in other income in May 1998, as a
result of the execution of an amendment to a purchase and sale agreement with a
third party to extend the closing date for the sale of the Burger King Property
located in Nashua, New Hampshire. In accordance with the terms of the amendment,
the Partnership was deemed to have earned the $60,000 upon execution of the
amendment to extend the closing date for the sale of this Property. This
Property was sold in October 1998.

     Operating expenses, including depreciation and amortization expense, were
$699,349 and $540,998 for the nine months ended September 30, 1999 and 1998,
respectively, $223,993 and $179,596 of which were incurred during the quarters
ended September 30, 1999 and 1998, respectively. The increase in operating
expenses during the quarter and nine months ended September 30, 1999, as
compared to 1998, was primarily a result of the Partnership incurring $63,691
and $183,788 during the quarter and nine months ended September 30, 1999,
respectively, in transaction costs relating to the general partners retaining
financial and legal advisors to assist them in evaluating and negotiating the
proposed Merger with APF, as described below. 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.

     The increase in operating expenses during the quarter and nine months ended
September 30, 1999, was partially offset by a decrease in depreciation expense
as a result of the 1998 sale of the Property in Nashua, New Hampshire.

Proposed 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 (the "Merger"). As consideration for the Merger, APF has
agreed to issue 2,197,098 shares of its common stock, par value $0.01 per share
(the "APF Shares"). 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 fair value of the Partnership's property portfolio and other
assets was $43,333,961 as of December 31, 1998. 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 first quarter of 2000, 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. 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.

                                       12
<PAGE>

         On May 11, 1999, four limited partners in several of the CNL Income
Funds served a lawsuit against the general partners and APF in connection with
the proposed Merger. On July 8, 1999 the plaintiffs amended the complaint to add
three additional limited partners as plaintiffs. Additionally, on June 22, 1999,
a limited partner in certain of the CNL Income Funds served a lawsuit against
the general partners, APF, CNL Fund Advisors, Inc. and certain of its
affiliates, in connection with the proposed Merger. On September 23, 1999, the
judge assigned to the two lawsuits entered an order consolidating the two cases.
Pursuant to this order, the plaintiffs in these cases filed a consolidated and
amended complaint on November 8, 1999. The various defendants, including the
general partners, have 45 days to respond to that consolidated complaint. The
general partners and APF believe that the lawsuits are without merit and intend
to defend vigorously against the claims. See Part II - Item 1. Legal
Proceedings.

Year 2000 Readiness Disclosure
------------------------------

Overview of Year 2000 Problem

     The year 2000 problem concerns the inability of information and
non-information technology systems to properly recognize and process date
sensitive information beyond January 1, 2000. The failure to accurately
recognize the year 2000 could result in a variety of problems from data
miscalculations to the failure of entire systems.

Information and Non-Information Technology Systems

     The Partnership does not have any information or non-information technology
systems. The general partners and their affiliates provide all services
requiring the use of information and non-information technology systems pursuant
to a management agreement with the Partnership. The information technology
system of the general partners' affiliates consists of a network of personal
computers and servers built using hardware and software from mainstream
suppliers. The non-information technology systems of the affiliates are
primarily facility related and include building security systems, elevators,
fire suppressions, HVAC, electrical systems and other utilities. The affiliates
have no internally generated programmed software coding to correct, because
substantially all of the software utilized by the affiliates is purchased or
licensed from external providers. The maintenance of non-information technology
systems at the Partnership's restaurant properties is the responsibility of the
tenants of such properties in accordance with the terms of the Partnership's
leases.

The Y2K Team

     In early 1998, the general partners and their affiliates formed a Year 2000
committee (the "Y2K Team") for the purpose of identifying, understanding and
addressing the various issues associated with the year 2000 problem. The Y2K
Team consists of the general partners and members from their affiliates,
including representatives from senior management, information systems,
telecommunications, legal, office management, accounting and property
management.

                                       13
<PAGE>

Assessing Year 2000 Readiness

     The Y2K Team's initial step in assessing year 2000 readiness consisted of
identifying any systems that are date-sensitive and, accordingly, could have
potential year 2000 problems. The Y2K Team has conducted inspections, interviews
and tests to identify which of the systems used by the Partnership could have a
potential year 2000 problem.

