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

                                    FORM 10-K

(Mark One)

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

                   For the fiscal year ended December 31, 2002

                                       OR

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

                        For the transition period from to

                         Commission file number 0-26218

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

     Florida                                              59-3198891
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

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

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

           Securities registered pursuant to Section12 (b) of the Act:

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

           Securities registered pursuant to Section12(g) of the Act:

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

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

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

         Indicate by check mark whether the registrant is an  accelerated  filer
(as defined in Exchange Act Rule 12b-2): Yes___ No X

         Aggregate market value of the voting stock held by nonaffiliates of the
registrant:  The registrant registered an offering of 4,500,000 units of limited
partnership  interest  (the  "Units") on Form S-11 under the  Securities  Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None


<PAGE>



                                     PART I


Item 1.  Business

         CNL Income Fund XVI, Ltd. (the "Registrant" or the  "Partnership") is a
limited  partnership  which was  organized  pursuant to the laws of the State of
Florida on September 2, 1993. The general partners of the Partnership are Robert
A.  Bourne,  James  M.  Seneff,  Jr.  and  CNL  Realty  Corporation,  a  Florida
corporation  (the  "General  Partners").  Beginning on  September  2, 1994,  the
Partnership offered for sale up to $45,000,000 of limited partnership  interests
(the  "Units")  (4,500,000  Units at $10 per Unit)  pursuant  to a  registration
statement on Form S-11 under the Securities  Act of 1933, as amended,  effective
February 23, 1994.  The offering  terminated on June 12, 1995, at which date the
maximum  offering  proceeds of $45,000,000  had been received from investors who
were admitted to the Partnership as limited partners (the "Limited Partners").

         The  Partnership  was organized to acquire both newly  constructed  and
existing  restaurant  properties,  as well as properties upon which  restaurants
were to be  constructed  (the  "Properties"),  which  are  leased  primarily  to
operators of national and regional fast-food and family-style  restaurant chains
(the "Restaurant Chains").  Net proceeds to the Partnership from its offering of
Units,  after  deduction  of  organizational  and  offering  expenses,   totaled
$39,600,000 and were used to acquire 43 Properties,  including seven  Properties
consisting of land only.

         As of December 31, 1999, the Partnership  owned 40 Properties  directly
and three  Properties  indirectly  through  joint  venture  or tenancy in common
arrangements.  During 2000,  the  Partnership  reinvested the net sales proceeds
from the 1999 sale of the Property in Lawrence,  Kansas in TGIF Pittsburgh Joint
Venture,  with  affiliates  of the General  Partners,  to purchase  and hold one
restaurant Property.  During 2000, the Partnership sold its Property in Columbia
Heights,  Minnesota. During 2001, the Partnership sold its Properties in Marana,
Arizona, St. Cloud, Minnesota, and Las Vegas, Nevada and reinvested the majority
of the net sales proceeds in a Property in San Antonio,  Texas and a Property in
Walker,   Louisiana,  with  CNL  Income  Fund  VIII,  Ltd.,  a  Florida  limited
partnership  and an affiliate  of the General  Partners,  as  tenants-in-common.
During 2002, the Partnership sold its Properties in Rancho Cordova,  California,
Mesquite,  Texas,  and Bucyrus,  Ohio. The Partnership  reinvested the net sales
proceeds from the sales of the  Properties in Rancho  Cordova,  California,  and
Mesquite,  Texas in a Property in Austin,  Texas and in Arlington Joint Venture.
The  Partnership  intends to reinvest the proceeds from the sale of the Property
in Bucyrus,  Ohio in an  additional  Property.  As of  December  31,  2002,  the
Partnership owned 35 Properties  directly and six Properties  indirectly through
joint  venture  or  tenancy  in common  arrangements.  The 35  Properties  owned
directly  include six Properties  consisting of land only. The lessee of the six
Properties  consisting of only land owns the buildings currently on the land and
has the right,  if not in default under the lease,  to remove the buildings from
the land at the end of the lease terms. In general,  the Partnership  leases the
Properties on a triple-net  basis with the lessees  responsible  for all repairs
and maintenance, property taxes, insurance and utilities.

         The  Partnership  holds  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  consider  factors such as potential  capital
appreciation,  net cash flow and  federal  income  tax  considerations.  Certain
lessees also have been granted options to purchase Properties,  generally at the
Property's  then fair market  value after a specified  portion of the lease term
has elapsed.  The  Partnership has no obligation to sell all or any portion of a
Property  at any  particular  time,  except as may be  required  under  property
purchase options granted to certain lessees.

Leases

         Although there are variations in the specific terms of the leases,  the
following  is  a  summarized   description  of  the  general  structure  of  the
Partnership's leases. The leases of the Properties owned by the Partnership, the
Properties owned by joint ventures in which the Partnership is a co-venturer and
Properties  owned as  tenants-in-common  with affiliates of the General Partners
provide for  initial  terms  ranging  from 9 to 20 years (the  average  being 18
years)  and  expire  between  2008 and  2020.  The  leases  are  generally  on a
triple-net basis, with the lessees  responsible for all repairs and maintenance,
property taxes,  insurance and utilities.  The leases of the Properties  provide
for  minimum  base annual  rental  payments  (payable  in monthly  installments)
ranging  from  approximately  $25,100 to  $259,900.  The  majority of the leases
provide for percentage rent, based on sales in excess of a specified  amount. In
addition, the majority of the leases provide that, commencing in specified lease
years  (generally the sixth lease year), the annual base rent required under the
terms of the lease will increase.

<PAGE>


         Generally,  the  leases  of the  Properties  provide  for  two to  five
five-year  renewal  options  subject  to the same  terms and  conditions  as the
initial lease.  Lessees of 28 of the  Partnership's 41 Properties also have been
granted options to purchase  Properties at the Property's then fair market value
after a specified portion of the lease term has elapsed.  Fair market value will
be determined  through an appraisal by an independent  appraisal firm. Under the
terms of certain leases,  the option purchase price may equal the  Partnership's
original cost to purchase the Property  (including  acquisition  costs),  plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.

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

         In  August  1999,  the  leases  relating  to  the  Long  John  Silver's
Properties in Silver City and Clovis,  New Mexico and Copperas Cove,  Texas were
amended to provide rent deferrals.  All other lease terms remained unchanged. As
of March 10, 2003, the  Partnership  has continued to receive the reduced rental
payments  relating  to these  Properties  and has  collected  a  portion  of the
deferrals,  in accordance with the 1999 agreement.  The General  Partners do not
believe  that the rent  deferrals  will have a  material  adverse  effect on the
results of operations of the Partnership.

         The tenant of the  Property  in Celina,  Ohio  exercised  its option to
extend the lease for an additional five years beginning in March 2003. All other
lease  terms  remained   unchanged  and  are   substantially  the  same  as  the
Partnership's other leases as described above.

         During  2001,   Phoenix   Restaurant  Group,  Inc.  ("PRG")  filed  for
bankruptcy and rejected two of the four leases it had with the  Partnership.  In
May and June 2002, the bankruptcy  court assigned the two leases not rejected by
PRG relating to the properties Branson, Missouri and Temple, Texas to CherryDen,
LLC and Seana, LLC, respectively.  CherryDen, LLC is an affiliate of the General
Partners. All other lease terms remained the same.

         During 2002, the Partnership reinvested the net sales proceeds from the
sale of the Properties in Rancho Cordova,  California,  and Mesquite, Texas in a
Property in Austin,  Texas and in  Arlington  Joint  Venture,  which  acquired a
Property  in  Arlington,  Texas.  The  lease  terms  for  these  Properties  are
substantially the same as the Partnership's other leases.

Major Tenants

         During  2002,  two  lessees  of  the  Partnership,  (i)  Golden  Corral
Corporation and (ii) Jack in the Box Inc. and Jack in the Box Eastern  Division,
LP.  (affiliated  under  common  control of Jack in the Box Inc.,  herein  after
referred to as "Jack in the Box Inc."),  each  contributed more than ten percent
of the  Partnership's  rental  revenues  (including the  Partnership's  share of
rental revenues from Properties  owned by joint ventures and the Properties held
as  tenants-in-common  with affiliates).  As of December 31, 2002, Golden Corral
Corporation  was the lessee under leases relating to six restaurants and Jack in
the Box Inc.  was the lessee under leases  relating to five  restaurants.  It is
anticipated  that based on the minimum  rental  payments  required by the leases
these two lessees will each continue to contribute  more than ten percent of the
Partnership's  rental revenues in 2003. In addition,  three  Restaurant  Chains,
Golden Corral Family Steakhouse Restaurants ("Golden Corral"),  Jack in the Box,
and  Denny's,  each  accounted  for more than ten  percent of the  Partnership's
rental  revenues  (including  the  Partnership's  share of rental  revenues from
Properties owned by joint ventures and the Properties held as  tenants-in-common
with  affiliates).  In 2003,  it is  anticipated  that each of these  Restaurant
Chains will  continue to contribute  more than ten percent of the  Partnership's
rental  revenues to which the  Partnership  is  entitled  under the terms of the
leases.  Any failure of these  lessees or  Restaurant  Chains  could  materially
affect the  Partnership's  income if the Partnership is not able to re-lease the
Properties  in  a  timely  manner.  As  of  December  31,  2002,  Golden  Corral
Corporation  leased Properties with an aggregate carrying value in excess of 20%
of the total assets of the Partnership.

<PAGE>


Joint Venture and Tenancy in Common Arrangements

         The Partnership has entered into the following joint venture and
tenancy in common arrangements as of December 31, 2002:
<TABLE>
<CAPTION>

<S> <C>

                Entity Name             Year      Ownership               Partners                Property

       CNL Income Fund XVI, Ltd and     1996       80.44%      CNL Income Fund XVII, Ltd.       Fayetteville, NC
            CNL Income Fund XVII,
            Ltd. Tenants in Common

       CNL Income Fund II, Ltd., CNL    1998       40.42%      CNL Income Fund II, Ltd.         Memphis, TN
            Income Fund VI, Ltd. and                           CNL Income Fund VI, Ltd.
            CNL Income Fund XVI,
            Ltd. Tenants in Common

       Columbus Joint Venture           1998       32.35%      CNL Income Fund XII, Ltd.        Columbus, OH
                                                               CNL Income Fund XVIII, Ltd.


       TGIF Pittsburgh Joint Venture    2000       19.72%      CNL Income Fund VII, Ltd.        Homestead, PA
                                                               CNL Income Fund XV, Ltd.
                                                               CNL Income Fund XVIII, Ltd.

       CNL Income Fund VIII, Ltd.,      2001       83.00%      CNL Income Fund VIII, Ltd.       Walker, LA
            and CNL Income Fund XVI,
            Ltd. Tenants in Common

       Arlington Joint Venture          2002       21.00%      CNL Income Fund VII, Ltd.        Arlington, TX

</TABLE>


         Each of the joint  ventures or  tenancies in common were formed to hold
one Property.  Each CNL Income Fund is an affiliate of the General  Partners and
is a limited partnership organized pursuant to the laws of the state of Florida.
The  Partnership  shares  management  control equally with the affiliates of the
General Partners.

         The joint  venture and tenancy in common  arrangements  provide for the
Partnership  and its joint venture or tenancy in common partners to share in all
costs and benefits in proportion to each  partner's  percentage  interest in the
business entity. The Partnership and its partners are also jointly and severally
liable for all debts,  obligations and other liabilities of the joint venture or
tenancy in common.  Net cash flow from  operations is  distributed to each joint
venture  or  tenancy  in  common  partner  in  accordance  with  its  respective
percentage interest in the business entity.

         Arlington  Joint  Venture has an initial term of 30 years,  each of the
other joint  ventures has an initial term of 20 years and,  after the expiration
of the initial term,  continues in existence from year to year unless terminated
at the option of either  joint  venturer by an event of  dissolution.  Events of
dissolution  include the  bankruptcy,  insolvency  or  termination  of any joint
venturer,  sale of the Property owned by the joint venture and mutual  agreement
of the  Partnership and its joint venture partner to dissolve the joint venture.
Any liquidation  proceeds,  after paying joint venture debts and liabilities and
funding reserves for contingent  liabilities,  will be distributed  first to the
joint venture  partners with positive  capital account balances in proportion to
such balances  until such balances  equal zero,  and thereafter in proportion to
each joint venture partner's percentage interest in the joint venture.

         The joint  venture  and  tenancy  in common  agreements  restrict  each
party's  ability to sell,  transfer  to assign  its joint  venture or tenancy in
common interest  without first offering it for sale to its partner,  either upon
such terms and conditions as to which the parties may agree or, in the event the
parties cannot agree, on the same terms and conditions as any offer from a third
party to purchase such joint venture or tenancy in common interest.

<PAGE>


         During  2002,  the  Partnership  reinvested  a portion of the net sales
proceeds  from the sale of the  Property in Mesquite,  Texas in Arlington  Joint
Venture, to purchase and hold one Property.

         The use of joint venture and tenancy in common  arrangements allows the
Partnership  to fully invest its available  funds at times at which it would not
have  sufficient  funds to purchase an additional  property,  or at times when a
suitable  opportunity to purchase an additional  property is not available.  The
use of joint  venture  and  tenancy in common  arrangements  also  provides  the
Partnership  with  increased  diversification  of its portfolio  among a greater
number of properties. In addition,  tenancy in common arrangements may allow the
Partnership  to defer the gain for federal  income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional property.

Certain Management Services

         RAI Restaurants,  Inc. (formerly known as CNL Restaurants XVIII, Inc.),
an affiliate of the General  Partners,  provides  certain  services  relating to
management  of the  Partnership  and its  Properties  pursuant  to a  management
agreement with the Partnership. CNL APF Partners, LP assigned its rights in, and
its  obligations  under,  the management  agreement with the  Partnership to RAI
Restaurants,  Inc.  ("Advisor")  effective January 1, 2002. All of the terms and
conditions of the management agreement,  including the payment of fees, remained
unchanged.  Under this  agreement,  the Advisor is  responsible  for  collecting
rental  payments,  inspecting the Properties and the tenants' books and records,
assisting the  Partnership  in responding to tenant  inquiries and notices,  and
providing  information to the Partnership about the status of the leases and the
Properties.  The Advisor also assists the General  Partners in  negotiating  the
leases.  For these  services,  the  Partnership had agreed to pay the Advisor an
annual fee of one percent of the sum of gross rental  revenues  from  Properties
wholly owned by the Partnership plus the Partnership's  allocable share of gross
revenues of joint ventures in which the Partnership is a co-venturer, but not in
excess of competitive fees for comparable services.

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

Competition

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

Employees

         The  Partnership   has  no  employees.   The  officers  of  CNL  Realty
Corporation  and the officers and  employees  of CNL American  Properties,  Inc.
("APF"),  the parent company of the Advisor,  perform  certain  services for the
Partnership.  In  addition,  the General  Partners  have  available  to them the
resources and  expertise of the officers and  employees of CNL Financial  Group,
Inc.,  a  diversified  real estate  company,  and its  affiliates,  who may also
perform certain services for the Partnership.


Item 2.  Properties

         As of December 31, 2002, the Partnership owned 41 Properties. Of the 41
Properties,  35 are  owned by the  Partnership  in fee  simple,  three are owned
through joint venture arrangements and three are owned through tenancy in common
arrangements.  See Item 1.  Business  - Joint  Venture  and  Tenancy  in  Common
Arrangements.  The Partnership is not permitted to encumber its Properties under
the terms of its  partnership  agreement.  Reference  is made to the Schedule of
Real Estate and  Accumulated  Depreciation  for a listing of the  Properties and
their  respective  costs,  including  acquisition  fees and certain  acquisition
expenses.

<PAGE>


Description of Properties

         Land. The Partnership's  Property sites range from approximately 16,600
to 104,800  square  feet  depending  upon  building  size and local  demographic
factors.  Sites  purchased  by  the  Partnership  are  in  locations  zoned  for
commercial use which have been reviewed for traffic patterns and volume.

         The  following  table lists the  Properties  owned by the  Partnership,
either  directly  or  indirectly  through  joint  venture  or  tenancy in common
arrangements,  as of  December  31,  2002 by state.  More  detailed  information
regarding  the location of the  Properties  is contained in the Schedule of Real
Estate and Accumulated Depreciation.


                     State                          Number of Properties

                California                                      1
                Colorado                                        1
                Washington, D.C.                                1
                Florida                                         5
                Georgia                                         1
                Idaho                                           1
                Indiana                                         2
                Kansas                                          1
                Louisiana                                       1
                Missouri                                        4
                New Mexico                                      3
                North Carolina                                  3
                Ohio                                            3
                Pennsylvania                                    1
                Tennessee                                       1
                Texas                                          11
                Utah                                            1
                                                        -----------------

                TOTAL PROPERTIES                               41
                                                        =================

         Buildings.  Each of the  Properties  owned by the  Partnership,  either
directly or indirectly through joint venture or tenancy in common  arrangements,
includes  a  building  that is one of a  Restaurant  Chain's  approved  designs.
However,  the buildings located on the six Checkers  Properties are owned by the
tenant  while the land  parcels  are  owned by the  Partnership.  The  buildings
generally are  rectangular  and are  constructed  from various  combinations  of
stucco,  steel,  wood,  brick and tile. The sizes of the buildings  owned by the
Partnership range from approximately  2,000 to 11,100 square feet. All buildings
on Properties are freestanding and surrounded by paved parking areas.  Buildings
are suitable for  conversion  to various  uses,  although  modifications  may be
required prior to use for other than restaurant  operations.  As of December 31,
2002,  the   Partnership   had  no  plans  for  renovation  of  the  Properties.
Depreciation  expense is  computed  for  buildings  and  improvements  using the
straight line method using a depreciable life of 40 years for federal income tax
purposes.

