UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                           FORM 10-KSB

             Annual Report Under Section 13 or 15(d)
             of The Securities Exchange Act of 1934

          For the Fiscal Year Ended:  December 31, 2002

                Commission file number:  0-16555

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
         (Name of Small Business Issuer in its Charter)

        State of Minnesota                41-1571166
   (State or other Jurisdiction of     (I.R.S. Employer)
    Incorporation or Organization)     Identification No.)

     1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
            (Address of Principal Executive Offices)

                           (651) 227-7333
                   (Issuer's telephone number)

Securities registered pursuant to Section 12(b) of the Act:
                                 Name of each exchange on
     Title of each class             which registered
             None                          None

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

                      Limited Partnership Units
                        (Title of class)

Check  whether  the issuer (1) filed all reports required  to  be
filed  by Section 13 or 15(d) of the Securities Exchange  Act  of
1934  during the past 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

Check if disclosure of delinquent filers in response to Rule  405
of  Regulation  S-B  is  not  contained  in  this  Form,  and  no
disclosure  will  be contained, to the best of  the  registrant's
knowledge,   in   definitive  proxy  or  information   statements
incorporated by reference in Part III of this Form 10-KSB or  any
amendment to this Form 10-KSB.

The  Issuer's  revenues  for year ended December  31,  2002  were
$504,836.

As  of  February 28, 2003, there were 13,193.18 Units of  limited
partnership interest in the registrant outstanding and  owned  by
nonaffiliates  of  the registrant, which Units had  an  aggregate
market  value (based solely on the price at which they were  sold
since there is no ready market for such Units) of $13,193,180.

               DOCUMENTS INCORPORATED BY REFERENCE

 The registrant has not incorporated any documents by reference
                        into this report.

         Transitional Small Business Disclosure Format:

                     Yes            No [X]

                             PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

         AEI  Real  Estate  Fund  XVI  Limited  Partnership  (the
"Partnership" or the "Registrant") is a limited partnership which
was  organized pursuant to the laws of the State of Minnesota  on
February  6,  1987.   The  registrant is comprised  of  AEI  Fund
Management XVI, Inc. (AFM) as Managing General Partner, Robert P.
Johnson  as  the  Individual General Partner, and  purchasers  of
partnership  units as Limited Partners.  The Partnership  offered
for  sale up to $15,000,000 of limited partnership interests (the
"Units")  (15,000  Units  at  $1,000  per  Unit)  pursuant  to  a
registration   statement  effective  December  15,   1986.    The
Partnership commenced operations on February 6, 1987 when minimum
subscriptions  of  2,000 Limited Partnership  Units  ($2,000,000)
were accepted.  The Partnership's offering terminated November 6,
1987  when  the  maximum  subscription limit  of  15,000  Limited
Partnership Units ($15,000,000) was reached.

        The Partnership was organized to acquire, initially on  a
debt-free   basis,  existing  and  newly  constructed  commercial
properties located in the United States, to lease such properties
to  tenants under triple net leases, to hold such properties  and
to  eventually sell such properties.  From subscription proceeds,
the  Partnership  purchased twenty properties, including  partial
interests  in  eleven  properties,  totaling  $12,910,857.    The
balance  of the subscription proceeds was applied to organization
and    syndication   costs,   working   capital   reserves    and
distributions,  which  represented  a  return  of  capital.   The
properties  are  all commercial, single tenant  buildings  leased
under triple net leases.

       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
appreciation,  net  cash flow and income tax considerations.   In
addition,  certain lessees have been granted options to  purchase
properties  after  a  specified portion of  the  lease  term  has
elapsed.   At  any  time  prior to selling  the  properties,  the
Partnership may mortgage one or more of its properties in amounts
not  exceeding  50%  of  the  of the fair  market  value  of  the
property.

Leases

       Although there are variations in the specific terms of the
leases,  the following is a summary of the general terms  of  the
Partnership's  leases.   The properties  are  leased  to  various
tenants  under  triple  net  leases,  which  are  classified   as
operating  leases.   Under  a triple net  lease,  the  lessee  is
responsible  for  all real estate taxes, insurance,  maintenance,
repairs  and  operating expenses for the property.   The  initial
lease terms are for 10 to 20 years.  The leases provide for  base
annual  rental  payments,  payable in monthly  installments,  and
contain  rent  clauses which entitle the Partnership  to  receive
additional rent in future years based on stated rent increases or
if  gross  receipts  for  the property exceed  certain  specified
amounts, among other conditions.

        Most  of the leases provide the lessee with two to  three
five-year   renewal  options  subject  to  the  same  terms   and
conditions  as  the  initial lease.  Certain  lessees  have  been
granted  options  to purchase the property at  a  formula  price,
which would exceed the original cost.  The actual sale price of a
property  to  a  lessee  may  or may  not  exceed  original  cost
depending on market and other conditions.

ITEM 1.   DESCRIPTION OF BUSINESS.  (Continued)

         In  November  1999,  the  Partnership  entered  into  an
agreement to sell the Caribou Coffee store in Atlanta, Georgia to
an  unrelated third party.  On February 2, 2000, the sale  closed
with  the  Partnership receiving net sale proceeds of $1,468,504,
which  resulted in a net gain of $273,747.  At the time of  sale,
the  cost and related accumulated depreciation was $1,247,571 and
$52,814, respectively.

       In January 2000, Texas Sports City Cafe, Ltd. (Texas), the
lessee  of  the  Sports City Cafe, notified the Partnership  that
they   were   discontinuing  the  restaurant   operations.    The
Partnership negotiated to sell the property to an unrelated third
party, who assumed the restaurant operations from Texas.  On July
28, 2000, the sale closed with the Partnership receiving net sale
proceeds  of $311,882, which resulted in a net gain of $628.   At
the  time  of sale, the cost and related accumulated depreciation
was $450,109 and $138,855, respectively.

        In December 1998, Gulf Coast Restaurants, Inc. (GCR), the
lessee of the Applebee's restaurant in Slidell, Louisiana,  filed
for reorganization.  GCR continued to make the lease payments  to
the Partnership under the supervision of the bankruptcy court.  A
reorganization plan was accepted by the Bankruptcy  Court,  which
provided  for  the  Lease to be assumed by GCR  and  assigned  to
another  operator who purchased the Partnership's  share  of  the
property.   The  reorganization  plan  also  provided   for   the
Partnership to collect all rents outstanding under the  terms  of
the  Lease.   On  October  25, 2000, the  sale  closed  with  the
Partnership  receiving  net  sale  proceeds  of  $960,230,  which
resulted  in  a net gain of $330,013.  At the time of  sale,  the
cost  and  related  accumulated  depreciation  was  $746,464  and
$116,247, respectively.

        In  November 2000, the Partnership sold 9,576 square feet
of  land  from  the  Fuddruckers' property  in  Omaha,  Nebraska,
pursuant  to  a  Right-Of-Way Agreement with the  City  of  Omaha
Public Works.  The Partnership received net proceeds of $216,593,
which  resulted in a gain of $168,838.  The original cost of  the
parcel of land was $47,755.  The Partnership believed the City of
Omaha  undervalued the land and negotiated to receive  additional
proceeds.  In March 2002, the City of Omaha approved a settlement
and  paid  the Partnership additional gross proceeds of  $69,795,
which resulted in a net gain of $59,273.

        Due  to  the redevelopment of the roads adjacent  to  the
Fuddruckers'  property and proceeds received  from  the  city  of
Omaha  for  easements during such redevelopment, the  Partnership
agreed to a temporary modification of rent payments through March
31, 2002.  For the three months ended March 31, 2002 and the year
ended December 31, 2001, the modification resulted in a reduction
of  base  rent of $6,410 and $43,002, respectively.  Due  to  the
permanent changes to the property and the proceeds received  from
the  city  of  Omaha,  the Partnership may consider  a  long-term
modification of the Lease.

        In  August 2000, Renaissant Development Corp. (RDC),  the
lessee of the Applebee's restaurant in Victoria, Texas filed  for
reorganization.   RDC closed the restaurant, rejected  the  Lease
and  returned possession of the property to the Partnership.  For
the  period  from January 1, 2002 through July 2, 2002,  and  the
year  ended  December 31, 2001, the Partnership did  not  collect
scheduled  rent  of  $82,477 and $142,687,  respectively.   These
amounts  were not accrued for financial reporting purposes.   The
Partnership  listed the property for sale or  lease.   While  the
property  was  vacant, the Partnership was responsible  for  real
estate taxes and other costs required to maintain the property.

ITEM 1.   DESCRIPTION OF BUSINESS.  (Continued)

        As  of  December 31, 2000, based on an analysis of market
conditions in the area, it was determined the fair value  of  the
Victoria  property  was approximately $800,000.   In  the  fourth
quarter  of  2000,  a  charge  to  operations  for  real   estate
impairment  of  $353,062 was recognized, which is the  difference
between the book value at December 31, 2000 of $1,153,062 and the
estimated  fair  value  of  $800,000.  The  charge  was  recorded
against the cost of the building and equipment.

        In  April 2002, the Partnership received an offer to  buy
the  restaurant for $725,000 from an unrelated third  party.   In
the first quarter of 2002, a charge to operations for real estate
impairment  of $106,745 was recognized, which was the  difference
between  the  book  value at March 31, 2002 of $776,745  and  the
estimated  net  sales  proceeds  of  $670,000.   The  charge  was
recorded against the cost of the land and building.  On  July  3,
2002,  the  sale closed with the Partnership receiving  net  sale
proceeds of $673,665, which resulted in a net gain of $3,665.

       In January 1996, the Cheddar's restaurant in Indianapolis,
Indiana  was  destroyed  by a fire.  The  property  will  not  be
rebuilt  and  the Partnership listed the land for  sale.   As  of
December  31, 2000, based on an analysis of market conditions  in
the  area,  it was determined the fair value of the Partnership's
interest  in the land was approximately $50,000.  In  the  fourth
quarter  of  2000,  a  charge  to  operations  for  real   estate
impairment  of  $124,747 was recognized, which is the  difference
between  the book value at December 31, 2000 of $174,747 and  the
estimated fair value of $50,000.  In the third quarter  of  2001,
the  Partnership recognized an additional real estate  impairment
of $50,000 to write down the book value of the land to zero.

       In July 2002, the Partnership entered into an agreement to
sell  the  Creative  Years daycare center  for  $230,000  to  the
lessee.   The sale is subject to numerous contingencies  and  may
not  be  completed.  In the fourth quarter of 2002, a  charge  to
operations  for real estate impairment of $63,177 was recognized,
which was the difference between book value at December 31,  2002
of $288,177 and the estimated net sale proceeds of $225,000.  The
charge was recorded against the cost of the land and building.