     The information system of the general partners' affiliates is comprised of
hardware and software applications from mainstream suppliers. Accordingly, the
Y2K Team has contacted and is evaluating documentation from the respective
vendors and manufacturers to verify the year 2000 compliance of their products.
The Y2K Team has also requested and is evaluating documentation from the
non-information technology systems providers of the affiliates.

     In addition, the Y2K Team has requested and is evaluating documentation
from other companies with which the Partnership has material third party
relationships. Such third parties, in addition to the providers of information
and non-information technology systems, consist of the Partnership's transfer
agent and financial institutions. The Partnership depends on its transfer agent
to maintain and track investor information and its financial institutions for
availability of cash.

     As of September 30, 1999, the Y2K Team had received responses from
approximately 62 percent of the third parties. All of the responses were in
writing. Of the third parties responding, all indicated that they are currently
year 2000 compliant or will be year 2000 compliant prior to the year 2000.
Although the Y2K Team continues to receive positive responses from the companies
with which the Partnership has third party relationships regarding their year
2000 compliance, the general partners cannot be assured that the third parties
have adequately considered the impact of the year 2000.

     In addition, the Y2K Team has requested documentation from the
Partnership's tenants. As of September 30, 1999, the Y2K Team had received
responses from approximately 67 percent of the tenants. All of the responses
were in writing. Of the tenant's responding, all indicated that they are
currently year 2000 compliant or will be year 2000 compliant prior to the year
2000. The general partners cannot be assured that the tenants have adequately
considered the impact of the year 2000. The Partnership has also instituted a
policy of requiring any new tenants to indicate that their systems are year 2000
compliant or are expected to be year 2000 compliant prior to the year 2000.

Achieving Year 2000 Compliance

     The Y2K Team has identified and completed upgrades for its hardware
equipment that was not year 2000 compliant. In addition, the Y2K Team has
identified and completed upgrades of the software applications that were not
year 2000 compliant, although the general partners cannot be assured that the
upgrade solutions provided by the vendors have addressed all possible year 2000
issues.

                                       14
<PAGE>

     The cost for these upgrades and other remedial measures is the
responsibility of the general partners and their affiliates. The general
partners do not expect that the Partnership will incur any costs in connection
with year 2000 remedial measures.

Assessing the Risks to the Partnership of Non-Compliance and Developing
Contingency Plans

Risk of Failure of Information and Non-Information Technology Systems Used by
the Partnership

     The general partners believe that the reasonably likely worst case scenario
with regard to the information and non-information technology systems used by
the Partnership is the failure of one or more of these systems as a result of
year 2000 problems. Because the Partnership's major source of income is rental
payments under long-term triple-net leases, any failure of information or
non-information technology systems used by the Partnership is not expected to
have a material impact on the results of operations of the Partnership. Even if
such systems failed, the payment of rent under the Partnership's leases would
not be affected. In addition, the Y2K Team is expected to correct any Y2K
problems within the control of the general partners and their affiliates before
the year 2000.

     The Y2K Team has determined that a contingency plan to address this risk is
not necessary at this time. However, if the Y2K Team identifies additional risks
associated with the year 2000 compliance of the information or non-information
technology systems used by the Partnership, the Y2K Team will develop a
contingency plan if deemed necessary at that time.

Risk of Inability of Transfer Agent to Accurately Maintain Partnership Records

     The general partners believe that the reasonably likely worst case scenario
with regard to the Partnership's transfer agent is that the transfer agent will
fail to achieve year 2000 compliance of its systems and will not be able to
accurately maintain the records of the Partnership. This could result in the
inability of the Partnership to accurately identify its limited partners for
purposes of distributions, delivery of disclosure materials and transfer of
units. The Y2K Team has received certification from the Partnership's transfer
agent of its year 2000 compliance. Despite the positive response from the
transfer agent, the general partners cannot be assured that the transfer agent
has addressed all possible year 2000 issues.