         As of December 31, 2002, the aggregate cost of the Properties  owned by
the Partnership and joint ventures  (including  Properties owned through tenancy
in common  arrangements)  for federal  income tax purposes was  $32,441,035  and
$8,290,050, respectively.


<PAGE>


         The  following  table lists the  Properties  owned by the  Partnership,
either  directly  or  indirectly  through  joint  venture  or  tenancy in common
arrangements, as of December 31, 2002 by Restaurant Chain.

                 Restaurant Chain               Number of Properties

                 Arby's                                   2
                 Boston Market                            2
                 Checkers                                 6
                 Denny's                                  6
                 Golden Corral                            6
                 IHOP                                     2
                 Jack in the Box                          5
                 KFC                                      1
                 Long John Silver's                       4
                 T.G.I. Friday's                          1
                 Taco Cabana                              3
                 Wendy's                                  1
                 Other                                    2
                                                  ---------------------

                 TOTAL PROPERTIES                        41
                                                  =====================

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

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

         Leases.  The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term  "triple  net"  basis,  meaning  that the  tenant is  responsible  for
repairs, maintenance, property taxes, utilities and insurance.

         At December 31, 2002,  2001,  2000,  1999 and 1998, the properties were
98%, 93%, 98%, 95% and 89%, occupied,  respectively. The following is a schedule
of the average rent per property for each of the years ended December 31:

<TABLE>
<CAPTION>


                                       2002              2001              2000             1999              1998
                                 --------------    -------------     -------------    -------------     -------------
<S> <C>


Rental Revenues (1)(2)             $ 3,953,069      $ 3,398,196       $ 3,730,031      $ 4,033,287       $ 4,244,356
Properties (2)                              40               39                42               43                44
Average Rent per Property            $  98,827        $  87,133         $  88,810        $  93,797         $  96,463


</TABLE>


 (1) Rental revenues  includes the  Partnership's  share of rental revenues from
     the Properties owned through joint venture  arrangements and the Properties
     owned through tenancy in common arrangements.

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


<PAGE>


         The following is a schedule of lease expirations for leases in place as
of December 31, 2002 for the next ten years and thereafter.

<TABLE>
<CAPTION>

                                                                                     Percentage of
             Expiration Year          Number             Annual Rental               Gross Annual
                                     of Leases              Revenues                 Rental Income
             -----------------    ----------------    ---------------------    --------------------------
<S> <C>

              2003                     --                          --                        --
              2004                     --                          --                        --
              2005                     --                          --                        --
              2006                     --                          --                        --
              2007                     --                          --                        --
              2008                      1                $     25,056                     0.65%
              2009                      2                     255,371                     6.59%
              2010                      4                     498,615                    12.87%
              2011                      3                     339,320                     8.76%
              2012                      2                     251,950                     6.50%
              Thereafter               28                   2,503,835                    64.63%
                                ----------               ------------                   -------
              Total (1)                40                $  3,874,147                   100.00%
                                ==========               ============                   ======

</TABLE>


 (1) Excludes  one  Property  which was vacant at December  31, 2002 and sold in
     February 2003.


         Leases  with Major  Tenants.  The terms of each of the leases  with the
Partnership's  major  tenants as of December  31,  2002 (see Item 1.  Business -
Major  Tenants),  are  substantially  the  same as  those  described  in Item 1.
Business - Leases.

         Golden Corral  Corporation  leases six Golden Corral  restaurants.  The
initial term of each lease is 15 years (expiring  between 2009 and 2015) and the
average  minimum  base  annual  rent is  approximately  $155,400  (ranging  from
approximately $138,000 to $192,900).

         Jack in the Box  Inc.  leases  six  Jack  in the Box  restaurants.  The
initial term of each lease is either 17 or 18 years  (expiring  between 2011 and
2019)  and the  average  minimum  base  annual  rent is  approximately  $113,900
(ranging from approximately $96,300 to $136,500).

Item 3.  Legal Proceedings

         Neither the  Partnership,  not its General Partners or any affiliate of
the General  Partners,  nor any of their  respective  Properties is party to, or
subject to, any material pending legal proceedings.


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

         Not applicable.




<PAGE>


                                     PART II


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

(a) As of March 10, 2003, there were 3,012 holders of record of the Units. There
is no public  trading  market for the Units,  and it is not  anticipated  that a
public  market for the Units will  develop.  During 2002,  Limited  Partners who
wished to sell their Units may have  offered the Units for sale  pursuant to the
Partnership's  distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their  distributions used to acquire additional Units (to the
extent  Units were  available  for  purchase)  may have done so pursuant to such
Plan. The General Partners have the right to prohibit  transfers of Units.  From
inception  through  December 31, 2002,  the price paid for any Unit  transferred
pursuant to the Plan ranged from $8.62 to $9.50 per Unit. The price paid for any
Unit  transferred  other than pursuant to the Plan was subject to negotiation by
the purchaser and the selling Limited  Partner.  The Partnership will not redeem
or repurchase Units.

         The following table reflects,  for each calendar quarter, the high, low
and average  sales prices for transfers of Units during 2002 and 2001 other than
pursuant to the Plan, net of commissions.

<TABLE>
<CAPTION>

                                              2002 (1)                                 2001 (1)
                                 ------------------------------------    -------------------------------------
                                   High         Low        Average         High          Low        Average
                                 ---------    --------    -----------    ---------     --------    -----------
<S>     <C>

         First Quarter              $7.21      $ 6.00        $  6.29        $9.51       $ 5.97        $  7.81
         Second Quarter              6.75        6.68           6.72         6.78         6.20           6.43
         Third Quarter               7.33        6.00           6.39         6.70         6.70           6.70
         Fourth Quarter              7.25        6.00           6.39         6.88         5.60           6.54

</TABLE>


 (1) A total of 39,922 and 31,096 Units were transferred  other than pursuant to
     the Plan for the years ended December 31, 2002 and 2001.

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

         For each of the years ended December 31, 2002 and 2001, the Partnership
declared cash  distributions of $3,600,000 to the Limited  Partners.  No amounts
distributed  to the Limited  Partners for the years ended  December 31, 2002 and
2001, are required to be or have been treated by the  Partnership as a return of
capital  for  purposes of  calculating  the  Limited  Partners'  return on their
adjusted capital  contributions.  No distributions have been made to the General
Partners to date.  Distributions  of $900,000 were declared at the close of each
of  the   Partnership's   calendar   quarters.   This  amount  includes  monthly
distributions  made in arrears for the Limited Partners electing to receive such
distributions on this basis.

         The  Partnership  intends to  continue  to make  distributions  of cash
available  for  distribution  to the  Limited  Partners  on a  quarterly  basis,
although some Limited  Partners,  in  accordance  with their  election,  receive
monthly distributions, for an annual fee.

(b)      Not applicable




<PAGE>


Item 6.  Selected Financial Data

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

<TABLE>
<CAPTION>

                                               2002           2001             2000           1999          1998
                                           ------------- --------------  -------------- -------------- -------------
<S>     <C>

Year ended December 31:

Continuing Operations (5):
    Revenues                                 $3,989,492    $ 2,924,556     $ 3,379,286     $3,508,929    $3,738,930
    Equity in earnings of joint ventures        312,454        250,885         180,084        158,580       132,002
    Income from continuing
      operations (1) (2)                      3,477,533      1,335,833       1,742,889      2,464,253     2,616,126

Discontinued Operations (5):
    Revenues                                     45,532        150,277         326,869        392,301       407,192
    Income (loss) from discontinued
      operations (3) (4)                       (180,205 )   (1,195,965 )       202,923        350,755       360,872

Net income                                    3,297,328        139,868       1,945,812      2,815,008     2,976,998

Net income (loss) per Unit:
    Continuing operations                    $     0.77    $      0.30     $      0.38     $     0.55    $     0.58
    Discontinued operations                       (0.04 )        (0.27 )          0.05           0.08          0.08
                                             ----------    -----------     -----------     ----------    ----------
      Total                                  $     0.73    $      0.03     $      0.43     $     0.63    $     0.66
                                             ==========    ===========     ===========     ==========    ==========

Cash distributions declared                  $3,600,000    $ 3,600,000     $ 3,600,000     $3,600,000    $3,690,000
Cash distributions declared per
    Unit                                           0.80           0.80            0.80           0.80          0.82

At December 31:
    Total assets                            $34,019,581   $ 34,305,402     $37,936,084    $39,710,973   $40,188,641
    Total partners' capital                  32,989,940     33,292,612      36,752,744     38,406,932    39,191,924

</TABLE>


    (1)   Income from continuing  operations includes $1,132,394 and $926,805 in
          provisions  for  write-down of assets for the years ended December 31,
          2001 and 2000, respectively.

    (2)   Income from  continuing  operations  includes  $383,637 and $88,661 in
          gains on sale of assets  for the years  ended  December  31,  2001 and
          2000, respectively. Income from continuing operations includes $84,478
          in loss on sale of assets for the year ended December 31, 1999.

    (3)   Income  (loss)  from  discontinued   operations   includes   $556,884,
          $1,158,159,  $36,166 and  $450,625 in  provisions  for  write-down  of
          assets for the years ended  December  31, 2002,  2001,  2000 and 1998,
          respectively.

    (4)   Income (loss) from discontinued  operations includes $396,382 in gains
          on sale of assets for the year ended December 31, 2002.

    (5)   Certain  items  in  prior  years'   financial   statements  have  been
          reclassified to conform to 2002 presentation.  These reclassifications
          had no effect on total net income. The results of operations  relating
          to Properties  that were either disposed of or were classified as held
          for  sale  as of  December  31,  2002  are  reported  as  discontinued
          operations. The results of operations relating to Properties that were
          identified for sale as of December 31, 2001 but sold  subsequently are
          reported as continuing operations.




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

        The Partnership was organized on September 2, 1993, to acquire for cash,
either directly or through joint venture  arrangements,  both newly  constructed
and  existing  restaurant  Properties,  as well as land  upon  which  restaurant
Properties  were to be  constructed,  to be leased  primarily  to  operators  of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are generally  triple-net leases, with the lessees generally  responsible
for all repairs and maintenance,  property taxes,  insurance and utilities.  The
leases  provide  for  minimum  base annual  rental  amounts  (payable in monthly
installments)  ranging from approximately  $25,100 to $259,900.  The majority of
the leases provide for  percentage  rent based on sales in excess of a specified
amount.  In addition,  the majority of the leases  provide  that,  commencing in
specified  lease years  (generally  the sixth lease year),  the annual base rent
required  under the terms of the lease will  increase.  As of December 31, 2000,
the  Partnership  owned 39 Properties  directly and four  Properties  indirectly
through  joint  venture or tenancy in common  arrangements.  As of December  31,
2001,  the  Partnership  owned  37  Properties   directly  and  five  Properties
indirectly  through  joint  venture  or tenancy  in common  arrangements.  As of
December  31,  2002,  the  Partnership  owned  35  Properties  directly  and six
Properties indirectly through joint venture or tenancy in common arrangements.

Capital Resources

        Cash  from  operating   activities  was  $3,878,671,   $2,723,368,   and
$3,165,697, for the years ended December 31, 2002, 2001, and 2000, respectively.
The increase in cash from  operating  activities  during the year ended December
31, 2002,  as compared to the previous  year,  and the decrease  during 2001, as
compared to 2000, was primarily a result of changes in income and expenses.

        Other sources and uses of cash  included the following  during the years
ended December 31, 2002, 2001, and 2000.

        During the year ended  December 31,  1999,  the  Partnership  accepted a
promissory  note from the former  tenant of the Shoney's  Property in Las Vegas,
Nevada,  in the  amount  of  $52,191,  representing  past due  rental  and other
amounts.  The  note  represented  receivables  for  which  the  Partnership  had
established a provision for doubtful  accounts.  Payments were due in 60 monthly
installments  of $1,220  including  interest at a rate of ten percent per annum,
which were scheduled to commence on March 1, 2000, at which time the accrued and
unpaid  interest of $5,219 was  capitalized  into the  principal  balance of the
note. Due to the uncertainty of the  collectibility of the note, the Partnership
established a provision for doubtful accounts. As of December 31, 2001 and 2000,
the balance in the allowance for doubtful  accounts  relating to this promissory
note was $63,954 and $62,751, respectively, including accrued interest of $6,117
and $4,914, respectively. During 2002, the Partnership ceased collection efforts
and wrote off the balance of the promissory note.

        In  February  1999,  the  Partnership  entered  into a new lease for the
Property in Las Vegas, Nevada. In connection therewith, the Partnership incurred
$183,500 in renovation costs which were completed in November 2000.

        In June 2000, the Partnership  used the net sales proceeds from the 1999
sale  of  the  Property  in  Lawrence,  Kansas  to  invest  in a  joint  venture
arrangement,  TGIF Pittsburgh Joint Venture, with CNL Income Fund VII, Ltd., CNL
Income Fund XV, Ltd., and CNL Income Fund XVIII,  Ltd.,  each a Florida  limited
partnership and an affiliate of the General  Partners,  to purchase and hold one
restaurant  Property.  As of December 31, 2002, the  Partnership  owned a 19.72%
interest in the profits and losses of the joint venture.

        During 2000,  the  Partnership  sold its  Property in Columbia  Heights,
Minnesota,  to a third party and  received net sales  proceeds of  approximately
$575,800, resulting in a gain of approximately $88,700.

        During 2001, the Partnership sold its Properties in Marana, Arizona, Las
Vegas, Nevada, and St. Cloud, Minnesota, each to a third party, and received net
sales proceeds of approximately  $2,851,700,  resulting in a net gain on sale of
assets of approximately  $383,700.  During 2001, the Partnership  reinvested the
net  sales  proceeds  from the sale of the  Property  in  Marana,  Arizona  in a
Property in Walker, Louisiana, as tenants-in-common,  with CNL income Fund VIII,
Ltd., a Florida limited  partnership,  and an affiliate of the General Partners.
As  of  December  31,  2002,  the  Partnership  had  contributed   approximately
$1,144,200 for an 83% interest in the profits and losses of the Property. During
2001,  the  Partnership  reinvested  the net sales proceeds from the sale of the
Property in Las Vegas, Nevada in a Property in San Antonio, Texas.

<PAGE>

        In October 2001, the Partnership entered into a promissory note with the
corporate  General  Partner in the amount of  $300,000  in  connection  with the
operations  of the  Partnership.  The  loan was  uncollateralized,  non-interest
bearing and due on demand.  As of December 31, 2001, the  Partnership had repaid
the loan in full to the corporate General Partner.

        During  2002,  the  Partnership  sold  its  Properties  Rancho  Cordova,
California,  Mesquite,  Texas,  and Bucyrus,  Ohio,  each to a third party,  and
received net sales proceeds of approximately $1,918,700, resulting in a net gain
on discontinued operations of approximately $396,400. The Partnership reinvested
the  sales  proceeds  from  the  sales  of the  properties  in  Rancho  Cordova,
California and Mesquite,  Texas in a Property in Austin,  Texas and in Arlington
Joint Venture, with CNL Income Fund VII, Ltd., a Florida limited partnership and
an affiliate of the General  Partners.  The joint venture acquired a Property in
Arlington,  Texas.  As of December 31, 2002,  the  Partnership  had  contributed
approximately  $210,800 for a 21% interest in this joint venture The Partnership
intends to  reinvest  the net sales  proceeds  from the sale of the  Property in
Bucyrus, Ohio in an additional Property.

        The  Partnership  and the joint venture  acquired the  Properties in San
Antonio, Texas, Austin, Texas and Arlington,  Texas from CNL Funding 2001-A, LP,
a Delaware  limited  partnership and an affiliate of the General  Partners.  CNL
Funding 2001-A, LP had purchased and temporarily held title to the Properties in
order to facilitate the acquisition of the Properties by the Partnership and the
joint venture. The purchase prices paid by the Partnership and the joint venture
represented  the  costs  incurred  by CNL  Funding  2001-A,  LP to  acquire  the
Properties.  These transactions,  or a portion thereof,  relating to the sale of
Properties  in  Las  Vegas,  Nevada  and  Rancho  Cordova,  California  and  the
reinvestment  of the net sales  proceeds  in the  Properties  in San Antonio and
Austin,  Texas  qualified  as a like-kind  transaction  for  federal  income tax
purposes.

        In December 2002, the Partnership entered into an agreement with a third
party to sell the Property in Salina,  Kansas. In February 2003, the Partnership
sold this Property and received net sales  proceeds of  approximately  $154,500,
resulting  in a  loss  on  sale  of  discontinued  operations  of  approximately
$536,600,   which  the  Partnership  recorded  as  of  December  31,  2002.  The
Partnership  anticipates  it  will  reinvest  these  proceeds  in an  additional
Property.

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

        Currently, rental income from the Partnership's Properties and net sales
proceeds  from the sale of Properties  are invested in money market  accounts or
other short-term,  highly liquid  investments such as demand deposit accounts at
commercial  banks,  money market accounts and  certificates of deposit with less
than a 90-day  maturity date,  pending  reinvestment  in additional  Properties,
paying Partnership  expenses,  or making distributions to partners.  At December
31, 2002, the Partnership had $1,343,836 invested in such short-term investments
as compared to $774,673 at December 31, 2001. The increase in cash was primarily
a result of the Partnership holding sales proceeds at December 31, 2002, pending
reinvestment  in  additional  Properties.  As of December 31, 2002,  the average
interest rate earned on the rental income  deposited in demand deposit  accounts
at commercial banks was approximately one percent annually.  The funds remaining
at December  31, 2002,  will be used to invest in an  additional  Property,  and
toward the payment of distributions and other liabilities.