        On December 31, 2002, the Lease term for the Grand Rapids
Teachers  Credit Union in Wyoming, Michigan expired.  Originally,
the lessee planned to move out of the building and relocate to  a
new  building in the area.  On a month-to-month basis, the lessee
is  renting a portion of the property for $1,250 per month  while
their  new  building is constructed.  The Partnership listed  the
property for sale with a local real estate broker.  Subsequently,
the Credit Union decided they would like to purchase the property
for  $400,000.  The Partnership is in the process of  negotiating
an  agreement with the Credit Union for the sale of the property.
At  December 31, 2002, the property was classified as Real Estate
Held for Sale.

        Subsequent to December 31, 2002, the Partnership  entered
into  an  agreement  to sell the two JEMCARE daycare  centers  in
Arlington,  Texas to the lessee for $175,000 for the property  on
Arkansas  Lane  and $325,000 for the property on Matlock  Avenue.
In  the  fourth quarter of 2002, a charge to operations for  real
estate impairment of $114,648 was recognized for the property  on
Arkansas  Lane, which was the difference between  book  value  at
December 31, 2002 of $282,648 and the estimated net sale proceeds
of  $168,000.  A charge to operations for real estate  impairment
of  $131,740 was recognized for the property located  on  Matlock
Avenue,  which was the difference between book value at  December
31,  2002  of  $449,740 and the estimated net  sale  proceeds  of
$318,000.  The charges were recorded against the cost of the land
and  building.   On  March  7, 2003, the  sale  closed  with  the
Partnership receiving net sale proceeds of approximately $168,000
and 318,000, respectively.

ITEM 1.   DESCRIPTION OF BUSINESS.  (Continued)

Major Tenants

        During 2002, three tenants each contributed more than ten
percent  of  the Partnership's total rental revenue.   The  major
tenants  in aggregate contributed 74% of total rental revenue  in
2002.  It is anticipated that each major tenant will continue  to
contribute more than ten percent of total rental revenue in  2003
and  future  years.  However, the tenant of the  JEMCARE  daycare
centers  will  not  continue  to be  a  major  tenant  since  the
properties  were sold in March 2003.  Any failure of these  major
tenants   or  business  concepts  could  materially  affect   the
Partnership's net income and cash distributions.

Competition

        The  Partnership is a minor factor in the commercial real
estate  business.   There are numerous entities  engaged  in  the
commercial  real  estate  business which have  greater  financial
resources  than  the  Partnership.  At the time  the  Partnership
elects to dispose of its properties, the Partnership will  be  in
competition  with other persons and entities to find  buyers  for
its properties.

Employees

        The  Partnership  has  no direct  employees.   Management
services   are  performed  for  the  Partnership  by   AEI   Fund
Management, Inc., an affiliate of AFM.

ITEM 2.   DESCRIPTION OF PROPERTIES.

Investment Objectives

        The  Partnership's investment objectives are  to  acquire
existing or newly-developed commercial properties throughout  the
United  States that offer the potential for (i) preservation  and
protection  of  the  Partnership's capital; (ii)  partially  tax-
deferred  cash distributions from operations which  may  increase
through  rent  participation clauses or mandated rent  increases;
and  (iii) long-term capital gains through appreciation in  value
of   the  Partnership's  properties  realized  upon  sale.    The
Partnership  does not have a policy, and there is no  limitation,
as  to the amount or percentage of assets that may be invested in
any  one  property.  However, to the extent possible, the General
Partners  attempt  to  diversify the type  and  location  of  the
Partnership's properties.

Description of Properties

       The Partnership's properties are commercial, single tenant
buildings.  The properties were acquired on a debt-free basis and
are  leased to various tenants under triple net leases, which are
classified  as  operating  leases.   The  Partnership  holds   an
undivided  fee simple interest in the properties.   At  any  time
prior to selling the properties, the Partnership may mortgage one
or  more  of its properties in amounts not exceeding 50%  of  the
fair market value of the property.

        The  Partnership's properties are subject to the  general
competitive conditions incident to the ownership of single tenant
investment  real estate.  Since each property is leased  under  a
long-term   lease,   there  is  little  competition   until   the
Partnership  decides to sell the property.   At  this  time,  the
Partnership will be competing with other real estate  owners,  on
both a national and local level, in attempting to find buyers for
the   properties.   In  the  event  of  a  tenant  default,   the
Partnership would be competing with other real estate owners, who
have  property vacancies, to attract a new tenant  to  lease  the
property.   The Partnership's tenants operate in industries  that
are  very  competitive and can be affected  by  factors  such  as
changes  in regional or local economies, seasonality and  changes
in consumer preference.

ITEM 2.DESCRIPTION OF PROPERTIES.  (Continued)

        The  following table is a summary of the properties  that
the Partnership acquired and owned as of December 31, 2002.

                                 Total Property           Annual    Annual
                        Purchase  Acquisition             Lease    Rent Per
Property                  Date      Costs     Lessee      Payment  Sq. Ft.

Creative Years Early                       Creative Years
Learning Center                            Early Learning
   Houston, TX           4/8/87 $  483,128  Centers, Inc. $ 45,663  $ 6.63

Grand Rapids Teachers
Credit Union                               Lake Michigan
   Wyoming, MI           5/1/87 $  626,240  Credit Union  $ 15,000   $ 4.34

Arby's Restaurant                             RTM Mid-
   Grand Rapids, MI      5/1/87 $  652,880  America, Inc. $ 24,000   $ 6.89

Fuddruckers Restaurant                      Fuddruckers,
   Omaha, NE           11/16/87 $1,103,787      Inc.      $145,081   $20.93

Children's World
Daycare Center                                 ARAMARK
   Sterling Heights, MI                       Educational
   (83.6514%)          11/25/87 $  729,486  Resources, Inc.$118,921  $23.02

Jiffy Lube Auto Care Center
   Dallas, TX                               Jiffy Lube of
   (25%)               12/10/87 $  154,891  Maryland, Inc  $ 25,095  $37.60

JEMCARE
   Arkansas Lane
   Arlington, TX       12/10/87 $  450,475  JEMCARE, Inc.  $ 43,125  $ 8.56

JEMCARE
   Matlock Avenue
   Arlington, TX       12/16/87 $  603,641  JEMCARE, Inc.  $ 50,164  $ 8.53

Cheddar's Restaurant
   Indianapolis, IN
   (50%)                2/16/88 $  253,747      (1)


(1)   The  property was destroyed by fire and the land is listed for
      sale.

        The  properties  listed above with  a  partial  ownership
percentage  are  owned with affiliates of the  Partnership.   AEI
Real  Estate  Fund  85-B Limited Partnership owns  the  remaining
interest in the Children's World Daycare Center.  AEI Real Estate
Fund XVII Limited Partnership owns the remaining interests in the
Jiffy Lube and the Cheddar's restaurant land.

        Each  Partnership owns a separate, undivided interest  in
the  properties.   No  specific agreement  or  commitment  exists
between the Partnerships as to the management of their respective
interests in the properties, and the Partnership that holds  more
than  a  50% interest does not control decisions over  the  other
Partnership's interest.

ITEM 2.   DESCRIPTION OF PROPERTIES.  (Continued)

        The  initial  Lease terms are 20 years,  except  for  the
Arby's  restaurant,  which has a Lease  term  of  15  years,  the
Creative Years daycare center, which has a Lease term of 13 years
and the Credit Union, which is currently being leased on a month-
to-month  basis.   The  initial  Lease  terms  for  the   JEMCARE
properties, which were to expire on December 31, 2002, have  been
extended  to March 31, 2003.  The Leases contain renewal  options
which  may  extend the Lease term an additional 10 years,  except
for  the  Arby's restaurant, which has renewal options  that  may
extend  the  Lease  term  an additional  15  years,  the  JEMCARE
properties, which have renewal options that may extend the  Lease
term  an  additional  9 years and the Jiffy Lube,  which  has  no
renewal options.

       Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they  occupy.   The General Partners believe the  properties  are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.

         For  tax  purposes,  the  Partnership's  properties  are
depreciated  under the Modified Accelerated Cost Recovery  System
(MACRS).  The largest depreciable component of a property is  the
building  which  is depreciated, using the straight-line  method,
over 31.5 or 40 years depending on the date when it was placed in
service.  The remaining depreciable components of a property  are
personal  property and land improvements which  are  depreciated,
using  an  accelerated method, over 5 and 15 years, respectively.
Since the Partnership has tax-exempt Partners, the Partnership is
subject to the rules of Section 168(h)(6) of the Internal Revenue
Code  which  requires a percentage of the properties' depreciable
components to be depreciated over longer lives using the straight-
line method.  In general, the federal tax basis of the properties
for  tax depreciation purposes is the same as the basis for  book
depreciation purposes except for properties whose book value  was
reduced  by  a real estate impairment loss pursuant to  Financial
Accounting Standards Board Statement No. 144, "Accounting for the
Impairment  or Disposal of Long-Lived Assets."  The  real  estate
impairment loss, which was recorded against the book cost of  the
land  and  depreciable  property,  was  not  recognized  for  tax
purposes.

        During  the last five years, all properties listed  above
were  100%  occupied except for the Cheddar's property which  was
100% vacant.

ITEM 3.   LEGAL PROCEEDINGS.

          None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          None.


                             PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
          RELATED SECURITY HOLDER MATTERS.

        As  of  December  31, 2002, there were 1,429  holders  of
record  of the registrant's Limited Partnership Units.  There  is
no  other  class  of  security outstanding  or  authorized.   The
registrant's  Units  are  not a traded security  in  any  market.
However,  the Partnership may acquire Units from Limited Partners
who have tendered their Units to the Partnership.  Such Units may
be  acquired at a discount.  The Partnership is not obligated  to
purchase  in any year more than 5% of the total number  of  Units
outstanding at the beginning of the year.  In no event shall  the
Partnership  be  obligated to purchase  Units  if,  in  the  sole
discretion  of the Managing General Partner, such purchase  would
impair the capital or operation of the Partnership.

        During  2002, eight Limited Partners redeemed a total  of
69.67  Partnership  Units  for $10,137  in  accordance  with  the
Partnership  Agreement.  In prior years, a total of  174  Limited
Partners redeemed 1,735.15 Partnership Units for $1,115,407.  The
redemptions  increase the remaining Limited  Partners'  ownership
interest in the Partnership.

       Cash distributions of $15,632 and $18,268 were made to the
General Partners and $1,537,378 and $1,781,951 were made  to  the
Limited   Partners   in   2002  and  2001,   respectively.    The
distributions  were made on a quarterly basis and  represent  Net
Cash   Flow,  as  defined,  except  as  discussed  below.   These
distributions  should  not be compared  with  dividends  paid  on
capital stock by corporations.