     The Y2K Team has developed a contingency plan pursuant to which the general
partners and their affiliates would maintain the records of the Partnership
manually, in the event that the systems of the transfer agent are not year 2000
compliant. The general partners and their affiliates would have to allocate
resources to internally perform the functions of the transfer agent. The general
partners do not anticipate that the additional cost of these resources would
have a material impact on the results of operations of the Partnership.

Risk of Loss of Short-Term Liquidity from Failure of Financial Institutions to
Achieve Year 2000 Compliance

     The general partners believe that the reasonably likely worst case scenario
with regard to the Partnership's financial institutions is that some or all of
its funds on deposit with such

                                       15
<PAGE>

financial institutions may be temporarily unavailable. The Y2K Team has received
responses from 93% of the Partnership's financial institutions indicating that
their systems are currently year 2000 compliant or are expected to be year 2000
compliant prior to the year 2000. Despite the positive responses from the
financial institutions, the general partners cannot be assured that the
financial institutions have addressed all possible year 2000 issues. The loss of
short-term liquidity could affect the Partnership's ability to pay its expenses
on a current basis. The general partners do not anticipate that a loss of
short-term liquidity would have a material impact on the results of operations
of the Partnership.

     Based upon the responses received from the Partnership's financial
institutions and the inability of the Y2K Team to identify a suitable
alternative for the deposit of funds that is not subject to potential year 2000
problems, the Y2K Team has determined not to develop a contingency plan to
address this risk.

Risks of Late Payment or Non-Payment of Rent by Tenants

     The general partners believe that the reasonably likely worst case scenario
with regard to the Partnership's tenants is that some of the tenants may make
rental payments late as the result of the failure of the tenants to achieve year
2000 compliance of their systems used in the payment of rent, the failure of the
tenant's financial institutions to achieve year 2000 compliance, or the
temporary disruption of the tenants' businesses. The Y2K Team is in the process
of requesting responses from the Partnership's tenants indicating the extent to
which their systems are currently year 2000 compliant or are expected to be year
2000 compliant prior to the year 2000. The general partners cannot be assured
that the tenants have addressed all possible year 2000 issues. The late payment
of rent by one or more tenants would affect the results of operations of the
Partnership in the short-term.

     The general partners are also aware of predictions that the year 2000
problem, if uncorrected, may result in a global economic crisis. The general
partners are not able to determine if such predictions are true. A widespread
disruption of the economy could affect the ability of the Partnership's tenants
to pay rent and, accordingly, could have a material impact on the results of
operations of the Partnership.

     Because payment of rent is under the control of the Partnership's tenants,
the Y2K Team is not able to develop a contingency plan to address these risks.
In the event of late payment or non-payment of rent, the general partners will
assess the remedies available to the Partnership under its lease agreements.

ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
              RISK

         Not applicable.

                                       16
<PAGE>

                           PART II. OTHER INFORMATION


Item 1.       Legal Proceedings.
              -----------------

              On May 11, 1999, four limited partners in several CNL Income Funds
              served a derivative and purported class action lawsuit filed April
              22, 1999 against the general partners and APF in the Circuit Court
              of the Ninth Judicial Circuit of Orange County, Florida, alleging
              that the general partners breached their fiduciary duties and
              violated provisions of certain of the CNL Income Fund partnership
              agreements in connection with the proposed Merger. The plaintiffs
              are seeking unspecified damages and equitable relief. On July 8,
              1999, the plaintiffs filed an amended complaint which, in addition
              to naming three additional plaintiffs, includes allegations of
              aiding and abetting and conspiring to breach fiduciary duties,
              negligence and breach of duty of good faith against certain of the
              defendants and seeks additional equitable relief. As amended, the
              caption of the case is Jon Hale, Mary J. Hewitt, Charles A.
                                     ------------------------------------
              Hewitt, Gretchen M. Hewitt Bernard J. Schulte, Edward M. and
              ------------------------------------------------------------
              Margaret Berol Trust, and Vicky Berol v. James M. Seneff, Jr.,
              --------------------------------------------------------------
              Robert A. Bourne, CNL Realty Corporation, and CNL American
              ----------------------------------------------------------
              Properties Fund, Inc., Case No. CIO-99-0003561.
              ----------------------