<PAGE>


Short-Term Liquidity

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

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

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

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

        The Partnership  generally  distributes  cash from operations  remaining
after the payment of the operating  expenses of the  Partnership,  to the extent
that  the  General  Partners   determine  that  such  funds  are  available  for
distribution.  Based on current and anticipated future cash from operations, and
for the year ended December 31, 2001, a loan from the corporate General Partner,
the Partnership  declared  distributions  to the Limited Partners of $3,600,000,
for each of the years ended December 31, 2002,  2001, and 2000.  This represents
distributions  of $0.80 per Unit for each of the years ended  December 31, 2002,
2001, and 2000. No  distributions  were made to the General  Partners during the
years ended  December 31, 2002,  2001,  and 2000. No amounts  distributed to the
Limited  Partners for the years ended  December 31, 2002,  2001,  and 2000,  are
required to be or have been  treated by the  Partnership  as a return of capital
for  purposes of  calculating  the Limited  Partners'  return on their  adjusted
capital contributions. The Partnership intends to continue to make distributions
of cash available for distribution to Limited Partners on a quarterly basis.

        During 2000, the General  Partners  waived their right to receive future
distributions  from the Partnership,  including both  distributions of operating
cash flow and  distributions  of  liquidation  proceeds,  to the extent that the
cumulative amount of such distributions  would exceed the balance in the General
Partners'  capital  account as of December  31, 1999.  Accordingly,  the General
Partners were not  allocated any net income during the years ended  December 31,
2002, 2001 and 2000.

        As of  December  31, 2002 and 2001,  the  Partnership  owed  $18,292 and
$17,331,  respectively,  to related  parties for accounting  and  administrative
services  and  management  fees.  As of March  10,  2003,  the  Partnership  had
reimbursed  the  affiliates   these  amounts.   Other   liabilities,   including
distributions  payable,  were  $1,011,349  at December 31, 2002,  as compared to
$995,459 at December 31, 2001. The General Partners believe that the Partnership
has sufficient cash on hand to meet its current working capital needs.

Long-Term Liquidity

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

Critical Accounting Policies

        The  Partnership's  leases are  accounted  for under the  provisions  of
Statement of Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and
have been  accounted  for using  either the direct  financing  or the  operating
method.  FAS 13 requires  management to estimate the economic life of the leased
property,  the residual  value of the leased  property and the present  value of
minimum lease payments to be received from the tenant.  In addition,  management
assumes  that all  payments  to be  received  under its leases are  collectible.
Changes in  management's  estimates or assumption  regarding  collectibility  of
lease  payments  could  result  in a change in  accounting  for the lease at the
inception of the lease.

<PAGE>

        The Partnership accounts for its unconsolidated joint ventures using the
equity method of accounting. Under generally accepted accounting principles, the
equity method of accounting is appropriate for entities that are partially owned
by the  Partnership,  but for which  operations  of the investee are shared with
other partners.  The Partnership's  joint venture agreements require the consent
of all partners on all key decisions  affecting the operations of the underlying
Property.

        Management  reviews the  Partnership's  Properties  and  investments  in
unconsolidated  entities  periodically  for  impairment  at least once a year or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  The assessment is based on the carrying amount
of the  Property  or  investment  at the date it is  tested  for  recoverability
compared to the sum of the estimated  future cash flows  expected to result from
its operation and sale through the expected holding period.  If an impairment is
indicated, the asset is adjusted to its estimated fair value.

        When the Partnership  makes the decision to sell or commits to a plan to
sell a  Property  within  one  year,  its  operating  results  are  reported  as
discontinued operations.

Results of Operations

Comparison of year ended December 31, 2002 to year ended December 31, 2001

        Total  rental  revenues,   including   contingent  rental  income,  were
$3,930,584  during the year ended  December 31, 2002,  as compared to $2,883,920
during the same period of 2001. Rental revenues were lower during the year ended
December  31,  2001  as  compared  to the  same  period  of  2002,  because  the
Partnership  stopped  recording  rental  revenues in March 2001 when the tenant,
PRG, was experiencing financial difficulties and ceased rental payments relating
to two Denny's  Properties.  In October 2001, PRG filed for  bankruptcy.  During
2002,  the  Partnership  received  payment  of past due  rents of  approximately
$522,800  relating to these two Properties,  which were not rejected by PRG, and
recorded the rental  revenues.  During 2002, the bankruptcy court assigned these
two leases to new tenants and all other lease terms  remained  the same.  One of
the new tenants,  CherryDen, LLC, is a Delaware limited liability company and an
affiliate of the General Partners.

        In addition,  the Partnership stopped recording rental revenues when the
tenant of the Las  Vegas,  Nevada  Property  vacated  the  Property  and  ceased
restaurant  operations  during the first quarter of 2001. The  Partnership  sold
this  Property  in  December  2001 and used the  proceeds,  along with the sales
proceeds from the sale of a Property in Rancho Cordova,  California,  to acquire
two additional Properties.  The increase in rental revenues during 2002 was also
partially due to the acquisition of these two  Properties,  one in December 2001
and one in June 2002.

        The Partnership  also earned $312,454  attributable to net income earned
by joint  ventures  during the year ended  December  31,  2002,  as  compared to
$250,885  during the same period of 2001.  The increase in net income  earned by
joint ventures  during the year ended December 31, 2002, as compared to the same
periods  of  2001,  was  primarily  due to the  fact  that  in  June  2001,  the
Partnership  reinvested the net sales proceeds it received from the 2001 sale of
the  Property  in  Marana,  Arizona  in a  Property  in  Walker,  Louisiana,  as
tenants-in-common,  with an affiliate of the General Partners.  In addition,  in
June 2002, the  Partnership  reinvested a portion of the net sales proceeds from
the sale of the  Property in  Mesquite,  Texas in a joint  venture  arrangement,
Arlington Joint Venture.

        During 2002, two lessees of the Partnership,  Golden Corral  Corporation
and  Jack in the Box  Inc.,  each  contributed  more  than  ten  percent  of the
Partnership's  rental  revenues  (including  the  Partnership's  share of rental
revenues from  Properties  owned by joint  ventures and the  Properties  held as
tenants-in-common  with  affiliates).  As of December  31, 2002,  Golden  Corral
Corporation  was the lessee under leases relating to six restaurants and Jack in
the Box Inc.  was the lessee under leases  relating to five  restaurants.  It is
anticipated  that based on the minimum  rental  payments  required by the leases
these two lessees will each continue to contribute  more than ten percent of the
Partnership's  rental revenues in 2003. In addition,  three  Restaurant  Chains,
Golden  Corral,  Jack in the Box, and Denny's,  each accounted for more than ten
percent of the Partnership's  rental revenues (including the Partnership's share
of rental  revenues from  Properties  owned by joint ventures and the Properties
held as tenants-in-common with affiliates). In 2003, it is anticipated that each
of these Restaurant  Chains will continue to contribute more than ten percent of
the Partnership's rental revenues to which the Partnership is entitled under the
terms of the leases.  Any failure of these  lessees or  Restaurant  Chains could
materially  affect the  Partnership's  income if the  Partnership is not able to
re-lease the Properties in a timely manner.

<PAGE>


        Operating expenses,  including depreciation and amortization expense and
provision for write-down of assets were $824,413  during the year ended December
31, 2002,  as compared to $2,223,245  during the same period of 2001.  Operating
expenses were higher during 2001 because the Partnership established a provision
for  write-down  of assets of  approximately  $1,132,400  relating to the vacant
Properties  in Las Vegas,  Nevada and St. Cloud,  Minnesota  and two  Properties
leased by PRG. The provisions represented the difference between each Property's
net carrying  value and its estimated fair value.  During 2001, the  Partnership
sold the two  vacant  Properties  and  assigned  the  leases  of the  other  two
Properties to new tenants, as described above.

        During the years  ended  December  31,  2002 and 2001,  the  Partnership
incurred Property related expenses, such as legal fees, repairs and maintenance,
insurance  and real estate  taxes  relating to vacant  Properties.  In addition,
during 2001,  the  Partnership  recorded a provision  for  doubtful  accounts of
approximately $90,100 relating to the Properties leased to PRG. Between November
2001 and February 2003, the  Partnership  sold all of its vacant  Properties and
re-leased the two PRG Properties to new tenants.  The  Partnership did not incur
any additional expenses relating to these Properties after the sale and re-lease
of each Property had occurred.

        Operating  expenses were lower during the year ended  December 31, 2002,
due  to a  decrease  in the  costs  incurred  for  administrative  expenses  for
servicing the  Partnership  and its  Properties  and a decrease in the amount of
state tax expense  relating to several states in which the Partnership  conducts
business.

        Effective  January  1,  2002,  the  Partnership   adopted  Statement  of
Financial  Accounting  Standards  No.  144  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets." This statement requires that a long-lived asset
be tested  for  recoverability  whenever  events  or  changes  in  circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived  asset is not recoverable if it exceeds the sum of the undiscounted
cash flows  expected  to result  from the use and  eventual  disposition  of the
asset.  The assessment is based on the carrying  amount of the asset at the date
it is tested for  recoverability.  An  impairment  loss is  recognized  when the
carrying  amount of a long-lived  asset exceeds its fair value. If an impairment
is recognized,  the adjusted  carrying  amount of a long-lived  asset is its new
cost basis.  The  statement  also  requires  that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a  discontinued  operation if the disposal  activity was
initiated subsequent to the adoption of the Standard.

        As a result of the 2001 sales of the Properties in Marana,  Arizona, Las
Vegas,  Nevada,  and St. Cloud,  Minnesota,  the  Partnership  recognized  gains
totaling approximately $383,600 during the year ended December 31, 2001.

        During the year ended December 31, 2002, the Partnership identified four
Properties  that  met the  criteria  of this  standard  and were  classified  as
Discontinued   Operations  in  the  accompanying   financial   statements.   The
Partnership sold its Properties in Rancho Cordova, California,  Mesquite, Texas,
and  Bucyrus,  Ohio,  resulting  in a net  gain on  discontinued  operations  of
approximately  $396,400.  The Partnership had recorded provisions for write-down
of approximately  $20,300,  $899,900 and $36,200 during the years ended December
31, 2002, 2001 and 2000,  respectively,  relating to the Properties in Mesquite,
Texas, and Bucyrus, Ohio. The Partnership reinvested the sales proceeds from the
sales of the Properties in Rancho Cordova,  California and Mesquite,  Texas in a
Property in Austin,  Texas and in Arlington  Joint  Venture.  During  2002,  the
Partnership entered into an agreement with a third party to sell the Property in
Salina,  Kansas.  In connection with the anticipated  sale of the Property,  the
Partnership  recorded a  provision  for  write-down  of assets of  approximately
$536,600 during the year ended December 31, 2002. The Partnership had recorded a
provision for write-down of assets in previous  years,  including  approximately
$258,300  during the year ended December 31, 2001 relating to this Property.  In
February  2003,  the  Partnership  sold this  Property.  PRG,  the tenant of the
Properties in Mesquite,  Texas,  Bucyrus, Ohio and Salina,  Kansas,  experienced
financial  difficulties  in March 2001 and  terminated the lease relating to the
Property  in  Bucyrus,  Ohio.  In October  2001,  PRG filed for  bankruptcy  and
rejected  the  leases  relating  to the other  two  Properties.  The  provisions
represented  the difference  between each  Property's net carrying value and its
estimated fair value. The Partnership intends to reinvest the net sales proceeds
from  the  sale of the  Properties  in  Bucyrus,  Ohio  and  Salina,  Kansas  in
additional Properties.

<PAGE>

Comparison of year ended December 31, 2001 to year ended December 31, 2000

        Total  rental  revenues,   including   contingent  rental  income,  were
$2,883,920  during the year ended  December 31, 2001,  as compared to $3,330,684
during the same period of 2000.  Rental  revenues were lower during 2001 because
PRG experienced financial difficulties during 2001 and filed for bankruptcy,  as
described above. As a result, the Partnership  stopped recording rental revenues
relating to two Properties.  The  Partnership  also had a vacant Property during
2001  resulting  from a  bankruptcy  of a  tenant  in  1998.  During  2001,  the
Partnership sold this vacant Property.

        Rental revenues were lower during 2001 because the Partnership  sold its
Property in Marana, Arizona. In addition,  rental revenues are lower during 2001
because the Partnership stopped recording rental revenues when the tenant of the
Property  in Las Vegas,  Nevada  ceased  restaurant  operations  and vacated the
Property. The Partnership sold this Property during 2001. The decrease in rental
revenues  was  partially  offset by an  increase  in  contingent  rental  income
resulting  from  increased  gross sales of certain  restaurant  properties,  the
leases of which require the payment of contingent rental income.

        The  Partnership  also earned $250,885 in net income from joint ventures
during the year ended December 31, 2001, as compared to $180,084 during the same
period of 2000.  Net income earned by joint  ventures was higher during 2001, as
compared to 2000, because the Partnership reinvested the net sales proceeds from
the sale of the Property in Marana, Arizona in Property in Walker, Louisiana, as
tenants-in-common, with an affiliate of the General Partners.

        Operating expenses,  including depreciation and amortization expense and
provision  for  write-down  of assets  were  $2,223,245  during  the year  ended
December 31,  2001,  as compared to  $1,905,142  during the same period of 2000.
Operating expenses were higher during 2001 because the Partnership established a
provision for  write-down of assets of  approximately  $1,132,400,  as described
above,  during 2001, as compared to approximately  $926,800 in 2000, relating to
the vacant Properties described above. The Partnership  incurred expenses,  such
as legal fees, repairs and maintenance, insurance and real estate taxes relating
to these vacant Properties.  In addition,  the Partnership  recorded a provision
for doubtful accounts of approximately $90,100 relating to the Properties leased
to PRG during 2001, as compared to approximately $33,500 during 2000 relating to
the vacant  Property in Las Vegas,  Nevada.  The Partnership has sold all of its
vacant  Properties  and  re-leased  the two PRG  Properties  to new tenants,  as
described above. The Partnership did not incur any additional  expenses relating
to these  Properties  after the sale and re-lease of each Property had occurred.
The increase in operating  expenses during 2001 was also partially  attributable
to an increase in the costs incurred for  administrative  expenses for servicing
the Partnership and its Properties.

        During 2000,  the  Partnership  incurred  $32,580 in  transaction  costs
related to the General Partners retaining financial and legal advisors to assist
them in evaluating  and  negotiating  the proposed  merger with APF. On March 1,
2000, the merger discussions were terminated.

        As a result  of the  2000  sale of the  Property  in  Columbia  Heights,
Minnesota,  the Partnership recognized a gain on sale of assets of approximately
$88,700, during 2000.

        The  restaurant  industry  has been  relatively  resilient  during  this
volatile time with steady performance during 2002. However, the industry remains
in a state of cautious optimism.  Restaurant  operators expect their business to
be better in 2003,  according to a nationwide  survey  conducted by the National
Restaurant  Association,   but  are  concerned  by  the  budget  deficits  being
experienced  by many states and the  potential  of new taxes on the  industry to
alleviate the situation.

        The  Partnership's  leases  as  of  December  31,  2002,  are  generally
triple-net  leases and  contain  provisions  that the General  Partners  believe
mitigate  the adverse  effect of  inflation.  Such  provisions  include  clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified  level and/or  automatic  increases in base rent at specified  times
during the term of the lease.  Inflation,  overall,  has had a minimal effect of
the results of  operations  of the  Partnership.  Continued  inflation may cause
capital  appreciation of the  Partnership's  Properties.  Inflation and changing
prices, however, also may have an adverse impact on the sales of the restaurants
and on potential capital appreciation of the Properties.

<PAGE>


        In January  2003,  FASB  issued FASB  Interpretation  No. 46 ("FIN 46"),
"Consolidation  of Variable  Interest  Entities"  to expand upon and  strengthen
existing  accounting  guidance that  addresses when a company should include the
assets,   liabilities   and  activities  of  another  entity  in  its  financial
statements.  To improve financial  reporting by companies involved with variable
interest  entities (more  commonly  referred to as  special-purpose  entities or
off-balance sheet  structures),  FIN 46 requires that a variable interest entity
be considered by a company if that company is subject to a majority risk of loss
from the variable interest entity's activities or entitled to receive a majority
of the entity's  residual returns or both. Prior to FIN 46, a company  generally
included  another entity in its  consolidated  financial  statements  only if it
controlled  the entity  through  voting  interests.  Consolidation  of  variable
interests  entities will provide more complete  information about the resources,
obligations,   risks  and  opportunities  of  the  consolidated   company.   The
consolidation  requirements  of FIN 46 apply  immediately  to variable  interest
entities  created  after  January 31, 2003,  and to older  entities in the first
fiscal year or interim period beginning after June 15, 2003. Management believes
adoption  of this  standard  may result in either  consolidation  or  additional
disclosure  requirements with respect to the Partnership's  unconsolidated joint
ventures  or  Properties  held  with  affiliates  of  the  General  Partners  as
tenants-in-common,  which are currently  accounted for under the equity  method.
However,  such  consolidation  is  not  expected  to  significantly  impact  the
Partnership's results of operations.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.