        As  part  of the Limited Partner distributions  discussed
above,  the Partnership distributed $1,284,189 and $1,558,612  of
proceeds from property sales in 2002 and 2001, respectively.  The
distributions  reduced  the  Limited Partners'  Adjusted  Capital
Contributions.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS.

        The Management's Discussion and Analysis contains various
"forward  looking  statements"  within  the  meaning  of  federal
securities  laws  which  represent management's  expectations  or
beliefs  concerning future events, including statements regarding
anticipated  application of cash, expected  returns  from  rental
income,  growth  in revenue, taxation levels, the sufficiency  of
cash to meet operating expenses, rates of distribution, and other
matters.  These, and other forward looking statements made by the
Partnership,  must be evaluated in the context  of  a  number  of
factors that may affect the Partnership's financial condition and
results of operations, including the following:

       - Market  and  economic conditions which affect the  value
          of  the  properties the Partnership owns and  the  cash
          from rental income such properties generate;

       - the  federal  income tax consequences of rental  income,
          deductions,  gain  on  sales and other  items  and  the
          affects of these consequences for the Partners;

       - resolution  by  the General Partners of  conflicts  with
          which they may be confronted;

       - the   success  of  the  General  Partners  of   locating
          properties with favorable risk return characteristics;

       - the effect of tenant defaults; and

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS  (Continued)

       - the  condition of the industries  in  which  the
          tenants of properties owned by the Partnership operate.

The Application of Critical Accounting Policies

        The preparation of the Partnership's financial statements
requires  management to make estimates and assumptions  that  may
affect the reported amounts of assets, liabilities, revenues  and
expenses,  and  related  disclosure  of  contingent  assets   and
liabilities. Management evaluates these estimates on  an  ongoing
basis,  including  those related to the carrying  value  of  real
estate  and  the  allocation  by AEI  Fund  Management,  Inc.  of
expenses  to  the  Partnership as opposed  to  other  funds  they
manage.

        The Partnership purchases properties and records them  in
the  financial  statements  at the lower  of  cost  or  estimated
realizable   value.   The  Partnership  initially   records   the
properties  at cost (including capitalized acquisition expenses).
The Partnership is required to periodically evaluate the carrying
value  of properties to determine whether their realizable  value
has  declined.   For  properties the Partnership  will  hold  and
operate, management determines whether impairment has occurred by
comparing the property's probability-weighted cash flows  to  its
current carrying value.  For properties held for sale, management
determines  whether  impairment has  occurred  by  comparing  the
property's estimated fair value less cost to sell to its  current
carrying  value.   If  the carrying value  is  greater  than  the
realizable  value, an impairment loss is recorded to  reduce  the
carrying value of the property to its realizable value.  A change
in  these assumptions or analysis could cause material changes in
the carrying value of the properties.

       AEI Fund Management Inc. allocates expenses to each of the
funds  they manage primarily on the basis of the number of  hours
devoted  by  their employees to each fund's affairs.   They  also
allocate  some  expenses at the end of each month  that  are  not
directly related to a fund's operations based upon the number  of
investors  in the fund and the fund's capitalization relative  to
other  funds  they  manage.   The  Partnership  reimburses  these
expenses  subject  to  detailed  limitations  contained  in   the
Partnership Agreement.

         Management   of  the  Partnership  has   discussed   the
development  and selection of the above accounting estimates  and
the management discussion and analysis disclosures regarding them
with the managing partner of the Partnership.

Results of Operations

        For  the  years  ended December 31, 2002  and  2001,  the
Partnership  recognized rental income of $490,486  and  $482,682,
respectively.   During the same periods, the  Partnership  earned
investment income of $14,350 and $75,771, respectively.  In 2002,
investment  income decreased due to the Partnership  having  less
money  invested, due to large distributions of sales proceeds  in
September  2002  and June 2001, and lower money  market  interest
rates.

        In  August 2000, Renaissant Development Corp. (RDC),  the
lessee of the Applebee's restaurant in Victoria, Texas filed  for
reorganization.   RDC closed the restaurant, rejected  the  Lease
and  returned possession of the property to the Partnership.  For
the  period  from January 1, 2002 through July 2, 2002,  and  the
year  ended  December 31, 2001, the Partnership did  not  collect
scheduled  rent  of  $82,477 and $142,687,  respectively.   These
amounts  were not accrued for financial reporting purposes.   The
Partnership  listed the property for sale or  lease.   While  the
property  was  vacant, the Partnership was responsible  for  real
estate taxes and other costs required to maintain the property.

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS  (Continued)

        As  of  December 31, 2000, based on an analysis of market
conditions in the area, it was determined the fair value  of  the
Victoria  property  was approximately $800,000.   In  the  fourth
quarter  of  2000,  a  charge  to  operations  for  real   estate
impairment  of  $353,062 was recognized, which is the  difference
between the book value at December 31, 2000 of $1,153,062 and the
estimated  fair  value  of  $800,000.  The  charge  was  recorded
against the cost of the building and equipment.

        In  April 2002, the Partnership received an offer to  buy
the  restaurant for $725,000 from an unrelated third  party.   In
the first quarter of 2002, a charge to operations for real estate
impairment  of $106,745 was recognized, which was the  difference
between  the  book  value at March 31, 2002 of $776,745  and  the
estimated  net  sales  proceeds  of  $670,000.   The  charge  was
recorded against the cost of the land and building.  On  July  3,
2002,  the  sale closed with the Partnership receiving  net  sale
proceeds of $673,665, which resulted in a net gain of $3,665.

       In January 1996, the Cheddar's restaurant in Indianapolis,
Indiana  was  destroyed  by a fire.  The  property  will  not  be
rebuilt  and  the Partnership listed the land for  sale.   As  of
December  31, 2000, based on an analysis of market conditions  in
the  area,  it was determined the fair value of the Partnership's
interest  in the land was approximately $50,000.   In the  fourth
quarter  of  2000,  a  charge  to  operations  for  real   estate
impairment  of  $124,747 was recognized, which is the  difference
between  the book value at December 31, 2000 of $174,747 and  the
estimated fair value of $50,000.  In the third quarter  of  2001,
the  Partnership recognized an additional real estate  impairment
of $50,000 to write down the book value of the land to zero.

       In July 2002, the Partnership entered into an agreement to
sell  the  Creative  Years daycare center  for  $230,000  to  the
lessee.   The sale is subject to numerous contingencies  and  may
not  be  completed.  In the fourth quarter of 2002, a  charge  to
operations  for real estate impairment of $63,177 was recognized,
which was the difference between book value at December 31,  2002
of $288,177 and the estimated net sale proceeds of $225,000.  The
charge was recorded against the cost of the land and building.

        On December 31, 2002, the Lease term for the Grand Rapids
Teachers  Credit Union in Wyoming, Michigan expired.  Originally,
the lessee planned to move out of the building and relocate to  a
new  building in the area.  On a month-to-month basis, the lessee
is  renting a portion of the property for $1,250 per month  while
their  new  building is constructed.  The Partnership listed  the
property for sale with a local real estate broker.  Subsequently,
the Credit Union decided they would like to purchase the property
for  $400,000.  The Partnership is in the process of  negotiating
an  agreement with the Credit Union for the sale of the property.
At  December 31, 2002, the property was classified as Real Estate
Held for Sale.

        Subsequent to December 31, 2002, the Partnership  entered
into  an  agreement  to sell the two JEMCARE daycare  centers  in
Arlington,  Texas to the lessee for $175,000 for the property  on
Arkansas  Lane  and $325,000 for the property on Matlock  Avenue.
In  the  fourth quarter of 2002, a charge to operations for  real
estate impairment of $114,648 was recognized for the property  on
Arkansas  Lane, which was the difference between  book  value  at
December 31, 2002 of $282,648 and the estimated net sale proceeds
of  $168,000.  A charge to operations for real estate  impairment
of  $131,740 was recognized for the property located  on  Matlock
Avenue,  which was the difference between book value at  December
31,  2002  of  $449,740 and the estimated net  sale  proceeds  of
$318,000.  The charges were recorded against the cost of the land
and  building.   On  March  7, 2003, the  sale  closed  with  the
Partnership receiving net sale proceeds of approximately $168,000
and 318,000, respectively.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        During  the years ended December 31, 2002 and  2001,  the
Partnership   paid   Partnership   administration   expenses   to
affiliated parties of $165,175 and $207,424, respectively.  These
administration  expenses  include  costs  associated   with   the
management of the properties, processing distributions, reporting
requirements and correspondence to the Limited Partners.   During
the   same   periods,   the  Partnership   incurred   Partnership
administration  and property management expenses  from  unrelated
parties  of  $61,783 and $86,662, respectively.   These  expenses
represent  direct payments to third parties for legal and  filing
fees,  direct administrative costs, outside audit and  accounting
costs, taxes, insurance and other property costs.

       As of December 31, 2002, the Partnership's annualized cash
distribution   rate  was  6%,  based  on  the  Adjusted   Capital
Contribution.   Distributions of Net Cash  Flow  to  the  General
Partners were subordinated to the Limited Partners as required in
the  Partnership  Agreement.  As a result, 99%  of  distributions
were  allocated  to  Limited  Partners  and  1%  to  the  General
Partners.

        Inflation  has  had  a  minimal  effect  on  income  from
operations.   Leases  may contain rent increases,  based  on  the
increase  in  the  Consumer Price Index over a specified  period,
which  will result in an increase in rental income over the  term
of  the  leases.   In addition, leases may contain  rent  clauses
which  entitle  the  Partnership to receive  additional  rent  in
future  years  if gross receipts for the property exceed  certain
specified  amounts.  Increases in sales volumes of  the  tenants,
due to inflation and real sales growth, may result in an increase
in rental income over the term of the leases.  Inflation also may
cause the real estate to appreciate in value.  However, inflation
and  changing prices may have an adverse impact on the  operating
margins  of  the  properties' tenants, which could  impair  their
ability  to  pay rent and subsequently reduce the Net  Cash  Flow
available for distributions.

Liquidity and Capital Resources

       During the year ended December 31, 2002, the Partnership's
cash  balances  decreased $598,328 as a result  of  distributions
paid  to  the Partners in excess of cash generated from operating
and investing activities.  The source of the excess distributions
was  proceeds from property sales completed in prior years.   Net
Cash provided by operating activities increased from $190,937  in
2001 to $249,988 in 2002 as a result of a decrease in Partnership
administration expenses in 2002 and net timing differences in the
collection  of  payments  form the lessees  and  the  payment  of
expenses, which were partially offset by a decrease in income  in
2002.

       During the year ended December 31, 2002, net cash provided
by  investing activities was $732,938 which represented cash flow
generated from the sale of real estate.