              On June 22, 1999, a limited partner of several CNL Income Funds
              served a purported class action lawsuit filed April 29, 1999
              against the general partners and APF, Ira Gaines, individually and
                                                    ----------------------------
              on behalf of a class of persons similarly situated, v. CNL
              ----------------------------------------------------------
              American Properties Fund, Inc., James M. Seneff, Jr., Robert A.
              ---------------------------------------------------------------
              Bourne, CNL Realty Corporation, CNL Fund Advisors, Inc., CNL
              ------------------------------------------------------------
              Financial Corporation a/k/a CNL Financial Corp., CNL Financial
              --------------------------------------------------------------
              Services, Inc. and CNL Group, Inc., Case NO. CIO-99-3796, in the
              -----------------------------------
              Circuit Court of the Ninth Judicial Circuit of Orange County,
              Florida, alleging that the general partners breached their
              fiduciary duties and that APF aided and abetted their breach of
              fiduciary duties in connection with the proposed Merger. The
              plaintiff is seeking unspecified damages and equitable relief.

              On September 23, 1999, Judge Lawrence Kirkwood entered an order
              consolidating the two cases under the caption In re: CNL Income
                                                            -----------------
              Funds Litigation, Case No. 99-3561. Pursuant to this order, the
              ----------------------------------
              plaintiffs in these cases filed a consolidated and amended
              complaint on November 8, 1999, and the various defendants,
              including the general partners, have 45 days to respond to that
              consolidated complaint.

Item 2.       Changes in Securities. Inapplicable.
              ---------------------

Item 3.       Defaults upon Senior Securities. Inapplicable.
              -------------------------------

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

Item 5.       Other Information. Inapplicable.
              -----------------

                                       17
<PAGE>

Item 6.       Exhibits and Reports on Form 8-K.
              --------------------------------

              (a)      Exhibits

                       2.1     Agreement and Plan of Merger by and between the
                               Registrant and CNL American Properties Fund, Inc.
                               ("APF") dated March 11, 1999, as amended June 4,
                               1999, and as amended October 27, 1999 (Filed as
                               Appendix B to the Prospectus Supplement for the
                               Registrant constituting a part of Amendment No. 3
                               to the Registration Statement of APF on Form S-4,
                               File No. 333-74329.)

                       3.1     Affidavit and Certificate of Limited Partnership
                               of CNL Income Fund XI, Ltd. (Included as Exhibit
                               3.2 to Registration Statement No. 33-43278 on
                               Form S-11 and incorporated herein by reference.)

                       4.1     Affidavit and Certificate of Limited Partnership
                               of CNL Income Fund XI, Ltd. (Included Exhibit 3.2
                               to Registration Statement 33-43278 on Form S-11
                               and incorporated herein by reference.)

                       4.2     Amended and Restated Agreement of Limited
                               Partnership of CNL Income Fund XI, Ltd. (Included
                               as Exhibit 4.2 to Form 10-K filed with the
                               Securities and Exchange Commission on April 15,
                               1993, and incorporated herein by reference.)

                       10.1    Management Agreement between CNL Income Fund XI,
                               Ltd. and CNL Investment Company (Included as
                               Exhibit 10.1 to Form 10-K filed with the
                               Securities and Exchange Commission on April 15,
                               1993, and incorporated herein by reference.)

                       10.2    Assignment of Management Agreement from CNL
                               Investment Company to CNL 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.)

              (b)      Reports on Form 8-K

                       No reports on Form 8-K were filed during the quarter
                       ended September 30, 1999.

                                       18
<PAGE>

                                   SIGNATURES
                                   ----------

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

     DATED this 10th day of November, 1999.


                               CNL INCOME FUND XI, LTD.

                               By:  CNL REALTY CORPORATION
                                    General Partner


                                    By:    /s/ James M. Seneff, Jr.
                                           ---------------------------------
                                           JAMES M. SENEFF, JR.
                                           Chief Executive Officer
                                           (Principal Executive Officer)


                                    By:    /s/ Robert A. Bourne
                                           ---------------------------------
                                           ROBERT A. BOURNE
                                           President and Treasurer
                                           (Principal Financial and
                                           Accounting Officer)

                                       19