Item 8.  Financial Statements and Supplementary Data




<PAGE>


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

                                    CONTENTS








                                                                         Page

Report of Independent Certified Public Accountants                        18

Financial Statements:

     Balance Sheets                                                       19

     Statements of Income                                                 20

     Statements of Partners' Capital                                      21

     Statements of Cash Flows                                          22-23

     Notes to Financial Statements                                     24-38










<PAGE>








               Report of Independent Certified Public Accountants



To the Partners
CNL Income Fund XVI, Ltd.



In our opinion,  the accompanying  balance sheets and the related statements of
income,  of partners' capital and of cash flows present fairly, in all material
respects,  the  financial  position  of CNL Income  Fund XVI,  Ltd.  (a Florida
limited  partnership)  at December  31,  2002 and 2001,  and the results of its
operations  and its cash flows for each of the three years in the period  ended
December 31, 2002 in conformity with accounting  principles  generally accepted
in the United  States of America.  In addition,  in our opinion,  the financial
statement  schedules  listed in the index appearing under item 15(a)(2) present
fairly, in all material  respects,  the information set forth therein when read
in  conjunction  with  the  related  financial   statements.   These  financial
statements  and financial  statement  schedules are the  responsibility  of the
Partnership's management;  our responsibility is to express an opinion on these
financial  statements and financial statement schedules based on our audits. We
conducted our audits of these statements in accordance with auditing  standards
generally accepted in the United States of America,  which require that we plan
and  perform  the  audit to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  An audit  includes
examining,  on a test basis, evidence supporting the amounts and disclosures in
the  financial  statements,   assessing  the  accounting  principles  used  and
significant estimates made by management,  and evaluating the overall financial
statement  presentation.  We believe that our audits provide a reasonable basis
for our opinion.

As described in Note 1 to the financial statements, on January 1, 2002, the
Partnership adopted Statement of Financial Accounting Standard No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."



/s/ PricewaterhouseCoopers LLP

Orlando, Florida
January 31, 2003, except for Note 13, for which the date is February 2, 2003



<PAGE>




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

                                 BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                      December 31,
                                                                              2002                    2001
                                                                       -------------------     -------------------
<S> <C>

                         ASSETS

Real estate properties with operating leases, net                         $  24,762,953           $  23,839,579
Net investment in direct financing leases                                     2,662,948               2,713,964
Real estate held for sale                                                       153,500               2,252,023
Investment in joint ventures                                                  3,446,648               3,248,973
Cash and cash equivalents                                                     1,343,836                 774,673
Receivables, less allowance for doubtful accounts
     of  $63,752 and $755,431, respectively                                      49,577                  50,999
Due from related parties                                                         18,966                  10,513
Accrued rental income, less allowance for
     doubtful accounts of $12,753 and $48,919, respectively                   1,549,115               1,382,581
Other assets                                                                     32,038                  32,097
                                                                          -------------           -------------

                                                                          $  34,019,581           $  34,305,402
                                                                          =============           =============

            LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                                                                  3,505           $       9,022
Real estate taxes payable                                                        10,502                  36,398
Distributions payable                                                           900,000                 900,000
Due to related parties                                                           18,292                  17,331
Rents paid in advance and deposits                                               97,342                  50,039
                                                                          --------------          -------------
         Total liabilities                                                    1,029,641               1,012,790

Commitment (Note 12)

Partners' capital                                                            32,989,940              33,292,612
                                                                          ---------------         -------------

                                                                          $  34,019,581           $  34,305,402
                                                                          =============           =============

</TABLE>

                See accompanying notes to financial statements.

<PAGE>


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

                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                                 Year Ended December 31,
                                                                         2002                2001              2000
                                                                   ----------------   ----------------   ---------------
<S> <C>

Revenues:
     Rental income from operating leases                              $  3,608,380        $ 2,617,750       $ 2,965,627
     Earned income from direct financing leases                            322,204            266,170           365,057
     Interest and other income                                              58,908             40,636            48,602
                                                                      ------------        -----------       -----------
                                                                         3,989,492          2,924,556         3,379,286
                                                                      ------------        -----------       -----------
Expenses:
     General operating and administrative                                  258,345            338,269           172,013
     Property expenses                                                      17,928            101,454           134,070
     Provision for doubtful accounts                                            --             90,074            33,532
     Management fees to related parties                                     41,568             30,726            36,605
     State and other taxes                                                  20,288             30,716            27,356
     Depreciation and amortization                                         486,284            499,612           542,181
     Provision for write-down of assets                                         --          1,132,394           926,805
     Transaction costs                                                          --                 --            32,580
                                                                      ------------        -----------       -----------
                                                                           824,413          2,223,245         1,905,142
                                                                      ------------        -----------       -----------

Income Before Gain on Sale of Assets and Equity in
     Earnings of Joint Ventures                                          3,165,079            701,311         1,474,144

Gain on Sale of Assets                                                          --            383,637            88,661

Equity in Earnings of Joint Ventures                                       312,454            250,885           180,084
                                                                      ------------        -----------       -----------

Income from Continuing Operations                                        3,477,533          1,335,833         1,742,889
                                                                      ------------        -----------       -----------

Discontinued Operations (Note 6)
     Loss from discontinued operations                                    (576,587)        (1,195,965)          202,923
     Gain on disposal of discontinued operations                           396,382                 --                --
                                                                      ------------        -----------       -----------
                                                                          (180,205)        (1,195,965)          202,923
                                                                      ------------        -----------       -----------

Net Income                                                            $  3,297,328        $   139,868         1,945,812
                                                                      ============        ===========       ===========

Income (Loss) Per Limited Partner Unit
     Continuing Operations                                                    0.77               0.30              0.38
     Discontinued Operations                                                 (0.04)             (0.27)             0.05
                                                                      ------------        -----------       -----------

     Total                                                            $       0.73        $      0.03       $      0.43
                                                                      ============        ===========       ===========

Weighted Average Number of
     Limited Partner Units Outstanding                                   4,500,000          4,500,000         4,500,000
                                                                      ============        ===========       ===========

</TABLE>

                See accompanying notes to financial statements.

<PAGE>



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

                         STATEMENTS OF PARTNERS' CAPITAL

                  Years Ended December 31, 2002, 2001, and 2000

<TABLE>
<CAPTION>

                                            General Partners                                Limited Partners
                                --------------------------------------  ------------------------------------------------------
                                                        Accumulated                                               Accumulated
                                   Contributions         Earnings         Contributions       Distributions         Earnings
                                ------------------   ----------------   -----------------   ----------------   ---------------
<S> <C>

Balance, December 31, 1999        $     1,000          $   159,017       $  45,000,000      $ (17,023,017 )     $  15,659,932

    Distributions to limited
       partners ($0.80 per
       limited partner unit)               --                   --                  --         (3,600,000 )                --
    Net income                             --                   --                  --                 --           1,945,812
                                -------------        -------------       -------------      -------------       -------------

Balance, December 31, 2000              1,000              159,017          45,000,000        (20,623,017 )        17,605,744

    Distributions to limited
       partners ($0.80 per
       limited partner unit)               --                   --                  --         (3,600,000 )                --
    Net income                             --                   --                  --                 --             139,868
                                 -------------       -------------       -------------      -------------       -------------

Balance, December 31, 2001              1,000              159,017          45,000,000        (24,223,017 )        17,745,612

    Distributions to limited
       partners ($0.80 per
       limited partner unit)               --                  --                  --          (3,600,000 )                --
    Net income                             --                  --                  --                  --           3,297,328
                                 -------------       ------------       -------------      --------------       --------------

Balance, December 31, 2002        $     1,000        $    159,017       $  45,000,000      $  (27,823,017 )     $  21,042,940
                                 =============       ============       =============      ==============       =============


                                                                                            Syndication
                                                                                              Costs                  Total
                                                                                         ---------------         --------------

                                                                                           $ (5,390,000 )          $38,406,932



                                                                                                    --              (3,600,000 )
                                                                                                    --               1,945,812
                                                                                           ------------            -----------

                                                                                            (5,390,000 )            36,752,744



                                                                                                    --              (3,600,000 )
                                                                                                    --                 139,868
                                                                                           ------------            -----------

                                                                                            (5,390,000 )            33,292,612



                                                                                                    --              (3,600,000 )
                                                                                                    --               3,297,328
                                                                                           ------------            -----------
                                                                                           $ (5,390,000 )          $32,989,940
                                                                                           ============            ===========

</TABLE>


                 See accompanying notes to financial statements.

<PAGE>


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

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                               Year Ended December 31,
                                                                       2002               2001              2000
                                                                 ---------------    ---------------    --------------

 <c>
Increase (Decrease) in Cash and Cash Equivalents
     Cash Flows from Operating Activities
      Net Income                                                    $ 3,297,328         $  139,868       $ 1,945,812
                                                                 ---------------    ---------------    --------------
      Adjustments to reconcile net income to net
       cash provided by operating
         activities:
             Depreciation                                               504,712            549,520           572,650
             Amortization of investment in direct
                financing leases                                         51,016             52,904            52,973
             Amortization                                                 2,912              3,097            13,009
             Equity in earnings of joint ventures,
                net of distributions                                     23,729             28,472             7,553
             Gain on sale of assets                                    (396,382 )         (383,637 )         (88,661 )
             Provision for write-down of assets                         556,884          2,290,553           962,971
             Provision of doubtful accounts                                  --             90,074            33,532
             Loss on termination of direct financing
               lease                                                         --                 --            31,215
             Decrease (increase) in receivables                          (8,993 )          289,153          (186,514 )
             Increase in accrued rental                                (166,534 )         (165,285 )        (212,436 )
             Decrease (increase) in other assets                         (2,852 )             (801 )           4,294
             Increase (decrease) in accounts
                payable and real estate taxes payable                   (31,413 )            1,632           (93,185 )
             Increase (decrease) in due to related
                parties                                                     961           (135,626 )          79,104
             Increase (decrease) in rents paid in
                advance and deposits                                     47,303            (36,556 )          43,380
                                                                 ---------------    ---------------    --------------
                  Total adjustments                                     581,343          2,583,500         1,219,885
                                                                 ---------------    ---------------    --------------

Net Cash Provided by Operating Activities                             3,878,671          2,723,368
                                                                                                           3,165,697
                                                                 ---------------    ---------------    --------------

      Cash Flows from Investing Activities:
         Proceeds from sale of assets                                 1,918,641          2,851,675           575,778
         Additions to real estate properties with
           operating leases                                          (1,406,745 )       (1,147,903 )        (183,500 )
         Investment in joint ventures                                  (221,404 )       (1,134,117 )        (500,021 )
         Payment of lease costs                                              --                 --           (14,057 )
                                                                 ---------------    ---------------    --------------

             Net cash provided by (used in)
                investing activities                                    290,492            569,655          (121,800 )
                                                                 ---------------    ---------------    --------------

      Cash Flows from Financing Activities:
         Proceeds from loan from corporate                                   --            300,000                --
             general partner
         Repayment of loan from corporate general
             partner                                                         --           (300,000 )              --
         Distributions to limited partners                           (3,600,000 )       (3,600,000 )      (3,600,000 )
                                                                 ---------------    ---------------    --------------

             Net cash used in financing activities                   (3,600,000 )       (3,600,000 )      (3,600,000 )
                                                                 ---------------    ---------------    --------------

Net Increase (Decrease) in Cash and Cash Equivalents                    569,163           (306,977 )        (556,103 )

Cash and Cash Equivalents at Beginning of Year                          774,673          1,081,650         1,637,753
                                                                 ---------------    ---------------    --------------
Cash and Cash Equivalents at End of Year                           $  1,343,836         $  774,673       $ 1,081,650
                                                                 ===============    ===============    ==============

</TABLE>


                 See accompanying notes to financial statements.

<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>


Supplemental Schedule of Non-Cash Financing
    Activities:

<S> <C>

      Distributions declared and unpaid at
         December 31                                              $    900,000         $  900,000            900,000
                                                                 ===============    ===============    ==============

</TABLE>


                 See accompanying notes to financial statments.

<PAGE>



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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2002, 2001, and 2000


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

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

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

         Real Estate and Lease Accounting - The Partnership records acquisitions
         of real estate properties at cost, including closing costs. Real estate
         properties are leased to third parties on a triple-net  basis,  whereby
         the tenant is generally responsible for all operating expenses relating
         to the property,  including property taxes, insurance,  maintenance and
         repairs.  During the years ended  December  31, 2002,  2001,  and 2000,
         tenants  paid  directly  to real  estate  taxing  authorities  $456,800
         $435,000,  and  $463,100,   respectively,   in  real  estate  taxes  in
         accordance  with  the  terms  of  their  triple  net  leases  with  the
         Partnership.

         The leases of the  Partnership  provide for base minimum  annual rental
         payments payable in monthly installments.  In addition,  certain leases
         provide for  contingent  rental  revenues  based on the tenants'  gross
         sales in  excess  of a  specified  threshold.  The  Partnership  defers
         recognition  of  the  contingent  rental  revenues  until  the  defined
         thresholds are met.

         The leases are accounted  for using either the direct  financing or the
         operating methods. Such methods are described below:

                  Direct  financing  method - Leases  accounted  for  using  the
                  direct  financing  method are recorded at their net investment
                  (which at the inception of the lease generally  represents the
                  cost of the asset).  Unearned income is deferred and amortized
                  to income  over the lease  terms so as to  produce a  constant
                  periodic rate of return on the Partnership's net investment in
                  the  leases.  For the leases  classified  as direct  financing
                  leases,  the  building  portions  of the  property  leases are
                  accounted  for as  direct  financing  leases  while  the  land
                  portion of some of the leases are operating leases.

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

                  Accrued  rental  income  represents  the  aggregate  amount of
                  income  recognized  on a  straight-line  basis  in  excess  of
                  scheduled rental payments to date.


<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2002, 2001, and 2000


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

         The  majority  of the  leases  are for 15 to 20 years and  provide  for
         minimum and  contingent  rentals.  The lease  options  generally  allow
         tenants  to  renew  the  leases  for two to five  successive  five-year
         periods  subject to the same terms and conditions as the initial lease.
         Most  leases  also allow the tenant to  purchase  the  property at fair
         market value after a specified portion of the lease has elapsed.

         When  the  properties  are  sold,  the  related  cost  and  accumulated
         depreciation  for operating  leases and the net  investment  for direct
         financing leases,  plus any accrued rental income, are removed from the
         accounts and gains or losses from sales are  reflected  in income.  The
         general  partners of the Partnership  review  properties for impairment
         whenever events or changes in circumstances  indicate that the carrying
         amount of the assets may not be  recoverable  through  operations.  The
         general partners  determine whether an impairment in value has occurred
         by comparing the estimated future  undiscounted  cash flows,  including
         the  residual  value of the  property,  with the  carrying  cost of the
         individual  property.  If an impairment  is  indicated,  the assets are
         adjusted to their estimated fair value.

         When the  collection  of amounts  recorded as rental or other income is
         considered to be doubtful,  a provision  adjustment is made to increase
         the  allowance  for  doubtful  accounts.  If amounts  are  subsequently
         determined  to  be  uncollectible,  the  corresponding  receivable  and
         allowance for doubtful accounts are decreased accordingly.

         Investment in Joint  Ventures - The  Partnership's  investments in TGIF
         Pittsburgh  Joint Venture,  Columbus Joint Venture and Arlington  Joint
         Venture, and the properties in Fayetteville,  North Carolina,  Memphis,
         Tennessee,   and   Walker,   Louisiana   each  of   which  is  held  as
         tenants-in-common  with affiliates,  are accounted for using the equity
         method since the joint  venture  agreement  requires the consent of all
         partners  on  all  key  decisions   affecting  the  operations  of  the
         underlying property.

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

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

         Lease Costs - Other  assets  include  brokerage  fees  associated  with
         negotiating  leases  and are  amortized  over the term of the new lease
         using the straight-line method.

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



<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2002, 2001, and 2000


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

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

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

         Reclassifications  -  Certain  items  in  the  prior  year's  financial
         statements  have been  reclassified  to conform  to 2002  presentation,
         including a change in  presentation of the statement of cash flows from
         the direct method to the indirect method. These  reclassifications  had
         no effect on partners' capital, net income or cash flows.

         Statement  of  Financial  Accounting  Standards  No. 144 ("FAS  144") -
         Effective  January  1,  2002,  the  Partnership  adopted  Statement  of
         Financial  Accounting  Standards No. 144 "Accounting for the Impairment
         or Disposal of  Long-Lived  Assets."  This  statement  requires  that a
         long-lived  asset be  tested  for  recoverability  whenever  events  or
         changes in  circumstances  indicate that its carrying amount may not be
         recoverable.   The  carrying  amount  of  a  long-lived  asset  is  not
         recoverable  if it  exceeds  the  sum of the  undiscounted  cash  flows
         expected to result from the use and eventual  disposition of the asset.
         The assessment is based on the carrying amount of the asset at the date
         it is tested for recoverability.  An impairment loss is recognized when
         the carrying amount of a long-lived asset exceeds its fair value. If an
         impairment is recognized,  the adjusted carrying amount of a long-lived
         asset is its new cost  basis.  The  statement  also  requires  that the
         results of  operations of a component of an entity that either has been
         disposed  of or is  classified  as  held  for  sale  be  reported  as a
         discontinued   operation  if  the  disposal   activity  was   initiated
         subsequent to the adoption of the Standard.