        In  November 2000, the Partnership sold 9,576 square feet
of  land  from  the  Fuddruckers' property  in  Omaha,  Nebraska,
pursuant  to  a  Right-Of-Way Agreement with the  City  of  Omaha
Public Works.  The Partnership received net proceeds of $216,593,
which  resulted in a gain of $168,838.  The original cost of  the
parcel of land was $47,755.  The Partnership believed the City of
Omaha  undervalued the land and negotiated to receive  additional
proceeds.  In March 2002, the City of Omaha approved a settlement
and  paid  the Partnership additional gross proceeds of  $69,795,
which resulted in a net gain of $59,273.

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS  (Continued)

        Due  to  the redevelopment of the roads adjacent  to  the
Fuddruckers'  property and proceeds received  from  the  city  of
Omaha  for  easements during such redevelopment, the  Partnership
agreed to a temporary modification of rent payments through March
31, 2002.  For the three months ended March 31, 2002 and the year
ended December 31, 2001, the modification resulted in a reduction
of  base  rent of $6,410 and $43,002, respectively.  Due  to  the
permanent changes to the property and the proceeds received  from
the  city  of  Omaha,  the Partnership may consider  a  long-term
modification of the Lease.

       The Partnership's primary use of cash flow is distribution
and  redemption  payments to Partners.  The Partnership  declares
its  regular  quarterly  distributions before  the  end  of  each
quarter and pays the distribution in the first week after the end
of  each quarter.  The Partnership attempts to maintain a  stable
distribution  rate from quarter to quarter.  Redemption  payments
are  paid  to  redeeming Partners in the fourth quarter  of  each
year.

         During   2002  and  2001,  the  Partnership  distributed
$1,297,160 and $1,574,356 of net sale proceeds to the Limited and
General Partners, which represented a return of capital of $96.83
and  $116.62  per  Limited Partnership Unit,  respectively.   The
remaining  net sale proceeds will be distributed to the  Partners
in the future.

        The  Partnership may acquire Units from Limited  Partners
who  have tendered their Units to the Partnership. Such Units may
be  acquired at a discount.  The Partnership is not obligated  to
purchase  in  any  year  more than 5%  of  the  number  of  Units
outstanding at the beginning of the year.  In no event shall  the
Partnership  be  obligated to purchase  Units  if,  in  the  sole
discretion  of the Managing General Partner, such purchase  would
impair the capital or operation of the Partnership.

        During  2002, eight Limited Partners redeemed a total  of
69.67  Partnership  Units  for $10,137  in  accordance  with  the
Partnership  Agreement.   The Partnership  acquired  these  Units
using Net Cash Flow from operations.  In prior years, a total  of
174  Limited  Partners  redeemed 1,735.15 Partnership  Units  for
$1,115,407.   The  redemptions  increase  the  remaining  Limited
Partners' ownership interest in the Partnership.

       The continuing rent payments from the properties, together
with  cash  generated from property sales, should be adequate  to
fund   continuing   distributions  and  meet  other   Partnership
obligations on both a short-term and long-term basis.

ITEM 7.   FINANCIAL STATEMENTS.

       See accompanying Index to Financial Statements.



          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  INDEX TO FINANCIAL STATEMENTS




                                                            Page

Report of Independent Auditors                               14

Balance Sheet as of December 31, 2002 and 2001               15

Statements for the Years Ended December 31, 2002 and 2001:

     Operations                                              16

     Cash Flows                                              17

     Changes in Partners' Capital                            18

Notes to Financial Statements                           19 - 30




                 REPORT OF INDEPENDENT AUDITORS





To the Partners:
AEI Real Estate Fund XVI Limited Partnership
St. Paul, Minnesota







      We  have audited the accompanying balance sheet of AEI Real
Estate   Fund  XVI  Limited  Partnership  (a  Minnesota   limited
partnership)  as  of December 31, 2002 and 2001 and  the  related
statements  of  operations, cash flows and changes  in  partners'
capital for the years then ended.  These financial statements are
the   responsibility  of  the  Partnership's   management.    Our
responsibility  is  to  express an  opinion  on  these  financial
statements based on our audits.

     We   conducted  our  audits  in  accordance  with   auditing
standards  generally accepted in the United  States  of  America.
Those  standards 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.  An audit also  includes
assessing   the   accounting  principles  used  and   significant
estimates  made by management, as well as evaluating the  overall
financial  statement presentation.  We believe  that  our  audits
provide a reasonable basis for our opinion.

      In  our opinion, the financial statements referred to above
present  fairly, in all material respects, the financial position
of  AEI  Real Estate Fund XVI Limited Partnership as of  December
31, 2002 and 2001, and the results of its operations and its cash
flows  for  the  years then ended, in conformity with  accounting
principles generally accepted in the United States of America.









Minneapolis, Minnesota         Boulay, Heutmaker, Zibell & Co. P.L.L.P.
January 21, 2003               Certified Public Accountants


<page>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                          BALANCE SHEET

                           DECEMBER 31

                             ASSETS

                                               2002       2001
CURRENT ASSETS:
  Cash and Cash Equivalents                $  503,979  $1,102,307
  Receivables                                   9,242      30,543
                                           ----------   ---------
      Total Current Assets                    513,221   1,132,850
                                           ----------   ---------
INVESTMENTS IN REAL ESTATE:
  Land                                      1,091,754   1,825,154
  Buildings and Equipment                   2,776,970   3,961,868
  Accumulated Depreciation                 (1,704,551) (2,079,895)
                                           ----------   ---------
                                            2,164,173   3,707,127
  Real Estate Held for Sale                   357,560           0
                                           ----------   ---------
      Net Investments in Real Estate        2,521,733   3,707,127
                                           ----------   ---------
          Total Assets                     $3,034,954  $4,839,977
                                            =========   =========

                LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.     $   58,418  $   79,957
  Distributions Payable                       109,228     127,335
  Deferred Income                              13,983      29,743
                                           ----------   ---------
      Total Current Liabilities               181,629     237,035
                                           ----------   ---------

DEFERRED INCOME - Net of Current Portion       46,565      58,457

PARTNERS' CAPITAL (DEFICIT):
  General Partners                                  0     (42,383)
  Limited Partners, $1,000 Unit value;
     15,000 Units authorized and issued;
     13,195 and 13,265 Units outstanding
     in 2002 and 2001, respectively         2,806,760   4,586,868
                                           ----------   ---------
      Total Partners' Capital               2,806,760   4,544,485
                                           ----------   ---------
           Total Liabilities and
           Partners' Capital               $3,034,954  $4,839,977
                                            =========   =========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</page>
<page>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                     STATEMENT OF OPERATIONS

                 FOR THE YEARS ENDED DECEMBER 3l


                                               2002       2001

INCOME:
  Rent                                     $  490,486  $  482,682
  Investment Income                            14,350      75,771
                                            ---------   ---------
      Total Income                            504,836     558,453
                                            ---------   ---------

EXPENSES:
  Partnership Administration - Affiliates     165,175     207,424
  Partnership Administration and Property
     Management - Unrelated Parties            61,783      86,662
  Depreciation                                 99,084     113,037
  Real Estate Impairment                      416,310      50,000
                                            ---------   ---------
      Total Expenses                          742,352     457,123
                                            ---------   ---------

OPERATING INCOME (LOSS)                      (237,516)    101,330

GAIN ON SALE OF REAL ESTATE                    62,938           0
                                            ---------   ---------
NET INCOME (LOSS)                          $ (174,578) $  101,330
                                             ========    ========

NET INCOME (LOSS) ALLOCATED:
  General Partners                         $   58,015  $   42,383
  Limited Partners                           (232,593)     58,947
                                            ---------   ---------
                                           $ (174,578) $  101,330
                                             ========    ========

NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT
(13,247 and 13,344 weighted average Units
outstanding in 2002 and 2001, respectively)$   (17.56) $     4.42
                                             ========    ========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
 </page>
 <page>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                     STATEMENT OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31


                                             2002       2001

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss)                      $(174,578)  $ 101,330

  Adjustments To Reconcile Net Income
  To Net Cash Provided By Operating Activities:
     Depreciation                            99,084    113,037
     Real Estate Impairment                 416,310     50,000
     Gain on Sale of Real Estate           (62,938)          0
     (Increase) Decrease in Receivables      21,301   (20,018)
     Decrease in Payable to
        AEI Fund Management, Inc.          (21,539)   (44,281)
     Decrease in Deferred Income           (27,652)    (9,131)
                                          ---------   ---------
       Total Adjustments                    424,566     89,607
                                          ---------   ---------
       Net Cash Provided By
           Operating Activities             249,988    190,937
                                          ---------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from Sale of Real Estate         732,938          0
                                          ---------   ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Decrease in Distributions Payable         (18,107)  (101,558)
  Distributions to Partners              (1,552,907)(1,799,950)
  Redemption Payments                       (10,240)   (26,881)
                                          ---------   ---------
       Net Cash Used For
           Financing Activities          (1,581,254) (1,928,389)
                                          ---------   ---------
NET DECREASE IN CASH
   AND CASH EQUIVALENTS                    (598,328) (1,737,452)

CASH AND CASH EQUIVALENTS,
beginning of period                       1,102,307   2,839,759
                                          ---------   ---------
CASH AND CASH EQUIVALENTS,
end of period                           $   503,979  $1,102,307
                                           ========    ========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</page>
<page>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

            STATEMENT OF CHANGES IN PARTNERS' CAPITAL

                 FOR THE YEARS ENDED DECEMBER 31


                                                                    Limited
                                                                  Partnership
                                General    Limited                   Units
                               Partners   Partners         Total  Outstanding


BALANCE, December 31, 2000   $ (66,498)  $ 6,336,484   $ 6,269,986  13,370.65

  Distributions                (17,999)   (1,781,951)   (1,799,950)

  Redemption Payments             (269)      (26,612)      (26,881)   (105.80)

  Net Income                    42,383        58,947       101,330
                              --------     ---------      --------   --------
BALANCE, December 31, 2001     (42,383)    4,586,868     4,544,485  13,264.85

  Distributions                (15,529)   (1,537,378)   (1,552,907)

  Redemption Payments             (103)      (10,137)      (10,240)    (69.67)

  Operating Loss                (4,750)     (232,766)     (237,516)

  Gain on Sale of Real Estate   62,765           173        62,938
                              --------     ---------      --------   --------
BALANCE, December 31, 2002   $       0   $ 2,806,760   $ 2,806,760  13,195.18
                              ========     =========     =========  =========









 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</page>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(1)  ORGANIZATION -

     AEI  Real  Estate Fund XVI Limited Partnership (Partnership)
     was  formed  to  acquire and lease commercial properties  to
     operating tenants.  The Partnership's operations are managed
     by AEI Fund Management XVI, Inc. (AFM), the Managing General
     Partner.    Robert  P.  Johnson,  the  President  and   sole
     shareholder of AFM, serves as the Individual General Partner
     and  an  affiliate of AFM, AEI Fund Management, Inc.  (AEI),
     performs the administrative and operating functions for  the
     Partnership.

     The   terms   of  the  Partnership  offering  call   for   a
     subscription  price of $1,000 per Limited Partnership  Unit,
     payable   on  acceptance  of  the  offer.   The  Partnership
     commenced  operations  on  February  6,  1987  when  minimum
     subscriptions    of   2,000   Limited   Partnership    Units
     ($2,000,000)  were  accepted.  The  offering  terminated  on
     November  6,  1987  when the maximum subscription  limit  of
     15,000 Limited Partnership Units ($15,000,000) was reached.

     Under  the  terms of the Limited Partnership Agreement,  the
     Limited  Partners and General Partners contributed funds  of
     $15,000,000  and  $1,000, respectively.  During  operations,
     any  Net  Cash Flow, as defined, which the General  Partners
     determine  to  distribute will be  distributed  90%  to  the
     Limited  Partners and 10% to the General Partners; provided,
     however,  that  such distributions to the  General  Partners
     will be subordinated to the Limited Partners first receiving
     an annual, noncumulative distribution of Net Cash Flow equal
     to  10%  of their Adjusted Capital Contribution, as defined,
     and,  provided  further, that in no event will  the  General
     Partners  receive  less than 1% of such Net  Cash  Flow  per
     annum.  Distributions to Limited Partners will be  made  pro
     rata by Units.

     Any  Net  Proceeds  of Sale, as defined, from  the  sale  or
     financing of properties which the General Partners determine
     to distribute will, after provisions for debts and reserves,
     be  paid  in  the following manner:  (i) first, 99%  to  the
     Limited  Partners and 1% to the General Partners  until  the
     Limited  Partners  receive an amount  equal  to:  (a)  their
     Adjusted Capital Contribution plus (b) an amount equal to 6%
     of their Adjusted Capital Contribution per annum, cumulative
     but not compounded, to the extent not previously distributed
     from  Net  Cash Flow; (ii) next, 99% to the Limited Partners
     and  1%  to the General Partners until the Limited  Partners
     receive  an  amount equal to 14% of their  Adjusted  Capital
     Contribution  per annum, cumulative but not  compounded,  to
     the  extent not previously distributed; (iii) next,  to  the
     General  Partners  until  cumulative  distributions  to  the
     General  Partners under Items (ii) and (iii)  equal  15%  of
     cumulative  distributions to all Partners under  Items  (ii)
     and (iii).  Any remaining balance will be distributed 85% to
     the  Limited  Partners  and  15% to  the  General  Partners.
     Distributions to the Limited Partners will be made pro  rata
     by Units.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(1)  ORGANIZATION - (Continued)

     For  tax  purposes,  profits  from  operations,  other  than
     profits  attributable  to  the  sale,  exchange,  financing,
     refinancing  or  other  disposition  of  property,  will  be
     allocated  first  in the same ratio in  which,  and  to  the
     extent,  Net  Cash Flow is distributed to the  Partners  for
     such year.  Any additional profits will be allocated 90%  to
     the Limited Partners and 10% to the General Partners. In the
     event  no  Net  Cash  Flow  is distributed  to  the  Limited
     Partners,  90%  of each item of income, gain or  credit  for
     each  respective  year  shall be allocated  to  the  Limited
     Partners,  and 10% of each such item shall be  allocated  to
     the  General Partners.  Net losses from operations  will  be
     allocated 98% to the Limited Partners and 2% to the  General
     Partners.

     For  tax purposes, profits arising from the sale, financing,
     or  other  disposition  of property  will  be  allocated  in
     accordance  with the Partnership Agreement as  follows:  (i)
     first,  to  those  Partners with deficit balances  in  their
     capital  accounts  in an amount equal to  the  sum  of  such
     deficit  balances; (ii) second, 99% to the Limited  Partners
     and  1%  to the General Partners until the aggregate balance
     in  the Limited Partners' capital accounts equals the sum of
     the Limited Partners' Adjusted Capital Contributions plus an
     amount  equal to 14% of their Adjusted Capital Contributions
     per  annum, cumulative but not compounded, to the extent not
     previously  allocated; (iii) third, to the General  Partners
     until  cumulative allocations to the General Partners  equal
     15%  of cumulative allocations.  Any remaining balance  will
     be  allocated  85% to the Limited Partners and  15%  to  the
     General  Partners.   Losses will be  allocated  98%  to  the
     Limited Partners and 2% to the General Partners.

     The  General Partners are not required to currently  fund  a
     deficit   capital   balance.   Upon   liquidation   of   the
     Partnership or withdrawal by a General Partner, the  General
     Partners will contribute to the Partnership an amount  equal
     to  the  lesser  of  the deficit balances in  their  capital
     accounts  or  1%  of  total Limited  Partners'  and  General
     Partners' capital contributions.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -

     Financial Statement Presentation

       The  accounts  of  the Partnership are maintained  on  the
       accrual  basis of accounting for both federal  income  tax
       purposes and financial reporting purposes.

     Accounting Estimates

       Management  uses  estimates and assumptions  in  preparing
       these  financial statements in accordance  with  generally
       accepted  accounting  principles.   Those  estimates   and
       assumptions may affect the reported amounts of assets  and
       liabilities,  the  disclosure  of  contingent  assets  and
       liabilities,  and  the  reported  revenues  and  expenses.
       Actual results could differ from those estimates.


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

       The  Partnership regularly assesses whether market  events
       and conditions indicate that it is reasonably possible  to
       recover  the carrying amounts of its investments  in  real
       estate  from  future operations and sales.   A  change  in
       those  market events and conditions could have a  material
       effect on the carrying amount of its real estate.

     Cash Concentrations of Credit Risk

       The  Partnership's  cash  is deposited  primarily  in  one
       financial institution and at times during the year it  may
       exceed FDIC insurance limits.

     Statement of Cash Flows

       For  purposes  of  reporting cash  flows,  cash  and  cash
       equivalents  may include cash in checking,  cash  invested
       in   money   market  accounts,  certificates  of  deposit,
       federal  agency notes and commercial paper with a term  of
       three months or less.

     Receivables

       Credit  terms are extended to tenants in the normal course
       of  business.   The  Partnership performs  ongoing  credit
       evaluations  of  its customers' financial  condition  and,
       generally, requires no collateral.

       Receivables   are   recorded  at   their   estimated   net
       realizable  value.  The Partnership follows  a  policy  of
       providing  an  allowance for doubtful  accounts;  however,
       based on historical experience, and its evaluation of  the
       current status of receivables, the Partnership is  of  the
       belief  that  such  accounts will be  collectible  in  all
       material  respects and thus an allowance is not necessary.
       Accounts  are considered past due if payment is  not  made
       on  a  timely  basis in accordance with the  Partnership's
       credit  terms.   Receivables considered uncollectible  are
       written off.

     Income Taxes

       The  income or loss of the Partnership for federal  income
       tax  reporting  purposes is includable in the  income  tax
       returns  of the partners.  In general, no recognition  has
       been  given to income taxes in the accompanying  financial
       statements.

       The  tax  return, the qualification of the Partnership  as
       such  for  tax  purposes, and the amount of  distributable
       Partnership  income or loss are subject to examination  by
       federal   and  state  taxing  authorities.   If  such   an
       examination  results  in  changes  with  respect  to   the
       Partnership  qualification or in changes to  distributable
       Partnership  income  or loss, the taxable  income  of  the
       partners would be adjusted accordingly.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

     Real Estate

       The  Partnership's real estate is leased under triple  net
       leases  classified as operating leases.   The  Partnership
       recognizes  rental revenue on the accrual basis  according
       to  the terms of the individual leases.  For leases  which
       contain  rent increases based on cost of living increases,
       the  increases  are recognized in the year in  which  they
       are effective.

       Real  estate is recorded at the lower of cost or estimated
       net   realizable  value.   The  Partnership  compares  the
       carrying   amount  of  its  properties  to  the  estimated
       probability-weighted future cash flows expected to  result
       from  the property and its eventual disposition.   If  the
       sum  of  the expected future cash flows is less  than  the
       carrying   amount   of  the  property,   the   Partnership
       recognizes an impairment loss by the amount by  which  the
       carrying amount of the property exceeds the fair value  of
       the property.

       The  Partnership  has capitalized as Investments  in  Real
       Estate   certain   costs  incurred  in  the   review   and
       acquisition  of the properties.  The costs were  allocated
       to the land, buildings and equipment.

       The   buildings  and  equipment  of  the  Partnership  are
       depreciated  using the straight-line method for  financial
       reporting purposes based on estimated useful lives  of  30
       years and 10 years, respectively.

(3)  RELATED PARTY TRANSACTIONS -

     The  Partnership owns an 83.6514% interest in  a  Children's
     World  Daycare  Center.   The  remaining  interest  in  this
     property  is  owned  by AEI Real Estate  Fund  85-B  Limited
     Partnership,   an   affiliate  of  the   Partnership.    The
     Partnership owns a 25% interest in a Jiffy Lube  and  a  50%
     interest in a parcel of land in Indianapolis, Indiana.   The
     remaining  interests in these properties are  owned  by  AEI
     Real  Estate Fund XVII Limited Partnership, an affiliate  of
     the Partnership.

     Each  Partnership owns a separate undivided interest in  the
     properties.   No  specific agreement  or  commitment  exists
     between  the  Partnerships as to  the  management  of  their
     respective  interests in the properties, and the Partnership
     that  holds  more  than  a  50% interest  does  not  control
     decisions  over  the  other  Partnership's  interest.    The
     financial   statements  reflect  only   this   Partnership's
     percentage  share  of  the properties'  land,  building  and
     equipment, liabilities, revenues and expenses.


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(3)  RELATED PARTY TRANSACTIONS - (Continued)

     AEI   and  AFM  received  the  following  compensation   and
     reimbursements for costs and expenses from the Partnership:
                                    Total Incurred by the Partnership
                                     for the Years Ended December 3l

                                                   2002       2001

a.AEI and AFM are reimbursed for all costs
  incurred in connection with managing the
  Partnership's operations, maintaining the
  Partnership's books and communicating
  the results of operations to the Limited
  Partners.                                     $ 165,175  $ 207,424
                                                 ========   ========
b.AEI and AFM are reimbursed for all direct
  expenses they have paid on the Partnership's
  behalf to third parties relating to Partnership
  administration and property management.
  These expenses included printing costs, legal
  and filing fees, direct administrative costs,
  outside audit and accounting costs, taxes,
  insurance and other property costs.           $  61,783  $  86,662
                                                 ========   ========
c.AEI is reimbursed for all costs incurred in
  connection with the sale of property.         $     921  $       0
                                                 ========   ========

     The  payable  to  AEI Fund Management, Inc.  represents  the
     balance due for the services described in 3a, b and c.  This
     balance is non-interest bearing and unsecured and is  to  be
     paid in the normal course of business.