         FASB  Interpretation  No. 46 ("FIN 46") - In January 2003,  FASB issued
         FASB  Interpretation  No. 46 ("FIN  46"),  "Consolidation  of  Variable
         Interest  Entities" to expand upon and strengthen  existing  accounting
         guidance  that  addresses  when a company  should  include  the assets,
         liabilities   and   activities  of  another  entity  in  its  financial
         statements.  To improve financial  reporting by companies involved with
         variable    interest   entities   (more   commonly   referred   to   as
         special-purpose  entities  or  off-balance  sheet  structures),  FIN 46
         requires that a variable  interest entity be considered by a company if
         that  company is subject to a majority  risk of loss from the  variable
         interest  entity's  activities or entitled to receive a majority of the
         entity's residual returns or both. Prior to FIN 46, a company generally
         included another entity in its consolidated  financial  statements only
         if it controlled the entity through voting interests.  Consolidation of
         variable  interests  entities  will provide more  complete  information
         about  the  resources,  obligations,  risks  and  opportunities  of the
         consolidated  company.  The consolidation  requirements of FIN 46 apply
         immediately  to variable  interest  entities  created after January 31,
         2003,  and to older entities in the first fiscal year or interim period
         beginning  after June 15, 2003.  Management  believes  adoption of this
         standard may result in either  consolidation  or additional  disclosure
         requirements  with respect to the  Partnership's  unconsolidated  joint
         ventures or properties held with affiliates of the general  partners as
         tenants-in-common,  which are currently  accounted for under the equity
         method.  However,  such  consolidation is not expected to significantly
         impact the Partnership's results of operations.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


2.       Real estate Properties with Operating Leases:
         --------------------------------------------

         Real estate Properties with operating leases consisted of the following
         at December 31:

<TABLE>
<CAPTION>
                                                            2002                2001
                                                      --------------       -------------
<S> <C>
                 Land                                 $   13,323,055       $ 12,776,956
                 Buildings                                14,927,816         14,067,169
                                                      --------------      ------------
                                                          28,250,871         26,844,125
                 Less accumulated depreciation            (3,487,918 )       (3,004,546 )
                                                      --------------      ------------

                                                      $   24,762,953       $ 23,839,579
                                                      ==============      =============

</TABLE>


         During the 2001, the Partnership  sold its property in Marana,  Arizona
         and received net sales proceeds of approximately $1,145,000,  resulting
         in a total gain of approximately  $281,100.  The Partnership reinvested
         these  sales   proceeds  in  a  property  in  Walker,   Louisiana,   as
         tenants-in-common, with CNL Income Fund VIII, Ltd., an affiliate of the
         general partners.

         During the year ended  December 31, 2001,  the  Partnership  recorded a
         provision for write-down of assets of approximately $25,300 relating to
         a  Boston  Market  property  located  in  St.  Cloud,  Minnesota.   The
         Partnership  had recorded  provisions for write-down of assets in prior
         years.  During 1998,  the tenant of this property  filed for bankruptcy
         and ceased making  rental  payments.  The  provisions  represented  the
         difference  between  the net  carrying  value of the  property  and its
         estimated  fair value.  In November  2001,  the  Partnership  sold this
         property  to  a  third  party  and  received  net  sales   proceeds  of
         approximately  $647,400,  resulting  in a gain  on sale  of  assets  of
         approximately $100,700.

         During the year ended December 31, 2001, the Partnership  established a
         provision for write-down of assets of approximately  $248,800  relating
         to the  property  Las  Vegas,  Nevada.  The  tenant  of  this  property
         experienced financial difficulties,  ceased restaurant operations,  and
         vacated the  property.  In December  2001,  the  Partnership  sold this
         property  to  a  third  party  and  received  net  sales   proceeds  of
         approximately $1,059,300,  resulting in a gain of approximately $1,900.
         In December 2001, the Partnership  reinvested these sales proceeds in a
         property in San Antonio,  Texas. The Partnership acquired this property
         from CNL Funding 2001-A, LP, an affiliate of the general partners.

         In addition,  during 2001, the Partnership  established a provision for
         write-down  of  assets  of  approximately   $858,300  relating  to  two
         properties  leased by  Phoenix  Restaurant  Group,  Inc.  ("PRG").  The
         provision  represented the difference between the net carrying value of
         each property and their estimated fair value. PRG experienced financial
         difficulties   during  2001  and  filed  for   Chapter  11   bankruptcy
         protection. During 2002 the bankruptcy court assigned the two leases to
         new tenants, one of which is an affiliate of the general partners.

         During  2002,  the  Partnership  reinvested  a portion of the net sales
         proceeds  from  the  sale of a  property  in  Mesquite,  Texas  and the
         majority  of the net  sales  proceeds  from the sale of a  property  in
         Rancho  Cordova,   California  in  a  property  in  Austin,  Texas  for
         approximately  $1,406,700.  The Partnership acquired this property from
         CNL Funding 2001-A, LP, an affiliate of the general partners.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


2.       Real Estate Properties with Operating Leases - Continued:
         --------------------------------------------------------

         The following is a schedule of the future minimum lease payments to be
         received on noncancellable operating leases at December 31, 2002:

                         2003                     $   2,988,014
                         2004                         3,014,551
                         2005                         3,155,704
                         2006                         3,191,414
                         2007                         3,193,126
                         Thereafter                  20,122,669
                                              ------------------

                                                  $  35,665,478
                                              ==================

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

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

                                                              2002                  2001
                                                       -----------------     -----------------
<S> <C>
                   Minimum lease payments
                        receivable                        $   4,448,402           $ 4,799,563
                   Estimated residual values                    957,216               957,216
                   Less unearned income                      (2,742,670 )          (3,042,815 )
                                                          -------------
                                                                                  -----------
                   Net investment in direct
                        financing leases                  $   2,662,948           $ 2,713,964
                                                          =============           ===========
</TABLE>

         The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2002:

                     2003                      $  355,644
                     2004                         356,299
                     2005                         356,961
                     2006                         357,629
                     2007                         358,304
                     Thereafter                 2,663,565
                                            --------------

                                              $ 4,448,402
                                            ==============

         In March 2001, the  Partnership  sold its property in Marana,  Arizona,
         for  which  the  building  portion  had  been  classified  as a  direct
         financing lease. In connection therewith, the gross investment (minimum
         lease  payments  receivable  and  the  estimated  residual  value)  and
         unearned income relating to the building were removed from the accounts
         and the gain from the sale of the property was reflected in income.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


4.       Investment in Joint Ventures:
         ----------------------------

         The Partnership has a 32.35%,a 19.72% an 80.44%,  and a 40.42% interest
         in the profits and losses of Columbus  Joint Venture,  TGIF  Pittsburgh
         Joint  Venture,  a  property  in  Fayetteville,  North  Carolina  and a
         property   in   Memphis,    Tennessee,   held   as   tenants-in-common,
         respectively.  The  remaining  interests in the joint  ventures and the
         properties  held as  tenants in common  are held by  affiliates  of the
         Partnership which have the same general partners.

         In June 2001, the Partnership reinvested the sales proceeds it received
         from the sale of property in Marana, Arizona, in an additional property
         in Walker, Louisiana, as tenants-in-common,  with CNL Income Fund VIII,
         Ltd.,  an affiliate of the general  partners.  As of December 31, 2002,
         the  Partnership had  contributed  approximately  $1,144,200 for an 83%
         interest in the profit and losses of the property.

         In June 2002,  the  Partnership  reinvested  a portion of the net sales
         proceeds from the sale of the property in Mesquite,  Texas,  in a joint
         venture arrangement, Arlington Joint Venture, with CNL Income Fund VII,
         Ltd., an affiliate of the general partners.  The joint venture acquired
         a  property  in  Arlington,  Texas  from CNL  Funding  2001-A,  LP,  an
         affiliate  of  the  general   partners   for  an   aggregate   cost  of
         approximately $1,003,600. The Partnership and CNL Income Fund VII, Ltd.
         entered into an agreement  whereby each  co-venturer  will share in the
         profits and losses of the  property  in  proportion  to its  applicable
         percentage  interest.  As of December 31,  2002,  the  Partnership  had
         contributed  approximately  $210,800  for a 21%  interest in this joint
         venture.

         Columbus Joint Venture,  TGIF Pittsburgh  Joint Venture,  and Arlington
         Joint  Venture,  each owned and leased one  property  to  operators  of
         fast-food or family-style restaurants. In addition, the Partnership and
         affiliates,  in three  separate  tenancies  in  common,  each owned and
         leased  one  property  to   operators  of  fast-food  or   family-style
         restaurants.  The following presents the combined,  condensed financial
         information for the joint ventures at:
<TABLE>
<CAPTION>

                                                      December 31,                      December 31,
                                                          2002                              2001
                                                    ------------------                 ----------------
 
 <C>
         Real estate properties with
            operating leases, net                       $   7,783,964                     $  6,921,194
         Cash                                                  27,252                           11,544
         Accrued rental income                                340,550                          246,192
         Other assets                                             188                            1,160
         Liabilities                                           30,893                           23,698
         Partners' Capital                                  8,121,061                        7,156,392


                                                                 Year Ended December 31,
                                                          2002              2001               2000
                                                     ----------------  ----------------  -----------------

         Revenues                                        $   877,210       $   747,735        $   530,177
         Expenses                                           (157,120 )        (134,476 )          (97,682 )
                                                     ----------------  ----------------  -----------------
         Net Income                                      $   720,090       $   613,259        $   432,495
                                                     ================  ================  =================
</TABLE>




<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


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

         The Partnership  recognized  income totaling  $312,454,  $250,885,  and
         $180,084,  for the years  ended  December  31,  2002,  2001,  and 2000,
         respectively,  from  the  joint  ventures  and the  properties  held as
         tenants-in-common with affiliates of the general partners.

5.       Receivables:
         -----------

         During the year ended  December 31, 1999,  the  Partnership  accepted a
         promissory note from the former tenant of the Shoney's  property in Las
         Vegas, Nevada, in the amount of $52,191 for past due amounts.  Payments
         were due in 60 monthly  installments of $1,220 including  interest at a
         rate of ten percent per annum,  commencing  on March 1, 2000,  at which
         time, all accrued and unpaid interest amounts were capitalized into the
         principal  balance of the note. Due to the uncertainty of collection of
         the note, the Partnership established a provision for doubtful accounts
         relating to this note during the year ended  December 31,  1999.  As of
         December 31, 2001,  the balance in the allowance for doubtful  accounts
         relating to this promissory note was $63,954 including accrued interest
         of $6,117.  During 2002, the Partnership  ceased collection efforts and
         wrote off the balance of the note.

6.       Discontinued Operations:

         During 2002, the  Partnership  sold its  properties in Rancho  Cordova,
         California,  Mesquite, Texas, and Bucyrus, Ohio, each to a third party,
         and received net sales proceeds of approximately $1,918,700,  resulting
         in a net gain on discontinued operations of approximately $396,400. The
         Partnership  had  recorded  provisions  for  write-down  of  assets  of
         approximately  $20,300,  $899,900  and  $36,200  during the years ended
         December  31,  2002,  2001  and  2000,  respectively,  relating  to the
         properties  in Mesquite,  Texas,  and Bucyrus,  Ohio.  The  Partnership
         reinvested  the  sales  proceeds  from the sales of the  properties  in
         Rancho Cordova, California and Mesquite, Texas in a property in Austin,
         Texas and in Arlington Joint Venture.

         In December  2002,  the  Partnership  entered into an agreement  with a
         third party to sell the property in Salina,  Kansas.  As a result,  the
         Partnership  reclassified  the asset from real estate  properties  with
         operating leases to real estate held for sale. The  reclassified  asset
         was  recorded at the lower of its  carrying  amount or  estimated  fair
         value,  less  cost  to  sell.  In  addition,  the  Partnership  stopped
         recording  depreciation  once the property was  identified for sale. In
         connection with the anticipated  sale of the property,  the Partnership
         recorded a provision for write-down of assets of approximately $536,600
         during the year ended December 31, 2002. The Partnership had recorded a
         provision for write-down of assets of approximately $258,300 during the
         year ended  December 31, 2001  relating to this  property.  In February
         2003, the  Partnership  sold this property.  The financial  results for
         these four properties are reflected as  Discontinued  Operations in the
         accompanying financial statements.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


6.       Discontinued Operations - Continued:
         -----------------------------------

         The  operating  results of the  discontinued  operations  for the above
         properties are as follows:

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                                             2002            2001               2001
                                                        --------------  --------------    ---------------
<S> <C>

          Rental revenues                                   $  45,532      $  116,298         $  326,869
          Termination fee income                                   --          33,979                 --
          Expenses                                            (65,235 )      (188,083 )          (87,780 )
          Provision for write-down                           (556,884 )    (1,158,159 )          (36,166 )
          Gain on disposal of assets                          396,382              --                 --
                                                        --------------  --------------    ---------------
          Income (loss) from discontinued operations       $ (180,205 )   $(1,195,965 )       $  202,923
                                                        ==============  ==============    ===============
</TABLE>

7.       Allocations and Distributions:
         -----------------------------

         From inception  through  December 31, 1999,  generally,  net income and
         losses of the Partnership,  excluding gains and losses from the sale of
         properties,  were allocated 99% to the limited partners and one percent
         to the general  partners.  From  inception  through  December 31, 1999,
         distributions  of net cash flow were made 99% to the  limited  partners
         and one percent to the general  partners.  However,  the one percent of
         net  cash  flow  to  be  distributed   to  the  general   partners  was
         subordinated to receipt by the limited partners of an aggregate,  eight
         percent,  cumulative,  noncompounded  annual  return on their  invested
         capital contributions (the "Limited Partners' 8% Return").

         From inception through December 31, 1999, generally, net sales proceeds
         from the sale of properties not in liquidation of the  Partnership,  to
         the extent distributed,  were distributed first to the limited partners
         in an amount sufficient to provide them with their Limited Partners' 8%
         Return,  plus the return of their adjusted capital  contributions.  The
         general partners then received,  to the extent previously  subordinated
         and unpaid,  a one percent  interest in all prior  distributions of net
         cash flow and a return of their  capital  contributions.  Any remaining
         sales proceeds were  distributed  95% to the limited  partners and five
         percent to the general partners.  Any gain from the sale of a property,
         not in liquidation of the Partnership was, in general, allocated in the
         same manner as net sales proceeds are distributable.  Any loss from the
         sale of a property  was, in  general,  allocated  first,  on a pro rata
         basis,  to partners with positive  balances in their capital  accounts;
         and  thereafter,  95% to the limited  partners  and five percent to the
         general partners.

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


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


7.       Allocations and Distributions - Continued:
         -----------------------------------------

         Effective  January 1, 2000, the general  partners waived their right to
         receive  future  distributions  from the  Partnership,  including  both
         distributions  of operating cash flow and  distributions of liquidation
         proceeds,   to  the  extent   that  the   cumulative   amount  of  such
         distributions would exceed the balance in the general partners' capital
         account as of December  31,  1999.  Accordingly,  for years  commencing
         January  1,  2000 and  after,  the  Partnership's  net  income  will be
         allocated entirely among the limited partners.  However,  if losses are
         allocated to the general  partners in a year, an amount of income equal
         to the sum of such losses may be allocated  to the general  partners in
         succeeding years. Accordingly,  the general partners were not allocated
         any net income during the years ended December 31, 2002, 2001 and 2000.

         During each of the years ended December 31, 2002, 2001, and 2000 the
         Partnership declared distributions to the limited partners of
         $3,600,000. No distributions have been made to the general partners to
         date.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


8.       Income Taxes:
         ------------

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

<TABLE>
<CAPTION>

                                                                   2002             2001              2000
                                                               --------------   --------------   ---------------

<S> <C>

             Net income for financial reporting purposes       $   3,297,328     $    139,868       $ 1,945,812

             Effect of timing differences relating to
                  depreciation                                        35,244           40,740            38,747

             Provision for write-down of assets                      556,884        2,290,553           962,971

             Direct financing leases recorded as operating
               leases for tax reporting purposes                      51,016           52,904            52,973

             Loss on termination of direct financing leases               --               --            31,215

             Effect of timing differences relating to equity
               in earnings of joint ventures                          (7,210 )        (15,881 )          (7,155 )

             Effect of timing differences relating to
               gains/losses on real estate property sales         (1,243,058 )       (993,358 )        (430,205 )

             Effect of timing differences relating to
               allowance for doubtful accounts                      (691,679 )        326,169           338,368

             Accrued rental income                                  (166,534 )       (165,285 )        (212,436 )

             Rents paid in advance                                    47,303          (22,056 )          43,380

             Deduction of transaction costs for tax
               reporting purposes                                         --               --          (236,745 )
                                                               --------------   --------------   ---------------
             Net income for federal income tax purposes        $   1,879,294    $   1,653,654      $  2,526,925
                                                               ==============   ==============   ===============

</TABLE>



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


9.       Related Party Transactions:
         --------------------------

         One of the individual general partners, James M. Seneff, Jr., is one of
         the principal  shareholders of CNL Holdings,  Inc. The other individual
         general partner, Robert A. Bourne, serves as President and Treasurer of
         CNL Financial  Group,  Inc., a wholly owned subsidiary of CNL Holdings,
         Inc. CNL APF  Partners,  LP, a wholly owned  subsidiary of CNL American
         Properties Fund, Inc. ("APF") served as the Partnership's advisor until
         January 1, 2002,  when it assigned its rights and  obligations  under a
         management  agreement to RAI Restaurants,  Inc.  (formerly known as CNL
         Restaurants  XVIII,  Inc.). RAI Restaurants,  Inc. ("the Advisor") is a
         wholly owned  subsidiary of APF. The  individual  general  partners are
         stockholders and directors of APF.