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(4)  INVESTMENTS IN REAL ESTATE -

     The  Partnership  leases its properties to  various  tenants
     through triple net leases, which are classified as operating
     leases.  Under a triple net lease, the lessee is responsible
     for  all  real estate taxes, insurance, maintenance, repairs
     and  operating expenses of the property.  The initial  Lease
     terms  are 20 years, except for the Arby's restaurant, which
     has  a  Lease  term of 15 years, the Creative Years  daycare
     center,  which has a Lease term of 13 years and  the  Credit
     Union,  which  is currently being leased on a month-to-month
     basis.   The initial Lease terms for the JEMCARE properties,
     which  were  to  expire  on December  31,  2001,  have  been
     extended  to  March  31, 2003.  The Leases  contain  renewal
     options  which  may extend the Lease term an  additional  10
     years,  except for the Arby's restaurant, which has  renewal
     options  that  may  extend the Lease term an  additional  15
     years,  the  JEMCARE properties, which have renewal  options
     that may extend the Lease term an additional 9 years and the
     Jiffy  Lube,  which  has  no renewal  options.   The  Leases
     contain  rent  clauses  which  entitle  the  Partnership  to
     receive additional rent in future years based on stated rent
     increases  or  if  gross receipts for  the  property  exceed
     certain specified amounts, among other conditions.

     The  Partnership's properties are commercial,  single-tenant
     buildings.    The   Creative  Years   daycare   center   was
     constructed   in  1984.   The  Fuddruckers  restaurant   was
     constructed  in  1985  and remodeled  in  1987.   All  other
     properties were constructed in 1986 or 1987.  All properties
     were acquired in 1987.  There have been no costs capitalized
     as improvements subsequent to the acquisitions.

     The cost of the properties not held for sale and the related
     accumulated  depreciation  at  December  31,  2002  are   as
     follows:

                                       Buildings and          Accumulated
Property                         Land    Equipment    Total   Depreciation

Creative Years, Houston, TX  $  115,361 $  304,590 $  419,951  $  194,951
Arby's, Grand Rapids, MI        195,229    457,651    652,880     267,421
Fuddruckers, Omaha, NE          260,157    843,630  1,103,787     554,657
Children's World,
  Sterling Heights, MI          138,133    591,353    729,486     315,304
Jiffy Lube, Dallas, TX           65,919     88,972    154,891      50,489
JEMCARE, Arlington, TX           88,095    247,732    335,827     167,827
JEMCARE, Arlington, TX          228,860    243,042    471,902     153,902
                              ---------  --------   ---------   ---------
                             $1,091,754 $2,776,970 $3,868,724  $1,704,551
                               ========   ========   ========    ========

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(4)  INVESTMENTS IN REAL ESTATE - (Continued)

     In  November 2000, the Partnership sold 9,576 square feet of
     land  from  the  Fuddruckers' property in  Omaha,  Nebraska,
     pursuant to a Right-Of-Way Agreement with the City of  Omaha
     Public  Works.   The Partnership received  net  proceeds  of
     $216,593,  which  resulted  in  a  gain  of  $168,838.   The
     original  cost  of  the  parcel of land  was  $47,755.   The
     Partnership believed the City of Omaha undervalued the  land
     and  negotiated  to receive additional proceeds.   In  March
     2002,  the City of Omaha approved a settlement and paid  the
     Partnership  additional  gross proceeds  of  $69,795,  which
     resulted in a net gain of $59,273.

     Due  to  the  redevelopment of the  roads  adjacent  to  the
     Fuddruckers' property and proceeds received from the city of
     Omaha   for   easements  during  such   redevelopment,   the
     Partnership  agreed  to  a temporary  modification  of  rent
     payments through March 31, 2002.  For the three months ended
     March  31,  2002 and the year ended December 31,  2001,  the
     modification resulted in a reduction of base rent of  $6,410
     and $43,002, respectively.  Due to the permanent changes  to
     the  property  and the proceeds received from  the  city  of
     Omaha, the Partnership may consider a long-term modification
     of the Lease.

     In  August  2000,  Renaissant Development Corp.  (RDC),  the
     lessee of the Applebee's restaurant in Victoria, Texas filed
     for reorganization.  RDC closed the restaurant, rejected the
     Lease  and  returned  possession  of  the  property  to  the
     Partnership.   For the period from January 1,  2002  through
     July  2,  2002,  and the year ended December 31,  2001,  the
     Partnership  did not collect scheduled rent of  $82,477  and
     $142,687, respectively.  These amounts were not accrued  for
     financial  reporting purposes.  The Partnership  listed  the
     property for sale or lease.  While the property was  vacant,
     the  Partnership was responsible for real estate  taxes  and
     other costs required to maintain the property.

     As  of  December  31, 2000, based on an analysis  of  market
     conditions in the area, it was determined the fair value  of
     the  Victoria property was approximately $800,000.   In  the
     fourth  quarter  of  2000, a charge to operations  for  real
     estate  impairment of $353,062 was recognized, which is  the
     difference  between the book value at December 31,  2000  of
     $1,153,062  and the estimated fair value of  $800,000.   The
     charge  was  recorded against the cost of the  building  and
     equipment.

     In  April 2002, the Partnership received an offer to buy the
     restaurant for $725,000 from an unrelated third  party.   In
     the  first quarter of 2002, a charge to operations for  real
     estate impairment of $106,745 was recognized, which was  the
     difference  between  the book value at  March  31,  2002  of
     $776,745  and the estimated net sales proceeds of  $670,000.
     The  charge  was recorded against the cost of the  land  and
     building.   On  July  3,  2002, the  sale  closed  with  the
     Partnership  receiving net sale proceeds of $673,665,  which
     resulted in a net gain of $3,665.

     During 2002 and 2001, the Partnership distributed $1,297,160
     and  $1,574,356  of  net sale proceeds to  the  Limited  and
     General  Partners, which represented a return of capital  of
     $96.83   and   $116.62   per   Limited   Partnership   Unit,
     respectively.   The  remaining net  sale  proceeds  will  be
     distributed to the Partners in the future.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(4)  INVESTMENTS IN REAL ESTATE - (Continued)

     In  January  1996, the Cheddar's restaurant in Indianapolis,
     Indiana was destroyed by a fire.  The property will  not  be
     rebuilt and the Partnership listed the land for sale.  As of
     December 31, 2000, based on an analysis of market conditions
     in  the  area,  it  was determined the  fair  value  of  the
     Partnership's   interest  in  the  land  was   approximately
     $50,000.   In  the  fourth quarter  of  2000,  a  charge  to
     operations  for  real  estate  impairment  of  $124,747  was
     recognized, which is the difference between the  book  value
     at  December  31,  2000 of $174,747 and the  estimated  fair
     value  of  $50,000.   In  the third  quarter  of  2001,  the
     Partnership recognized an additional real estate  impairment
     of $50,000 to write down the book value of the land to zero.

     In  July 2002, the Partnership entered into an agreement  to
     sell  the Creative Years daycare center for $230,000 to  the
     lessee.   The sale is subject to numerous contingencies  and
     may  not  be  completed.  In the fourth quarter of  2002,  a
     charge  to operations for real estate impairment of  $63,177
     was  recognized, which was the difference between book value
     at  December 31, 2002 of $288,177 and the estimated net sale
     proceeds  of $225,000.  The charge was recorded against  the
     cost of the land and building.

     On  December  31, 2002, the Lease term for the Grand  Rapids
     Teachers   Credit   Union  in  Wyoming,  Michigan   expired.
     Originally,  the lessee planned to move out of the  building
     and  relocate to a new building in the area.  On a month-to-
     month basis, the lessee is renting a portion of the property
     for   $1,250   per  month  while  their  new   building   is
     constructed.  The Partnership listed the property  for  sale
     with  a  local real estate broker.  Subsequently, the Credit
     Union  decided they would like to purchase the property  for
     $400,000.   The Partnership is in the process of negotiating
     an  agreement  with the Credit Union for  the  sale  of  the
     property.  At December 31, 2002, the property was classified
     as Real Estate Held for Sale.

     Subsequent  to  December 31, 2002, the  Partnership  entered
     into an agreement to sell the two JEMCARE daycare centers in
     Arlington, Texas to the lessee for $175,000 for the property
     on  Arkansas Lane and $325,000 for the property  on  Matlock
     Avenue.   In  the  fourth  quarter  of  2002,  a  charge  to
     operations  for  real  estate  impairment  of  $114,648  was
     recognized for the property on Arkansas Lane, which was  the
     difference  between  book  value at  December  31,  2002  of
     $282,648 and the estimated net sale proceeds of $168,000.  A
     charge  to operations for real estate impairment of $131,740
     was  recognized for the property located on Matlock  Avenue,
     which was the difference between book value at December  31,
     2002  of  $449,740  and the estimated net sale  proceeds  of
     $318,000.  The charges were recorded against the cost of the
     land  and building.  On March 7, 2003, the sale closed  with
     the Partnership receiving net sale proceeds of approximately
     $168,000 and 318,000, respectively.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(4)  INVESTMENTS IN REAL ESTATE - (Continued)

     The   minimum  future  rentals  on  the  Leases  for   years
     subsequent to December 31, 2002 are as follows:

                       2003            $  394,883
                       2004               324,989
                       2005               324,989
                       2006               324,989
                       2007               263,456
                                         --------
                                       $1,633,306
                                         ========

     In  2002  and  2001,  the Partnership recognized  contingent
     rents of $38,846 and $112,407, respectively.

 (5) DEFERRED INCOME -

     In  June  1994, Fuddruckers, Inc., the restaurant  concept's
     franchisor,  acquired  the  operations  of  the  Fuddruckers
     restaurant  in  Omaha,  Nebraska,  and  assumed  the   lease
     obligations  from  the  original lessee.   As  part  of  the
     agreement, the Partnership amended the Leases to reduce  the
     base  rent from $167,699 to $145,081.  The Partnership could
     receive  additional  rent in the  future  if  10%  of  gross
     receipts  from  the  property  exceed  the  base  rent.   In
     consideration  for the lease assumption and  amendment,  the
     Partnership  received a lump sum payment from  the  original
     lessee of $159,539.  The lump sum payment will be recognized
     as income over the remainder of the Lease term which expires
     November 30, 2007 using the straight line method.

     Through  December  31, 2002 and 2001,  the  Partnership  had
     recognized  $101,082 and $89,190 of the payment  as  income.
     The  remaining  deferred income of $2,091 was  prepaid  rent
     related  to  certain  other  Partnership  properties  as  of
     December 31, 2002.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(6)  MAJOR TENANTS -

     The following schedule presents rent revenue from individual
     tenants,   or  affiliated  groups  of  tenants,   who   each
     contributed more than ten percent of the Partnership's total
     rent revenue for the years ended December 31:

                                             2002       2001
      Tenants                Industry

     Fuddruckers, Inc.        Restaurant  $ 154,563  $ 113,972
     ARAMARK Educational
         Resources, Inc.      Child Care    116,619    114,415
     JEMCARE, Inc.            Child Care     93,289     93,289
                                           --------   --------

     Aggregate rent revenue of major
     tenants                              $ 364,471  $ 321,676
                                           ========   ========

     Aggregate rent revenue of major tenants
     as a percentage of total rent revenue      74%        67%
                                           ========   ========

(7) PARTNERS' CAPITAL -

     Cash  distributions of $15,632 and $18,268 were made to  the
     General Partners and $1,537,378 and $1,781,951 were made  to
     the  Limited Partners for the years ended December 31,  2002
     and 2001, respectively.  The Limited Partners' distributions
     represent  $116.05 and $133.54 per Limited Partnership  Unit
     outstanding  using 13,247 and 13,344 weighted average  Units
     in 2002 and 2001, respectively.  The distributions represent
     $-0-  and  $2.41  per  Unit of Net Income  and  $116.05  and
     $131.13  per Unit of return of contributed capital  in  2002
     and 2001, respectively.

     As  part  of  the  Limited  Partner distributions  discussed
     above, the Partnership distributed $1,284,189 and $1,558,612
     of   proceeds  from  property  sales  in  2002   and   2001,
     respectively.   The   distributions  reduced   the   Limited
     Partners' Adjusted Capital Contributions.

     Distributions  of  Net  Cash Flow to  the  General  Partners
     during  2002  and  2001  were subordinated  to  the  Limited
     Partners  as  required in the Partnership Agreement.   As  a
     result,  99% of distributions were allocated to the  Limited
     Partners and 1% to the General Partners.

     The  Partnership may acquire Units from Limited Partners who
     have tendered their Units to the Partnership. Such Units may
     be acquired at a discount.  The Partnership is not obligated
     to  purchase in any year more than 5% of the number of Units
     outstanding at the beginning of the year.  In no event shall
     the  Partnership be obligated to purchase Units if,  in  the
     sole  discretion  of  the  Managing  General  Partner,  such
     purchase  would  impair  the capital  or  operation  of  the
     Partnership.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(7) PARTNERS' CAPITAL - (Continued)

     During  2002,  eight Limited Partners redeemed  a  total  of
     69.67  Partnership Units for $10,137 in accordance with  the
     Partnership Agreement  The Partnership acquired these  Units
     using  Net Cash Flow from operations.  In 2001, nine Limited
     Partners  redeemed a total of 105.80 Partnership  Units  for
     $26,612.   The  redemptions increase the  remaining  Limited
     Partners' ownership interest in the Partnership.

     After  the  effect of redemptions and the return of  capital
     from   the   sale   of   property,  the   Adjusted   Capital
     Contribution,  as defined in the Partnership  Agreement,  is
     $600.18 per original $1,000 invested.

 (8) INCOME TAXES -

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

                                              2002       2001
     Net Income (Loss) for Financial
      Reporting Purposes                  $(174,578)  $ 101,330

     Depreciation for Tax Purposes
      Over Depreciation for Financial
      Reporting Purposes                     (3,504)     (4,105)

     Income Accrued for Tax Purposes
      Over (Under) Income for Financial
      Reporting Purposes                      9,587     (77,830)

     Property Expenses for Tax Purposes
      Over Expenses for Financial
      Reporting Purposes                          0     (20,050)

     Real Estate Impairment Loss
      Not Recognized for Tax Purposes       416,310      50,000

     Gain on Sale of Real Estate for Tax
      Purposes Over (Under) Gain for
      Financial Reporting Purposes         (522,088)     62,595
                                           --------    --------
           Taxable Income (Loss)
           to Partners                  $  (274,273) $  111,940
                                           ========    ========

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2002 AND 2001

(8)  INCOME TAXES - (Continued)

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

                                             2002       2001

     Partners' Capital for
      Financial Reporting Purposes        $2,806,760  $4,544,485

     Adjusted Tax Basis of Investments
      in Real Estate Over Net Investments
      in Real Estate for Financial
      Reporting Purposes                     816,889     863,576

     Income Accrued for Tax Purposes Over
      Income for Financial
      Reporting Purposes                     144,332     197,340

     Syndication Costs Treated as
      Reduction of Capital for
      Financial Reporting Purposes         1,981,686   1,981,686
                                           ---------   ---------
           Partners' Capital for
              Tax Reporting Purposes      $5,749,667 $7,587,087
                                            ========   ========
(9)  FAIR VALUE OF FINANCIAL INSTRUMENTS -

     The estimated fair values of the financial instruments, none
     of which are held for trading purposes, are as follows at
     December 31:

                              _______2002_______      _______2001_______
                             Carrying     Fair        Carrying    Fair
                              Amount     Value         Amount    Value

     Cash                    $      0   $      0   $      195  $      195
     Money Market Funds       503,979    503,979    1,102,112   1,102,112
                              -------    -------     --------    --------
        Total Cash and
            Cash Equivalents $503,979   $503,979   $1,102,307  $1,102,307
                              =======    =======     ========    ========

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE.

              None.


                            PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
          PERSONS;  COMPLIANCE WITH SECTION 16(a)  OF  THE  EXCHANGE
          ACT.

        The  registrant  is  a  limited partnership  and  has  no
officers,  directors, or direct employees.  The General  Partners
of  the  registrant are Robert P. Johnson and AFM.   The  General
Partners  manage and control the Partnership's affairs  and  have
general  responsibility and the ultimate authority in all matters
affecting the Partnership's business.  The director and  officers
of AFM are as follows:

        Robert  P.  Johnson, age 58, is Chief Executive  Officer,
President  and  Director and has held these positions  since  the
formation  of  AFM  in September 1986, and has  been  elected  to
continue  in these positions until December 2003.  From  1970  to
the  present, he has been employed exclusively in the  investment
industry,  specializing  in  tax-advantaged  limited  partnership
investments.   In  that  capacity, he has been  involved  in  the
development,  analysis, marketing and management  of  public  and
private investment programs investing in net lease properties  as
well  as  public  and  private investment programs  investing  in
energy  development.   Since  1971,  Mr.  Johnson  has  been  the
president,  a  director  and  a  registered  principal   of   AEI
Securities,  Inc.,  which is registered with the  Securities  and
Exchange Commission as a securities broker-dealer, is a member of
the  National Association of Securities Dealers, Inc. (NASD)  and
is  a  member  of  the Security Investors Protection  Corporation
(SIPC).   Mr.  Johnson has been president,  a  director  and  the
principal shareholder of AEI Fund Management, Inc., a real estate
management  company founded by him, since 1978.  Mr.  Johnson  is
currently  a general partner or principal of the general  partner
in  fourteen limited partnerships and a managing member in  three
LLCs.

        Patrick  W.  Keene,  age 43, is Chief Financial  Officer,
Treasurer  and  Secretary  and has  held  these  positions  since
January  22,  2003  and  has been elected to  continue  in  these
positions  until December 2003.  Mr. Keene has been  employed  by
AEI  Fund  Management, Inc. and affiliated entities  since  1986.
Prior  to being elected to the positions above, he was Controller
of  the various entities.  From 1982 to 1986, Mr. Keene was  with
KPMG  Peat  Marwick  Certified Public Accountants,  first  as  an
auditor and later as a tax manager.  Mr. Keene is responsible for
all accounting functions of AFM and the registrant.

Section 16(a) Beneficial Ownership Reporting Compliance

        Under federal securities laws, the directors and officers
of  the  General  Partner of the Partnership, and any  beneficial
owner  of  more than 10% of a class of equity securities  of  the
Partnership,  are  required  to report  their  ownership  of  the
Partnership's equity securities and any changes in such ownership
to  the  Securities  and Exchange Commission (the  "Commission").
Specific due dates for these reports have been established by the
Commission, and the Partnership is required to disclose  in  this
Annual  Report on 10-KSB  any delinquent filing of  such  reports
and any failure to file such reports during the fiscal year ended
December  31, 2002.  Based upon information provided by  officers
and directors of the General Partner, all officers, directors and
10% owners filed all reports on a timely basis in the 2002 fiscal
year.

ITEM 10.   EXECUTIVE COMPENSATION.

        The General Partner and affiliates are reimbursed at cost
for  all  services performed on behalf of the registrant and  for
all  third party expenses paid on behalf of the registrant.   The
cost for services performed on behalf of the registrant is actual
time  spent  performing such services plus  an  overhead  burden.
These  services include organizing the registrant  and  arranging
for  the  offer  and  sale  of Units,  reviewing  properties  for
acquisition and rendering administrative, property management and
property sales services.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT.

        The following table sets forth information pertaining  to
the   ownership  of  the  Units  by  each  person  known  by  the
Partnership to beneficially own 5% or more of the Units, by  each
General  Partner, and by each officer or director of the Managing
General Partner as of February 28, 2003:

   Name and Address                          Number of     Percent
   of Beneficial Owner                       Units Held    of Class

   AEI Fund Management XVI, Inc.                 2            *
   1300 Minnesota World Trade Center
   30 East 7th Street, St. Paul, Minnesota 55101

   Robert P. Johnson                             0            0%
   1300 Minnesota World Trade Center
   30 East 7th Street, St. Paul, Minnesota 55101

   Patrick W. Keene                              0            0%
   1300 Minnesota World Trade Center
   30 East 7th Street, St. Paul, Minnesota 55101

   Mark E. Larson **                             0            0%
   1300 Minnesota World Trade Center
   30 East 7th Street, St. Paul, Minnesota 55101

*   Less than 1%
**  Mr.  Larson  resigned as an officer of the  Managing  General
    Partner effective February 28, 2003.

The  persons  set forth in the preceding table hold  sole  voting
power  and power of disposition with respect to all of the  Units
set forth opposite their names.  The General Partners know of  no
holders of more than 5% of the outstanding Units.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        The  registrant,  AFM  and  its  affiliates  have  common
management and utilize the same facilities.  As a result, certain
administrative  expenses  are  allocated  among   these   related
entities.   All  of  such activities and any  other  transactions
involving the affiliates of the General Partner of the registrant
are  governed  by,  and  are conducted in  conformity  with,  the
limitations set forth in the Limited Partnership Agreement of the
registrant.   Reference  is  made to  Note  3  of  the  Financial
Statements,   as  presented,  and  is  incorporated   herein   by
reference,  for  details of related party  transactions  for  the
years ended December 31, 2002 and 2001.