         The Advisor provides services  pursuant to a management  agreement with
         the Partnership. In connection therewith, the Partnership has agreed to
         pay the Advisor an annual  management  fee of one percent of the sum of
         gross revenues from properties  wholly owned by the Partnership and the
         Partnership's  allocable  share of gross revenues from joint  ventures.
         Any  portion  of the  management  fee  not  paid  is  deferred  without
         interest. The Partnership incurred management fees of $41,568, $30,726,
         and $36,605,  for the years ended  December 31, 2002,  2001,  and 2000,
         respectively.

         The Advisor is also entitled to receive a deferred,  subordinated  real
         estate   disposition  fee,  payable  upon  the  sale  of  one  or  more
         properties,  based on the  lesser of  one-half  of a  competitive  real
         estate  commission  or three  percent of the sales price if the Advisor
         provides a substantial  amount of services in connection with the sale.
         However,  if the net sales  proceeds are  reinvested  in a  replacement
         property,  no such real estate  disposition fees will be incurred until
         such  replacement  property  is sold  and the net  sales  proceeds  are
         distributed.  The  payment  of  the  real  estate  disposition  fee  is
         subordinated to the receipt by the limited  partners of their aggregate
         Limited Partners' 8% Return, plus their adjusted capital contributions.
         No  deferred,  subordinated  real  estate  disposition  fees  have been
         incurred since inception.

         During  the  years  ended  December  31,  2002,  2001,  and  2000,  the
         Partnership's  advisor  and  its  affiliates  provided  accounting  and
         administrative  services. The Partnership incurred $179,207,  $243,206,
         and $109,898,  for the years ended  December 31, 2002,  2001, and 2000,
         respectively, for such services.

         During 2001 and 2002, the  Partnership  acquired a property  located in
         San Antonio, Texas and a property in Austin, Texas, respectively,  from
         CNL Funding  2001-A,  LP. In addition,  in June 2002,  Arlington  Joint
         Venture,  in which the  Partnership  owns a 21%  interest,  acquired  a
         property in Arlington,  Texas, from CNL Funding 2001-A, LP. CNL Funding
         2001-A, LP is an affiliate of the general partners. CNL Funding 2001-A,
         LP had purchased and temporarily  held title to the properties in order
         to facilitate the  acquisition of the properties by the Partnership and
         the joint venture.  The purchase prices paid by the Partnership and the
         joint venture  represented the costs incurred by CNL Funding 2001-A, LP
         to acquire the properties.

         During  2001,   Phoenix   Restaurant  Group,  Inc.  ("PRG")  filed  for
         bankruptcy  and  rejected  two of the  four  leases  it  had  with  the
         Partnership.  In May and June 2002, the  bankruptcy  court assigned the
         two leases not rejected by PRG relating to the  properties  in Branson,
         Missouri  and  Temple,   Texas  to  CherryDen,   LLC  and  Seana,  LLC,
         respectively.  CherryDen,  LLC is an affiliate of the general partners.
         All other lease terms  remained the same. In connection  with the lease
         to  CherryDen,  LLC,  the  Partnership  recognized  rental  revenues of
         approximately  $265,900  relating to the property in Branson,  Missouri
         during the year ended December 31, 2002.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


9.       Related Party Transactions - Continued
         --------------------------------------

         The amount due to related parties at December 31, 2002 and 2001 totaled
         $18,292 and $17,331, respectively.

10.      Concentration of Credit Risk:
         ----------------------------

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

<TABLE>
<CAPTION>

                                                                2002                 2001                 2000
                                                        -----------------     -----------------    -----------------
<S> <C>

          Golden Corral Corporation                          $   989,368          $  1,023,304          $   931,631
          Jack in the Box Inc.
                (formerly known as Foodmaker, Inc.)
                                                                 624,944               621,879              556,365


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

                                                          2002                 2001                2000
                                                      ----------------     ----------------    ---------------

              Golden Corral Family
                  Steakhouse Restaurants                  $  989,368          $ 1,023,304         $  931,631
              Denny's                                        729,186              402,615            946,399
              Jack in the Box                                624,944              621,879            556,365

</TABLE>

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




<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


11.      Selected Quarterly Financial Data:
         ----------------------------------

         The following table presents  selected  unaudited  quarterly  financial
         data for each full quarter during the years ended December 31, 2002 and
         2001.
<TABLE>
<CAPTION>

                      2002 Quarter                  First        Second        Third        Fourth         Year
         ---------------------------------------- ----------- ------------- ------------- ------------  ------------
<S> <C>

         Continuing Operations (1):
              Revenues                             $ 828,183    $1,379,203     $ 884,931    $ 897,175    $3,989,492
              Equity in earnings of joint
                 ventures                             75,155        75,646        81,698       79,955       312,454
              Income from continuing
                 operations                          680,423     1,252,998       766,534      777,578     3,477,533
         Discontinued operations (1):
              Revenues                                26,721        18,811            --           --        45,532
              Income (loss) from discontinued
                 operations (2)                        3,834       374,386       (18,910 )   (539,515 )    (180,205 )

         Net Income                                  684,257     1,627,384       747,624      238,063     3,297,328

         Net Income (Loss) per limited partner unit:

              Continuing operations                  $  0.15      $   0.28      $   0.17     $   0.17      $   0.77
              Discontinued operations                     --          0.08            --        (0.12 )       (0.04 )
                                                  ----------- ------------- ------------- ------------  ------------
                Total                                $  0.15      $   0.36      $   0.17     $   0.05      $   0.73
                                                  =========== ============= ============= ============  ============

</TABLE>



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000

11.      Selected Quarterly Financial Data:
         ---------------------------------
<TABLE>
<CAPTION>

                      2001 Quarter                  First        Second        Third        Fourth         Year
         --------------------------------------- ------------ ------------- ------------- ------------  ------------

 <c>
         Continuing Operations (1):
              Revenues                             $ 754,655     $ 746,553     $ 679,376    $ 743,972   $ 2,924,556
              Equity in earnings of joint
                  ventures                            49,314        47,716        76,368       77,487       250,885
              Income (Loss) from continuing
                  operations                         562,902       378,421      (383,821 )    778,331     1,335,833
         Discontinued operations (1):
              Revenues                                75,587        12,485        47,278       14,927       150,277
              Loss  from discontinued
                  operations                          (8,310 )    (481,576 )    (676,150 )    (29,929 )  (1,195,965 )

         Net Income (Loss)                           554,592      (103,155 )  (1,059,971 )    748,402       139,868

         Net Income (Loss) per limited partner unit:

              Continuing operations                 $   0.12      $   0.09     $   (0.09 )   $   0.18      $   0.30
              Discontinued operations                     --         (0.11 )       (0.15 )      (0.01 )       (0.27 )
                                                 ------------ ------------- ------------- ------------  ------------
                Total                               $   0.12     $   (0.02 )   $   (0.24 )   $   0.17      $   0.03
                                                 ============ ============= ============= ============  ============
</TABLE>

         (1)  Certain items in the selected  quarterly  financial data have been
              reclassified   to   conform  to  the  2002   presentation.   These
              reclassifications  had no effect on total net income.  The results
              of operations  relating to properties that were either disposed of
              or were  classified  as held for sale as of December  31, 2002 are
              reported as discontinued operations for all periods presented. The
              results of operations  relating to properties that were identified
              for  sale as of  December  31,  2001  but  sold  subsequently  are
              reported as continuing operations.

         (2)  In December 2002, the Partnership entered into an agreement with a
              third party to sell the property in Salina,  Kansas. In connection
              with  the  anticipated  sale  of  the  property,  the  Partnership
              recorded a provision  for  write-down  of assets of  approximately
              $536,600  during the  fourth  quarter of 2002.  During  2001,  the
              tenant of this property experienced financial difficulties,  filed
              for  bankruptcy,  and rejected the lease relating to the property.
              The  Partnership had recorded a provision for write-down of assets
              in previous  years,  including  approximately  $258,300 during the
              year ended  December  31,  2001  relating  to this  property.  The
              provision  represented  the  difference  between the net  carrying
              value of the property and its  estimated  fair value.  In February
              2003, the Partnership sold this property.

12.      Commitment:
         ----------

         In December  2002,  the  Partnership  entered into an agreement  with a
         third party to sell the property in Salina,  Kansas.  In February 2003,
         the Partnership sold this property.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2002, 2001, and 2000


13.      Subsequent Event:
         ----------------

         In February 2003, the Partnership sold its property in Salina,  Kansas,
         to a third  party and  received  net sales  proceeds  of  approximately
         $154,500,  resulting in a loss on sale of  discontinued  operations  of
         approximately  $536,600,  which the Partnership recorded as a provision
         for write-down of assets of December 31, 2002.





<PAGE>


Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         None.
                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

         The General Partners of the Registrant are James M. Seneff, Jr., Robert
A.  Bourne  and CNL  Realty  Corporation,  a Florida  corporation.  The  General
Partners  manage  and  control  the  Partnership's   affairs  and  have  general
responsibility   and  the  ultimate  authority  in  all  matters  affecting  the
Partnership's  business.  The  Partnership  has  available  to it the  services,
personnel and experience of CNL American Properties Fund, Inc. ("APF"), CNL Fund
Advisors, Inc., CNL Financial Group, Inc. and their affiliates, all of which are
affiliates of the General Partners.

         James M. Seneff, Jr., age 56. Since 1971, Mr. Seneff has been active in
the  acquisition,  development,  and  management  of real estate  projects  and,
directly or through an  affiliated  entity,  has served as a general  partner or
co-venturer in over 100 real estate  ventures.  These ventures have involved the
financing,  acquisition,   construction,  and  leasing  of  restaurants,  office
buildings,  apartment  complexes,  hotels, and other real estate. Mr. Seneff has
served as Director  and  Chairman of the Board of APF, a public,  unlisted  real
estate  investment  trust,  since 1994.  Mr.  Seneff  served as Chief  Executive
Officer  of APF from 1994  through  August  1999,  and has  served  as  co-Chief
Executive  Officer of APF since  December 2000. Mr. Seneff served as Chairman of
the Board and Chief Executive Officer of CNL Fund Advisors,  Inc.,  formerly the
Partnership's advisor, until it merged with a wholly-owned  subsidiary of APF in
September  1999, and in June 2000, was re-elected to those positions of CNL Fund
Advisors, Inc. Mr. Seneff is a principal stockholder of CNL Holdings,  Inc., the
parent  company of CNL  Financial  Group,  Inc.  (formerly CNL Group,  Inc.),  a
diversified real estate company,  and has served as a Director,  Chairman of the
Board and  Chief  Executive  Officer  of CNL  Financial  Group,  Inc.  since its
formation in 1980.  CNL  Financial  Group,  Inc. is the parent  company,  either
directly or indirectly through subsidiaries,  of CNL Real Estate Services, Inc.,
CNL Capital Markets,  Inc., CNL Investment Company and CNL Securities Corp., all
of which are engaged in the  business of real estate  finance.  Mr.  Seneff also
serves as a Director,  Chairman of the Board and Chief Executive  Officer of CNL
Hospitality  Properties,  Inc., a public, unlisted real estate investment trust,
as well as, CNL  Hospitality  Corp.,  its advisor.  In addition,  he serves as a
Director,  Chairman of the Board and Chief  Executive  Officer of CNL Retirement
Properties,  Inc.,  a public,  unlisted  real  estate  investment  trust and its
advisor,  CNL  Retirement  Corp.  Since  1992,  Mr.  Seneff has also served as a
Director,  Chairman of the Board and Chief  Executive  Officer of Commercial Net
Lease Realty,  Inc., a public real estate investment trust that is listed on the
New York Stock Exchange.  Mr. Seneff has also served as a Director,  Chairman of
the Board and Chief Executive  Officer of CNL Securities  Corp.  since 1979; CNL
Investment  Company  since  1990;  and  CNL  Institutional  Advisors,   Inc.,  a
registered investment advisor for pension plans, since 1990. Mr. Seneff formerly
served  as a  Director  of First  Union  National  Bank of  Florida,  N.A.,  and
currently  serves as the  Chairman  of the Board of CNL  Bank,  an  independent,
state-chartered  commercial  bank. Mr. Seneff  previously  served on the Florida
State Commission on Ethics and is a former member and past Chairman of the State
of Florida Investment Advisory Council, which recommends to the Florida Board of
Administration  investments for various Florida employee  retirement  funds. The
Florida Board of Administration,  Florida's  principal  investment  advisory and
money  management  agency,  oversees the  investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration from
Florida State University in 1968.

         Robert A.  Bourne,  age 55. Mr.  Bourne has  participated  as a general
partner  or  co-venturer  in over  100  real  estate  ventures  involved  in the
financing,  acquisition,   construction,  and  leasing  of  restaurants,  office
buildings,  apartment complexes,  hotels, and other real estate. Mr. Bourne is a
Director  of APF.  Mr.  Bourne  served as  President  of APF from  1994  through
February  1999. He also served as Treasurer  from  February 1999 through  August
1999  and from May  1994  through  December  1994.  He also  served  in  various
executive  positions  with CNL Fund  Advisors,  Inc.  prior to its merger with a
wholly-owned subsidiary of APF including,  President from 1994 through September
1997, and Director from 1994 through August 1999. Mr. Bourne serves as President
and  Treasurer of CNL  Financial  Group,  Inc.;  Director,  Vice Chairman of the
Board, and Treasurer , and from 1997 until June 2002 served as President, of CNL
Hospitality  Properties,  Inc., a public, unlisted real estate investment trust;
as well as, Director,  Vice Chairman of the Board, and Treasurer,  and from 1997
until June 2002 served as President,  of CNL Hospitality Corp., its advisor.  In
addition,  Mr.  Bourne  serves as  Director,  Vice  Chairman  of the Board,  and
Treasurer,  and from 1997 until June 2002 served as President, of CNL Retirement
Properties, Inc., a public, unlisted real estate investment trust; as well as, a
Director,  Vice Chairman of the Board,  and Treasurer,  and from 1997 until June
2002 served as President,  of its advisor,  CNL Retirement Corp. Mr. Bourne also
serves as a Director of CNL Bank. He has served as a Director  since 1992,  Vice
Chairman of the Board since February 1996, Secretary and Treasurer from February
1996 through  1997,  and  President  from July 1992 through  February  1996,  of
Commercial Net Lease Realty,  Inc., a public real estate investment trust listed
on the New York Stock  Exchange.  Mr. Bourne also serves as Director,  President
and Treasurer for various affiliates of CNL Financial Group, Inc. including, CNL
Investment Company, CNL Securities Corp. and CNL Institutional Advisors, Inc., a
registered  investment advisor for pension plans. Mr. Bourne began his career as
a certified public  accountant  employed by Coopers & Lybrand,  Certified Public
Accountants,  from 1971  through  1978,  where he attained  the  position of Tax
Manager in 1975.  Mr. Bourne  graduated  from Florida  State  University in 1970
where he received a B.A. in Accounting, with honors.

         Curtis B.  McWilliams,  age 47. Mr.  McWilliams  has served as Co-Chief
Executive  Officer of APF since  December  2000 and  previously  served as Chief
Executive  Officer from  September  1999  through  December  2000.  Prior to the
acquisition of CNL Fund Advisors,  Inc., Mr.  McWilliams  served as President of
APF from  February  1999 until  September  1999.  From February 1998 to February
1999, he served as Executive  Vice President of APF. Mr.  McWilliams  joined CNL
Financial  Group,  Inc. in April 1997 and served as an Executive  Vice President
from October 1997 until September 1999. In addition,  Mr.  McWilliams  served as
President  of CNL Fund  Advisors,  Inc.  and CNL  Financial  Services,  Inc.,  a
corporation  engaged in the business of real estate  financing,  from April 1997
until the  acquisition of such entities by  wholly-owned  subsidiaries of APF in
September  1999.  From  September  1983 through March 1997,  Mr.  McWilliams was
employed by Merrill  Lynch & Co. The  majority of his career at Merrill  Lynch &
Co.  was in the  Investment  Banking  division  where he  served  as a  Managing
Director.  Mr.  McWilliams  received  a  B.S.E.  in  Chemical  Engineering  from
Princeton University in 1977 and a Master of Business Administration degree with
a concentration in finance from the University of Chicago in 1983.

         Steven  D.  Shackelford,  age  39.  Mr.  Shackelford  was  promoted  to
Executive Vice President of APF in June 2000. He served as Senior Vice President
from September 1999 until his promotion in June 2000. Mr. Shackelford has served
as Chief  Financial  Officer  since January 1997 and has served as Secretary and
Treasurer of APF since September 1999. He also served as Chief Financial Officer
of CNL Fund Advisors,  Inc. from September  1996 to September  1999.  From March
1995 to July 1996, Mr.  Shackelford  was a senior manager in the national office
of Price  Waterhouse LLP where he was responsible  for advising  foreign clients
seeking to raise capital and a public listing in the United States.  From August
1992 to March  1995,  he was a  manager  in the  Paris,  France  office of Price
Waterhouse, serving several multi-national clients. Mr. Shackelford was an audit
staff and  senior  from  1986 to 1992 in the  Orlando,  Florida  office of Price
Waterhouse.  Mr.  Shackelford  received a Bachelor of Arts degree in Accounting,
with honors, and a Master of Business  Administration  degree from Florida State
University and is a certified public accountant.


Section 16(a) Beneficial Ownership Reporting Compliance

         Section  16(a) of the Exchange Act requires the General  Partners,  the
officers of the  corporate  General  Partner,  and persons who own more than ten
percent  of  a  registered  class  of  the   Partnership's   equity   securities
(collectively,  the  "Reporting  Persons"),  to file  reports of  ownership  and
changes in  ownership  on Forms 3, 4 and 5 with the SEC.  Reporting  Persons are
required by SEC regulation to furnish the  Partnership  with copies of all Forms
3, 4 and 5 that they file.