        The  limitations  included in the  Partnership  Agreement
require   that  the  cumulative  reimbursements  to  the  General
Partners  and  their affiliates for administrative  expenses  not
allowed under the NASAA Guidelines ("Guidelines") will not exceed
the  sum of (i) the front-end fees allowed by the Guidelines less
the  front-end fees paid by the Partnership, (ii) the  cumulative
property management fees allowed by the Guidelines but not  paid,
(iii)  any real estate commission allowed by the Guidelines,  and
(iv)  10%  of  Net  Cash  Flow less the Net  Cash  Flow  actually
distributed to the General Partners.  The administrative expenses
not  allowed under the Guidelines include a controlling  person's
salary  and  fringe  benefits,  rent  and  depreciation.   As  of
December  31, 2002, the cumulative reimbursements to the  General
Partners and their affiliates did not exceed those amounts.

        The following table sets forth the forms of compensation,
distributions  and cost reimbursements paid by the registrant  to
the  General Partners or their Affiliates in connection with  the
operation  of  the Fund and its properties for  the  period  from
inception through December 31, 2002.

Person or Entity                                      Amount Incurred From
 Receiving             Form and Method          Inception (February 6, 1987)
Compensation           of Compensation                To December 31, 2002

AEI Securities,Inc. Selling Commissions equal to 9% of proceeds   $1,500,000
                    plus a 1% nonaccountable expense allowance,
                    most of which was reallowed to Participating
                    Dealers.

General Partners    Reimbursement at Cost for other Organization  $  487,080
and Affiliates      and Offering Costs.

General Partners    Reimbursement at Cost for all Acquisition     $  215,052
and Affiliates      Expenses


General Partners    Reimbursement at Cost for all Administrative  $3,248,150
and Affiliates      Expenses attributable to the Fund, including
                    all expenses related to management and
                    disposition of the Fund's properties and all
                    other transfer agency, reporting, partner
                    relations and other administrative functions.

General Partners    Reimbursement at Cost for all expenses        $   31,771
and Affiliates      related to the disposition of the Fund's
                    properties.

ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Person or Entity                                        Amount Incurred From
 Receiving             Form and Method           Inception (February 6, 1987)
Compensation           of Compensation                  To December 31, 2002

General  Partners   1% of Net Cash Flow in any fiscal year until  $  121,990
                    the Limited Partners have received annual,
                    non-cumulative distributions of Net Cash
                    Flow equal to 10% of their Adjusted Capital
                    Contributions and 10% of any remaining Net
                    Cash Flow in such fiscal year.

General Partners    15% of distribution of Net Proceeds of Sale   $   71,520
                    other than distributions necessary to restore
                    Adjusted Capital Contributions and provide a
                    6% cumulative return to Limited Partners.
                    The General Partners will receive only 1%
                    of distributions of Net Proceeds of Sale until
                    the Limited Partners have received an amount
                    equal to: (a) their Adjusted Capital Contributions,
                    plus (b) an amount equal to 14% of their Adjusted
                    Capital Contributions per annum, cumulative but
                    not compounded, less (c) all previous cash
                    distributions to the Limited Partners.


                             PART IV

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K.

             A.   Exhibits -
                               Description

     10.1  Purchase  Agreement dated April 11, 2002  between  the
     Partnership and Ford Tex Investments, Inc. relating  to  the
     property  at  6409  North  Navarro  Road,  Victoria,   Texas
     (incorporated  by reference to Exhibit 10.1 of  Form  10-QSB
     filed on April 30, 2002).

     10.2  Purchase Agreement dated February 1, 2003 between  the
     Partnership  and Jem Care, Inc. relating to the property  at
     5900  Matlock  Avenue,  Arlington,  Texas  (incorporated  by
     reference  to  Exhibit 10.1 of Form 8-K filed  on  March  8,
     2003).

     10.3  Purchase  Agreement dated February 1, 2003 between  the
     Partnership  and Jem Care, Inc. relating to the property  at
     1951  E.  Arkansas  Lane, Arlington, Texas (incorporated  by
     reference  to  Exhibit 10.2 of Form 8-K filed  on  March  8,
     2003).

     10.4  Purchase  Agreement  dated July 30,  2002  between  the
     Partnership  and  Edward  A. Routzong  and  Pamela  C.  Baca
     relating  to  the property at 17135 Keith Harrow  Boulevard,
     Houston, Texas.

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K.

           A.   Exhibits -
                             Description

     99.1  Certification  of Chief Executive Officer  of  General
     Partner  pursuant  to Section 906 of the Sarbanes-Oxley  Act
     of 2002.

     99.2  Certification  of Chief Financial Officer  of  General
     Partner  pursuant  to Section 906 of the Sarbanes-Oxley  Act
     of 2002.

           B. Reports on Form 8-K -   None.


ITEM 14.        CONTROLS AND PROCEDURES.

       (a) Evaluation of disclosure controls and procedures

        Under  the  supervision  and with  the  participation  of
management, including its President and Chief Financial  Officer,
the  Managing  General Partner of the Partnership  evaluated  the
effectiveness  of  the  design and operation  of  its  disclosure
controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)]
under  the Exchange Act) related to the Partnership as of a  date
(the  "Evaluation Date") within 90 days prior to the filing  date
of  this  report.  Based upon that evaluation, the President  and
Chief Financial Officer of the Managing General Partner concluded
that,  as  of  the Evaluation Date, the disclosure  controls  and
procedures are effective in timely alerting them to the  material
information  relating to the Partnership required to be  included
in periodic SEC filings.

       (b)  Changes in internal controls

         There   were   no  significant  changes  made   in   the
Partnership's internal controls during the period covered by this
report or, to the Managing General Partner's knowledge, in  other
factors that could significantly affect these controls subsequent
to the date of their evaluation.


                           SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the
Securities  Exchange Act of 1934, the registrant has duly  caused
this  report  to  be  signed on its behalf  by  the  undersigned,
thereunto duly authorized.

                               AEI REAL ESTATE FUND XVI
                               Limited Partnership
                               By: AEI Fund Management XVI, Inc.
                                   Its Managing General Partner


March 26, 2003                 By:  /s/ Robert P. Johnson
                                    Robert  P. Johnson, President and Director
                                    (Principal Executive Officer)


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

 Name                            Title                  Date


/s/ Robert P. Johnson    President (Principal Executive Officer) March 26, 2003
Robert P. Johnson        and Sole Director of Managing General
                         Partner

/s/Patrick W. Keene      Chief Financial Officer and Treasurer   March 26, 2003
Patrick W. Keene         (Principal Accounting Officer)

                         CERTIFICATIONS

I, Robert P. Johnson, certify that:

1.  I have reviewed this annual report on Form 10-KSB of AEI Real
Estate Fund XVI Limited Partnership;

2. Based on my knowledge, this annual report does not contain any
untrue  statement of a material fact or omit to state a  material
fact  necessary  to make the statements made,  in  light  of  the
circumstances  under  which  such  statements  were   made,   not
misleading  with  respect to the period covered  by  this  annual
report;

3.  Based  on my knowledge; the financial statements,  and  other
financial  information  included in this  annual  report,  fairly
present in all material respects the financial condition, results
of  operations and cash flows of the registrant as of,  and  for,
the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and  I   are
responsible for establishing and maintaining disclosure  controls
and  procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have;

       a)   designed  such disclosure controls and procedures  to
ensure  that  material information relating  to  the  registrant,
including its consolidated subsidiaries, is made known to  us  by
others  within those entities, particularly during the period  in
which this annual report is being prepared;

       b)   evaluated  the  effectiveness  of  the  registrant's
disclosure  controls and procedures as of a date within  90  days
prior  to  the filing date of this annual report (the "Evaluation
Date"); and

       c)   presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5.   The  registrant's  other  certifying  officers  and  I  have
disclosed,   based  on  our  most  recent  evaluation,   to   the
registrant's  auditors  and the audit committee  of  registrant's
board   of   directors  (or  persons  performing  the  equivalent
functions):

      a)  all significant deficiencies in the design or operation
of   internal   controls   which  could  adversely   affect   the
registrant's  ability  to record, process, summarize  and  report
financial data and have identified for the registrant's  auditors
any material weaknesses in internal controls; and

      b)   any  fraud,  whether or not material,  that  involves
management or other employees who have a significant role in  the
registrant's internal controls; and

6.   The  registrant's  other  certifying  officers  and  I  have
indicated  in  this annual report whether there were  significant
changes  in  internal  controls or in other  factors  that  could
significantly affect internal controls subsequent to the date  of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.



Dated:  March 26, 2003           /s/ Robert P. Johnson
                                 Robert P. Johnson, President
                                 AEI Fund Management XVI, Inc.
                                 Managing General Partner

                         CERTIFICATIONS

I, Patrick W. Keene, certify that:

1.  I have reviewed this annual report on Form 10-KSB of AEI Real
Estate Fund XVI Limited Partnership;

2. Based on my knowledge, this annual report does not contain any
untrue  statement of a material fact or omit to state a  material
fact  necessary  to make the statements made,  in  light  of  the
circumstances  under  which  such  statements  were   made,   not
misleading  with  respect to the period covered  by  this  annual
report;

3.  Based  on my knowledge; the financial statements,  and  other
financial  information  included in this  annual  report,  fairly
present in all material respects the financial condition, results
of  operations and cash flows of the registrant as of,  and  for,
the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and  I   are
responsible for establishing and maintaining disclosure  controls
and  procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have;

       a)   designed  such disclosure controls and procedures  to
ensure  that  material information relating  to  the  registrant,
including its consolidated subsidiaries, is made known to  us  by
others  within those entities, particularly during the period  in
which this annual report is being prepared;

       b)   evaluated  the  effectiveness  of  the  registrant's
disclosure  controls and procedures as of a date within  90  days
prior  to  the filing date of this annual report (the "Evaluation
Date"); and

       c)   presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5.   The  registrant's  other  certifying  officers  and  I  have
disclosed,   based  on  our  most  recent  evaluation,   to   the
registrant's  auditors  and the audit committee  of  registrant's
board   of   directors  (or  persons  performing  the  equivalent
functions):

       a)  all significant deficiencies in the design or operation
of   internal   controls   which  could  adversely   affect   the
registrant's  ability  to record, process, summarize  and  report
financial data and have identified for the registrant's  auditors
any material weaknesses in internal controls; and

       b)   any  fraud,  whether or not material,  that  involves
management or other employees who have a significant role in  the
registrant's internal controls; and

6.   The  registrant's  other  certifying  officers  and  I  have
indicated  in  this annual report whether there were  significant
changes  in  internal  controls or in other  factors  that  could
significantly affect internal controls subsequent to the date  of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.



Dated:  March 26, 2003
                                 /s/ Patrick W. Keene
                                 Patrick W. Keene, Chief Financial Officer
                                 AEI Fund Management XVI, Inc.
                                 Managing General Partner