         Based  solely on the  General  Partners'  review of the  copies of such
forms the  Partnership  has  received and written  representations  from certain
Reporting  Persons  that they  were not  required  to file  Forms 5 for the last
fiscal year, the General  Partners  believe that all Reporting  Persons complied
with all filing  requirements  applicable  to them with respect to  transactions
during fiscal 2002.


Item 11.  Executive Compensation

         Other than as  described in Item 13, the  Partnership  has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates.  There are no compensatory plans or arrangements  regarding
termination of employment or change of control.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         As of March 10,  2003,  no person was known to the  Registrant  to be a
beneficial owner of more than five percent of the Units.

         The following  table sets forth,  as of March 10, 2003,  the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>

                    Title of Class                        Name of Partner               Percent of Class

 <c>

           General Partnership Interests                James M. Seneff, Jr.                    45%
                                                        Robert A. Bourne                        45%
                                                        CNL Realty Corporation                  10%
                                                                                            --------
                                                                                               100%
                                                                                            ========
</TABLE>

         Neither the General  Partners,  nor any of their  affiliates,  owns any
interest in the Registrant, except as noted above.

         The Partnership does not have any equity compensation plans.





<PAGE>



Item 13.  Certain Relationships and Related Transactions
          ----------------------------------------------

         The  table  below   summarizes  the  types,   recipients,   methods  of
computation and amounts of compensation,  fees and distributions paid or payable
by the  Partnership  to the General  Partners and their  affiliates for the year
ended  December 31, 2002,  exclusive of any  distributions  to which the General
Partners or their  affiliates  may be entitled by reason of their  purchase  and
ownership of Units.
<TABLE>
<CAPTION>

                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2002
---------------------------------      --------------------------------------      ------------------------------

 <c>
Reimbursement  to affiliates for       Operating  expenses are reimbursed at       Accounting   and
operating expenses                     the  lower  of  cost  or  90%  of the       admini-strative services:
                                       prevailing  rate at which  comparable       $179,207
                                       services  could have been obtained in
                                       the     same     geographic     area.
                                       Affiliates  of the  General  Partners
                                       from  time  to  time  incur   certain
                                       operating  expenses  on behalf of the
                                       Partnership     for     which     the
                                       Partnership       reimburses      the
                                       affiliates without interest.

Annual  management    fee   to         One  percent  of  the  sum  of  gross       $41,568
affiliates                             revenues   from   Properties   wholly
                                       owned by the Partnership plus the
                                       Partnership's allocable share of gross
                                       revenues of joint ventures in which the
                                       Partnership is a co-venturer. The
                                       management fee, which will not exceed
                                       competitive fees for comparable services
                                       in the same geographic area, may or may
                                       not be taken, in whole or in part as to
                                       any year, in the sole discretion of the
                                       affiliates. All of any portion of the
                                       management fee not taken as to any fiscal
                                       year shall be deferred without interest
                                       and may be taken in such other fiscal
                                       year as the affiliates shall determine.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2002
---------------------------------      --------------------------------------      ------------------------------

 <c>
Deferred,    subordinated   real       A deferred,  subordinated real estate       $-0-
estate  disposition  fee payable       disposition  fee,  payable  upon sale
to affiliates                          of  one  or  more  Properties,  in an
                                       amount equal to the lesser of (i)
                                       one-half of a competitive real estate
                                       commission, or (ii) three percent of the
                                       sales price of such Property or
                                       Properties. Payment of such fee shall be
                                       made only if affiliates of the General
                                       Partners provide a substantial amount of
                                       services in connection with the sale of a
                                       Property or Properties and shall be
                                       subordinated to certain minimum returns
                                       to the Limited Partners. However, if the
                                       net sales proceeds are reinvested in a
                                       replacement Property, no such real estate
                                       disposition fee will be incurred until
                                       such replacement Property is sold and the
                                       net sales proceeds are distributed.

General   Partners'    deferred,       A deferred,  subordinated share equal       $-0-
subordinated       share      of       to   one   percent   of   Partnership
Partnership net cash flow              distributions   of  net  cash   flow,
                                       subordinated   to   certain   minimum
                                       returns to the Limited Partners.

General   Partners'    deferred,       A deferred,  subordinated share equal       $-0-
subordinated       share      of       to  five   percent   of   Partnership
Partnership  net sales  proceeds       distributions   of  such  net   sales
from  a   sale   or   sales   of       proceeds,   subordinated  to  certain
Properties  not  in  liquidation       minimum   returns   to  the   Limited
of the Partnership                     Partners

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2002
---------------------------------      --------------------------------------      ------------------------------

 <c>
General   Partners'   share   of       Distributions  of net sales  proceeds       $-0-
Partnership  net sales  proceeds       from   a    sale    or    sales    of
from  a   sale   or   sales   in       substantially      all     of     the
liquidation of the Partnership         Partnership's    assets    will    be
                                       distributed in the following order or
                                       priority: (i) first, to pay all debts and
                                       liabilities of the Partnership and to
                                       establish reserves; (ii) second, to
                                       Partners with positive capital account
                                       balances, determined after the allocation
                                       of net income, net loss, gain and loss,
                                       in proportion to such balances, up to
                                       amounts sufficient to reduce such
                                       balances to zero; and (iii) thereafter,
                                       95% to the Limited Partners and 5% to the
                                       General Partners.
</TABLE>

During 2002, the Partnership  acquired a Property,  in Austin,  Texas,  from CNL
Funding  2001-A,  LP for an  aggregate  cost  of  approximately  $1,406,700.  In
addition, in June 2002, Arlington Joint Venture, in which the Partnership owns a
21% interest,  acquired a Property in Arlington, Texas, from CNL Funding 2001-A,
LP for an aggregate cost of approximately $1,003,600.  CNL Funding 2001-A, LP is
an affiliate of the General  Partners.  CNL Funding 2001-A, LP had purchased and
temporarily  held title to the Properties in order to facilitate the acquisition
of the Properties by the Partnership  and the joint venture.  The purchase price
paid by the Partnership and the joint venture  represented the costs incurred by
CNL Funding 2001-A, LP to acquire the Properties.

During 2001,  Phoenix  Restaurant  Group,  Inc. ("PRG") filed for bankruptcy and
rejected  two of the four  leases it had with the  Partnership.  In May and June
2002, the bankruptcy  court assigned the two leases not rejected by PRG relating
to the Properties in Branson,  Missouri and Temple, Texas to CherryDen,  LLC and
Seana,  LLC,  respectively.  CherryDen,  LLC  is an  affiliate  of  the  General
Partners.  All other lease terms remained the same. In connection with the lease
with CherryDen,  LLC the Partnership recognized rental revenues of approximately
$265,900  relating to the  Property in Branson,  Missouri  during the year ended
December 31, 2002.




<PAGE>


Item 14.  Controls and Procedures

         The  General  Partners  maintain  a  set  of  disclosure  controls  and
procedures  designed to ensure that information  required to be disclosed in the
Partnership's  filings  under the  Securities  Exchange Act of 1934 is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Securities and Exchange  Commission's  rules and forms. The principal  executive
and  financial  officers of the  corporate  General  Partner have  evaluated the
Partnership's  disclosure  controls and  procedures  within 90 days prior to the
filing  of this  Annual  Report  on Form  10-K and  have  determined  that  such
disclosure controls and procedures are effective.

         Subsequent to the above evaluation,  there were no significant  changes
in internal  controls or other  factors  that could  significantly  affect these
controls,   including  any   corrective   actions  with  regard  to  significant
deficiencies and material weaknesses.


                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)      The following documents are filed as part of this report.
<TABLE>
<CAPTION>

         1.  Financial Statements

 <c>
                  Report of Independent Certified Public Accountants

                  Balance Sheets at December 31, 2002 and 2001

                  Statements of Income for the years ended December 31, 2002, 2001, and 2000

                  Statements of Partners' Capital for the years ended December 31, 2002, 2001, and 2000

                  Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000

                  Notes to Financial Statements

         2.  Financial Statement Schedules

                  Schedule II - Valuation and Qualifying Accounts for the years
                  ended December 31, 2002, 2001, and 2000

                  Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002

                  Notes to Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002

                  All other Schedules are omitted as the required information is
                  inapplicable or is presented in the financial statements or
                  notes thereto.
</TABLE>

         3.  Exhibits


               3.1   Affidavit and  Certificate  of Limited  Partnership  of CNL
                     Income  Fund  XVI,   Ltd.   (Included  as  Exhibit  3.2  to
                     Registration  Statement  No.  33-69968-01  on Form S-11 and
                     incorporated herein by reference.)

               4.1   Affidavit and  Certificate  of Limited  Partnership  of CNL
                     Income  Fund  XVI,   Ltd.   (Included  as  Exhibit  3.2  to
                     Registration  Statement  No.  33-69968-01  on Form S-11 and
                     incorporated herein by reference.)

               4.2   Amended and Restated  Agreement of Limited  Partnership  of
                     CNL Income Fund XVI, Ltd.  (Included as Exhibit 4.2 to Form
                     10-K filed with the Securities  and Exchange  Commission on
                     March 30, 1995, and incorporated herein by reference.)

               10.1  Management  Agreement between CNL Income Fund XVI, Ltd. and
                     CNL  Investment  Company  (Included as Exhibit 10.1 to Form
                     10-K filed with the Securities  and Exchange  Commission on
                     March 30, 1995, and incorporated herein by reference.)

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

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

               10.4  Assignment of Management  Agreement from CNL Fund Advisors,
                     Inc. to CNL APF Partners,  LP. (Included as Exhibit 10.4 to
                     Form 10-Q filed with the Securities  Exchange Commission on
                     August 13, 2001, and incorporated herein by reference).

               10.5  Assignment of Management  Agreement  from CNL APF Partners,
                     LP to CNL Restaurants XVIII, Inc. (Included as Exhibit 10.5
                     to  Form  10-Q  filed  with  the  Securities  and  Exchange
                     Commission on August 13, 2002, and  incorporated  herein by
                     reference.)

               99.1  Certification  of  Chief  Executive  Officer  of  Corporate
                     General  Partner  Pursuant  to 18  U.S.C.  Section  1350 as
                     Adopted Pursuant to Section 906 of the  Sarbanes-Oxley  Act
                     of 2002. (Filed herewith.)

               99.2  Certification  of  Chief  Financial  Officer  of  Corporate
                     General  Partner  Pursuant  to 18  U.S.C.  Section  1350 as
                     Adopted Pursuant to Section 906 of the  Sarbanes-Oxley  Act
                     of 2002. (Filed herewith.)

(b)      The  Registrant  filed no reports on Form 8-K during the period October
         1, 2002 through December 31, 2002.

(c)      Not applicable.

(d)      Other Financial Information

         The  Partnership is required to file audited  financial  information of
         one of its  tenants  (Golden  Corral  Corporation)  as a result of this
         tenant  leasing  more  than 20% of the  Partnership's  total  assets at
         December  31,  2002.  Golden  Corral  Corporation  is a  privately-held
         company  and  its  financial   information  is  not  available  to  the
         Partnership to include in this filing.  The Partnership  will file this
         financial  information  under  cover of a Form  10-K/A as soon as it is
         available.






<PAGE>




                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 24th day of
March, 2003.


                                           CNL INCOME FUND XVI, LTD.

                                           By:      CNL REALTY CORPORATION
                                                    General Partner

                                                    /s/ Robert A. Bourne
                                                    --------------------------
                                                    ROBERT A. BOURNE, President


                                           By:      ROBERT A. BOURNE
                                                    General Partner

                                                    /s/ Robert A. Bourne
                                                    --------------------------
                                                    ROBERT A. BOURNE


                                           By:      JAMES M. SENEFF, JR.
                                                    General Partner

                                                    /s/ James M. Seneff, Jr.
                                                    --------------------------
                                                    JAMES M. SENEFF, JR.




<PAGE>



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

               Signature                                  Title                                  Date

 <c>

/s/ Robert A. Bourne                     President,   Treasurer   and   Director            March 24, 2003
------------------------------------
Robert A. Bourne                         (Principal   Financial  and  Accounting
                                         Officer)

/s/ James M. Seneff, Jr.                 Chief  Executive  Officer and  Director            March 24, 2003
------------------------------------
James M. Seneff, Jr.                     (Principal Executive Officer)

</TABLE>


<PAGE>




                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                          OF CORPORATE GENERAL PARTNER

                 PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


         I, James M.  Seneff,  Jr.,  the Chief  Executive  Officer of CNL Realty
Corporation,  the  corporate  general  partner of CNL Income Fund XVI, Ltd. (the
"registrant"), certify that:

       1.  I have reviewed this annual report on Form 10-K of the registrant;

       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  officer 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 officer 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  officer and I have indicated in
           this annual report whether or not 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.

Date:  March 24, 2003


/s/ James M. Seneff, Jr.
---------------------------
 James M. Seneff, Jr.
Chief Executive Officer

<PAGE>




                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                          OF CORPORATE GENERAL PARTNER

                 PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

         I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation,
the corporate  general  partner of CNL Income Fund XVI, Ltd. (the  "registrant")
certify that:

         1. I have reviewed this annual report on Form 10-K of the registrant;

         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 officer 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  officer 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  officer and I have indicated in
            this annual report whether or not 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.


Date:  March 24, 2003


/s/ Robert A. Bourne
---------------------------
Robert A. Bourne
President and Treasurer

<PAGE>




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

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                  Years Ended December 31, 2002, 2001, and 2000

<TABLE>
<CAPTION>

                                                     Additions                           Deductions
                                          ---------------------------------    -------------------------------
                                                                                                          Collected
                                                                                                          or Deter-
                                   Balance at       Charged to       Charged to           Deemed          mined to       Balance
                                    Beginning       Costs and           Other           Uncollec-          be Col-       at End
  Year          Description          of Year         Expenses         Accounts            tible           lectible       of Year
----------    -----------------   --------------  ---------------  ----------------    -------------     ------------  ------------

 <c>
  2000        Allowance for
                  doubtful
                  accounts (a)        $  96,992       $   42,688        $  489,975 (b)    $   3,171 (c)    $ 148,303     $ 478,181
                                  ==============  ===============  ================    =============     ============  ============

  2001        Allowance for
                  doubtful
                  accounts (a)        $ 478,181       $  198,086        $  544,282 (b)    $ 416,199 (c)       $   --     $ 804,350
                                  ==============  ===============  ================    =============     ============  ============

  2002        Allowance for
                  doubtful
                  accounts (a)        $ 804,350       $    5,615        $    5,169 (b)    $ 133,344 (c)    $ 605,285      $ 76,505
                                  ==============  ===============  ================    =============     ============  ============
</TABLE>


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

             (b)   Reduction of rental, earned and other income.

             (c)   Amounts written off as uncollectible.


<page>



                            CNL INCOME FUND XVI, LTD.
                         (A Florida Limited Partnership)
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 2002



<TABLE>
<CAPTION>


                                                                         Costs Capitalized
                                                                           Subsequent To
                                                     Initial Cost           Acquisition
                                          -----------------------  ---------------------
                            Encum-                    Buildings and  Improve-   Carrying
                            brances          Land      Improvements   ments      Costs
                           ----------     ----------- -------------------------  -------

 <c>
Properties the Partnership
  has Invested in Under
  Operating Leases:

    Arby's Restaurant:
      Indianapolis, Indiana    -            $315,276    $591,993             -        -

    Checkers Drive-In Restaurants:
      Conyers, Georgia         -             363,553           -             -        -
      Lake Worth, Florida      -             325,301           -             -        -
      Ocala, Florida           -             289,578           -             -        -
      Pompano Beach, Florida   -             373,491           -             -        -
      Tampa, Florida           -             372,176           -             -        -
      Tampa, Florida           -             221,715           -             -        -

    Denny's Restaurants:
      Idaho Falls, Idaho       -             552,186           -       692,274        -
      Branson, Missouri (k)    -           1,160,979           -     1,010,688        -
      Dover, Ohio              -             266,829           -             -        -
      Moab, Utah               -             435,927           -             -        -
      Temple, Texas (l)        -             306,866     677,659             -        -

    Golden Corral Family
      Steakhouse Restaurants:
          Fort  Collins, Colora-o            566,943           -     1,122,500        -
          Hickory, North Caroli-a            761,108           -     1,001,893        -
          Independence, Missour-             781,761           -     1,147,538        -
          Baytown, Texas       -             446,240           -       971,766        -
          Rosenburg, Texas     -             320,133           -       804,428        -
          Farmington, New Mexic-             523,584           -       870,136        -

     IHOP Restaurant:
      Ft. Worth, Texas         -             364,634     554,302             -        -

    Jack in the Box Restaurants:
      Brownsville, Texas       -             553,671           -       658,282        -
      Grand Prairie, Texas     -             439,950           -       636,524        -
      Temple City, California  -             744,493     225,404             -        -
      Texas City, Texas        -             403,476     568,053             -        -

    KFC Restaurant:
      Concordia, Missouri      -             188,759           -       434,369        -

    Long John Silver's Restaurants:
      Copperas Cove, Texas     -             162,000           -             -        -
      Kansas City, Missouri    -             370,204           -       433,058        -
      Silver City, New Mexico  -             116,767     183,174             -        -

    Taco Cabana Restaurant:
      San Antonio, Texas (m)   -             442,286     705,618             -        -
      Austin, Texas (n)        -             546,099     860,648             -        -

    Wendy's Old Fashioned
      Hamburgers Restaurant:
         Washington, District of
            Columbia           -             393,963     567,625             -        -

    Other:
      Celina, Ohio (j)         -             109,130           -       158,888        -
      Charlotte, North Carolina-             313,200           -       415,695        -
                                          ----------- -----------  ------------  -------

                                          $13,532,278 $4,934,476   $10,358,039        -
                                          =========== ===========  ============  =======

Property in Which the Partnership
    has an 80.44% Interest as
    Tenants-in-Common and has
    Invested in Under an Operating
    Lease:

         Boston Market Restaurant:
           Fayetville, North Ca-olina       $377,800    $587,700             -        -
                                          =========== ===========  ============  =======

Property in Which the Partnership
    has a 40.42% Interest as Tenants-
    in-Common and has Invested in
    Under an Operating Lease:

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


Property of Joint Venture in
    Which the Partnership has a
    32.35% Interest and has Invested
     in Under an Operating Lease:

         Arby's Restaurant:
           Columbus, Ohio      -            $406,976           -      $498,804        -
                                          =========== ===========  ============  =======

Property of Joint Venture in
    Which the Partnership has a
    19.72% Interest and has Invested
     in Under an Operating Lease:

         T.G.I. Friday's Restaurant:
           Homestead, Pennsylva-ia        $1,036,297  $1,499,295             -        -
                                          =========== ===========  ============  =======

Property in Which the Partnership
    has an 83% Interest as Tenants-
    in-Common and has Invested in
    Under an Operating Lease:

         Jack in the Box Restaurant:
           Walker, Louisiana   -            $517,354    $861,245             -        -
                                          =========== ===========  ============  =======

Property of Joint Venture in
    Which the Partnership has a
    21% Interest and has Invested
     in Under an Operating Lease:

      Taco.CabanarRestaurant:aurant:
           Arlington, Texas (o)-            $456,544    $547,070             -        -
                                          =========== ===========  ============  =======

Properties the Partnership has
    Invested in Under Direct
    Financing Leases:

         Boston Market Restaurant:
           Indianapolis, Indian- (h)        $184,014    $577,320             -        -

         Denny's Restaurants:
           Dover, Ohio         -                   -     200,612       236,270        -
           Moab, Utah          -                   -           -       718,578        -

         Long John Silver's Restaurants:
           Clovis, New Mexico  -             127,607     425,282             -        -
           Copperas Cove, Texas-                   -     424,319             -        -

                                          ----------- -----------  ------------  -------

                                            $311,621  $1,627,533      $954,848        -
                                          =========== ===========  ============  =======





              Net Cost Basis at Which
              Carried at Close of Period (g)                         Depreciation in
--------------------------------------               Date              Latest Income
              Buildings and            Accumulated  of Con-   Date      Statement is
   Land       Improvements   Total     Depreciation struction Acquired     Computed
------------  -----------  ----------- ----------  ---------- -----    ------------

   $315,276     $591,993     $907,269   $145,444    1978     08/95          (c)


    363,553            -      363,553         (b)    -       12/94          (b)
    325,301            -      325,301         (b)    -       12/94          (b)
    289,578            -      289,578         (b)    -       12/94          (b)
    373,491            -      373,491         (b)    -       12/94          (b)
    372,176            -      372,176         (b)    -       12/94          (b)
    221,715            -      221,715         (b)    -       12/94          (b)


    552,186      692,274    1,244,460    173,513    1995     01/95          (c)
    951,757      801,464    1,753,221    226,993    1995     03/95          (c)
    266,829           (d)     266,829         (e)   1971     03/95          (e)
    435,927           (d)     435,927         (e)   1995     06/95          (e)
    306,866      522,185      829,051    157,020    1975     08/95          (c)



    566,943    1,122,500    1,689,443    291,927    1995     10/94          (c)
    761,108    1,001,893    1,763,001    267,263    1994     11/94          (c)
    781,761    1,147,538    1,929,299    306,115    1994     11/94          (c)
    446,240      971,766    1,418,006    250,725    1995     01/95          (c)
    320,133      804,428    1,124,561    199,166    1995     05/95          (c)
    523,584      870,136    1,393,720    197,137    1996     01/96          (c)


    364,634      554,302      918,936    126,085    1994     03/96          (c)


    553,671      658,282    1,211,953    174,866    1995     10/94          (c)
    439,950      636,524    1,076,474    165,075    1995     10/94          (c)
    744,493      225,404      969,897     61,384    1984     10/94          (c)
    403,476      568,053      971,529    154,697    1991     10/94          (c)


    188,759      434,369      623,128    103,376    1995     09/95          (c)


    162,000           (d)     162,000         (e)   1994     12/94          (e)
    370,204      433,058      803,262    112,348    1995     12/94          (c)
    116,767      183,174      299,941     43,158    1982     12/95          (c)


    442,286      705,618    1,147,904     25,481    1995     12/01          (c)
    546,098      860,647    1,406,745     16,734    1980     06/02          (c)




    393,963      567,625      961,588    152,196    1983     12/94          (c)


    109,130      158,888      268,018     30,634    1995     10/94          (i)
    313,200      415,695      728,895    106,581    1995     12/94          (c)
------------  -----------  ----------- ----------

$13,323,055   $14,927,816  $28,250,871 $3,487,918
============  ===========  =========== ==========








   $377,800     $587,700     $965,500   $122,308    1996     10/96          (c)
============  ===========  =========== ==========







   $678,890     $825,076   $1,503,966   $136,654    1997     01/98          (c)
============  ===========  =========== ==========








   $406,976     $498,804     $905,780    $67,184    1999     08/98          (c)
============  ===========  =========== ==========







 $1,036,297   $1,499,295   $2,535,592   $129,244    2000     06/00          (c)
============  ===========  =========== ==========







   $517,354     $861,245   $1,378,599    $43,060    2001     06/01          (c)
============  ===========  =========== ==========







   $456,544     $547,070   $1,003,614    $10,637    1997     06/02          (c)
============  ===========  =========== ==========






         (d)          (d)          (d)        (f)   1995     05/95          (f)


          -           (d)          (d)        (e)   1971     03/95          (e)
          -           (d)          (d)        (e)   1995     06/94          (e)


         (d)          (d)          (d)        (f)   1976     12/94          (f)
          -           (d)          (d)        (e)   1994     12/94          (e)

</TABLE>
<PAGE>







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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2002


(a)      Transactions in real estate and accumulated depreciation are summarized
         below.  The  balances  in 1999,  2000,  and 2001 have been  adjusted to
         reflect  the   reclassification   of   properties   accounted   for  as
         discontinued operations:

<TABLE>
<CAPTION>
                                                                                              Accumulated
                                                                              Cost            Depreciation
                                                                         ----------------   -----------------

 <c>
            Properties the Partnership has Invested
              in Under Operating Leases:

                 Balance, December 31, 1999                                 $ 29,996,632        $  2,308,005
                 Acquisitions                                                     33,500                  --
                 Dispositions                                                   (603,038 )          (115,921 )
                 Provision for write-down of assets                             (857,316 )                --
                 Depreciation expense                                                 --             529,172
                                                                         ----------------   -----------------

                 Balance, December 31, 2000                                   28,569,778           2,721,256
                 Acquisitions                                                  1,147,903                  --
                 Dispositions                                                 (2,035,631 )          (213,225 )
                 Provision for write-down of assets                             (837,925 )                --
                 Depreciation expense                                                 --             496,515
                                                                         ----------------   -----------------

                 Balance, December 31, 2001                                   26,844,125           3,004,546
                 Acquisition                                                   1,406,746                  --
                 Depreciation expense                                                 --             483,372
                                                                         ----------------   -----------------

                 Balance, December 31, 2002                                 $ 28,250,871        $  3,487,918
                                                                         ================   =================

</TABLE>


<PAGE>


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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2002

<TABLE>
<CAPTION>

                                                                                                Accumulated
                                                                               Cost            Depreciation
                                                                          ----------------    ----------------

 <c>
            Property in Which the Partnership has an 80.44% Interest as
              Tenants-in-Common and has Invested in Under an Operating Lease:

                 Balance, December 31, 1999                                   $   965,500         $    63,538
                 Depreciation expense                                                  --              19,590
                                                                          ----------------    ----------------

                 Balance, December 31, 2000                                       965,500              83,128
                 Depreciation expense                                                  --              19,590
                                                                          ----------------    ----------------

                 Balance, December 31, 2001                                       965,500             102,718
                 Depreciation expense                                                  --              19,590
                                                                          ----------------    ----------------

                 Balance, December 31, 2002                                   $   965,500         $   122,308
                                                                          ================    ================

            Property in Which the Partnership has a 40.42% Interest as
              Tenants-in-Common and has Invested in Under an Operating Lease:

                 Balance, December 31, 1999                                  $  1,503,966         $    54,145
                 Depreciation expense                                                  --              27,503
                                                                          ----------------    ----------------

                 Balance, December 31, 2000                                     1,503,966              81,648
                 Depreciation expense                                                  --              27,503
                                                                          ----------------    ----------------

                 Balance, December 31, 2001                                     1,503,966             109,151
                 Depreciation expense                                                  --              27,503
                                                                          ----------------    ----------------

                 Balance, December 31, 2002                                  $  1,503,966         $   136,654
                                                                          ================    ================

</TABLE>


<PAGE>


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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2002

<TABLE>
<CAPTION>

                                                                                                Accumulated
                                                                               Cost            Depreciation
                                                                          ----------------    ------------------

 <c>
            Property of Joint Venture in Which the Partnership has a 32.35%
              Interest and has Invested in Under an Operating Lease:

                 Balance, December 31, 1999                                   $   905,780         $    17,315
                 Depreciation expense                                                  --              16,623
                                                                          ----------------    ----------------

                 Balance, December 31, 2000                                       905,780              33,938
                 Depreciation expense                                                  --              16,623
                                                                          ----------------    ----------------

                 Balance, December 31, 2001                                       905,780              50,561
                 Depreciation expense                                                  --              16,623
                                                                          ----------------    ----------------

                 Balance, December 31, 2002                                   $   905,780         $    67,184
                                                                          ================    ================

            Property of Joint Venture in Which the Partnership has a 19.72%
              Interest and has Invested in Under an Operating Lease:

                 Balance, December 31, 1999                                      $     --            $     --
                 Acquisition                                                    2,535,592                  --
                 Depreciation expense                                                  --              29,290
                                                                          ----------------    ----------------

                 Balance, December 31, 2000                                     2,535,592              29,290
                 Depreciation expense                                                  --              49,977
                                                                          ----------------    ----------------

                 Balance, December 31, 2001                                     2,535,592              79,267
                 Depreciation expense                                                  --              49,977
                                                                          ----------------    ----------------

                 Balance, December 31, 2002                                  $  2,535,592         $   129,244
                                                                          ================    ================

</TABLE>


<PAGE>


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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2002

<TABLE>
<CAPTION>

                                                                                                Accumulated
                                                                               Cost            Depreciation
                                                                          ----------------    ------------------

 <c>
            Property in Which the Partnership has an 83% Interest as
              Tenants-in-Common and has Invested in Under an Operating Lease:

                 Balance, December 31, 2000                                      $     --            $     --
                 Acquisition                                                    1,366,405                  --
                 Depreciation expense                                                  --              14,352
                                                                          ----------------    ----------------

                 Balance, December 31, 2001                                     1,366,405              14,352
                 Acquisition                                                       12,194                  --
                 Depreciation expense                                                  --              28,708
                                                                          ----------------    ----------------

                 Balance, December 31, 2002                                  $  1,378,599         $    43,060
                                                                          ================    ================

            Property of Joint Venture in Which the Partnership has a 21%
              Interest and has Invested in Under an Operating Lease:

                 Balance, December 31, 2001                                      $     --            $     --
                 Acquisition                                                    1,003,613                  --
                 Depreciation expense                                                  --              10,637
                                                                          ----------------    ----------------

                 Balance, December 31, 2002                                  $  1,003,613         $    10,637
                                                                          ================    ================
</TABLE>


(b)      The  building  portion  of  this  Property  is  owned  by  the  tenant;
         therefore, depreciation is not applicable.

(c)      Depreciation  expense is computed for buildings and improvements  based
         upon estimated lives of 30 years.

(d)      Certain components of the lease relating to land and building have been
         recorded as a direct  financing lease.  Accordingly,  costs relating to
         these components of this lease are not shown.

(e)      The portion of the lease  relating to the building has been recorded as
         a direct financing lease. The cost of the building has been included in
         net investment in direct financing leases;  therefore,  depreciation is
         not applicable.

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

(g)      As of December 31, 2002, the aggregate cost of the Properties  owned by
         the  Partnership  and the joint venture for federal income tax purposes
         was  $32,441,035 and  $8,290,050,  respectively.  All of the leases are
         treated as operating leases for federal income tax purposes.


<PAGE>



(h)      This Property was exchanged  for a Boston  Market  Property  previously
         owned and located in Chattanooga, Tennessee.

(i)      Effective  June  1998,  the lease  for this  Property  was  terminated,
         resulting in the  reclassification of the building portion of the lease
         to an operating  lease.  The building was recorded at net book value as
         of June 11, 1998 and depreciated  over its remaining  estimated life of
         approximately 26 years.

(j)      The undepreciated cost of the Property in Celina, Ohio was written down
         to net realizable value due to an anticipated  impairment in value. The
         Partnership  recognized  an  impairment  by  recording a provision  for
         write-down  of assets in the amount of $266,257 at December  31,  1998.
         The tenant of this  Property  experienced  financial  difficulties  and
         ceased  payments of rents under the terms of its lease  agreement.  The
         provision   represented  the  difference  between  the  Property's  net
         carrying value and its estimated  fair value.  The cost of the Property
         presented on this  schedule is the net amount at which the Property was
         carried at December 31, 2002, including the provision for write-down of
         assets.

(k)      The  undepreciated  cost of the  Property  in  Branson,  Missouri,  was
         written down to net realizable value due to an impairment in value. The
         Partnership  recognized  the  impairment  by recording a provision  for
         write-down  of assets in the amount of $418,447 at December  31,  2001.
         The provision  represented  the  difference  between the Property's net
         carrying value and its estimated  fair value.  The cost of the Property
         presented on this  schedule is the net amount at which the Property was
         carried at December 31, 2002, including the provision for write-down of
         assets.

(l)      The  undepreciated  cost of the Property in Temple,  Texas, was written
         down  to net  realizable  value  due to an  impairment  in  value.  The
         Partnership  recognized  the  impairment  by recording a provision  for
         write-down  of assets in the amount of $155,474 at December  31,  2001.
         The provision  represented  the  difference  between the Property's net
         carrying value and its estimated  fair value.  The cost of the Property
         presented on this  schedule is the net amount at which the Property was
         carried at December 31, 2002, including the provision for write-down of
         assets.

(m)      During 2001 the  Partnership  acquired a real estate  property from CNL
         Funding  2001-A,  LP, an  affiliate  of the  General  Partners,  for an
         aggregate cost of approximately $1,147,900.

(n)      During 2002, the  Partnership  acquired a real estate property from CNL
         Funding  2001-A,  LP, an  affiliate  of the  General  Partners,  for an
         aggregate cost of approximately $1,406,700.

(o)      During 2002,  Arlington Joint Venture,  in which the Partnership owns a
         21% interest,  acquired a real estate property from CNL Funding 2001-A,
         LP, an affiliate  of the General  Partners,  for an  aggregate  cost of
         approximately $1,003,600.




<PAGE>



                                  EXHIBIT INDEX


Exhibit Number

        (a).  Exhibits


        3.1    Affidavit and  Certificate  of Limited  Partnership of CNL Income
               Fund XVI, Ltd. (Included as Exhibit 3.2 to Registration Statement
               No.   33-69968-01  on  Form  S-11  and  incorporated   herein  by
               reference.)

        4.1    Affidavit and  Certificate  of Limited  Partnership of CNL Income
               Fund XVI, Ltd. (Included as Exhibit 3.2 to Registration Statement
               No.   33-69968-01  on  Form  S-11  and  incorporated   herein  by
               reference.)

        4.2    Amended and  Restated  Agreement  of Limited  Partnership  of CNL
               Income Fund XVI, Ltd. (Included as Exhibit 4.2 to Form 10-K filed
               with the  Securities  and Exchange  Commission on March 30, 1995,
               and incorporated herein by reference.)

        10.1   Management  Agreement  between CNL Income Fund XVI,  Ltd. and CNL
               Investment  Company  (Included as Exhibit 10.1 to Form 10-K filed
               with the  Securities  and Exchange  Commission on March 30, 1995,
               and incorporated herein by reference.)

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

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

        10.4   Assignment of Management  Agreement from CNL Fund Advisors,  Inc.
               to CNL APF Partners,  LP.  (Included as Exhibit 10.4 to Form 10-Q
               filed with the Securities Exchange Commission on August 13, 2001,
               and incorporated herein by reference).

        10.5   Assignment of Management  Agreement from CNL APF Partners,  LP to
               CNL  Restaurants  XVIII,  Inc.  (Included as Exhibit 10.5 to Form
               10-Q filed with the Securities and Exchange  Commission on August
               13, 2002, and incorporated herein by reference.)

        99.1   Certification  of Chief  Executive  Officer of Corporate  General
               Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

        99.2   Certification  of Chief  Financial  Officer of Corporate  General
               Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

  (b)  The Registrant filed no reports on Form 8-K during the period October 1,
       2002 through December 31, 2002.


<PAGE>






















                                  EXHIBIT 99.1



<PAGE>



<PAGE>











                                  EXHIBIT 99.2