<PAGE>

                                 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, 1999

                                      OR

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

          For the transition period from ___________ to ___________


                        Commission file number 0-26218

                           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 Section 12(b) of the Act:

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

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

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

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

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

     Aggregate market value of the voting stock held by nonaffiliates of the
registrant:  The registrant registered an offering of 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 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, totalled
$39,600,000 and were used to acquire 43 Properties, including seven Properties
consisting of land only.  During the year ended December 31, 1996, the
Partnership sold a Property in Appleton, Wisconsin, and used the net sales
proceeds to acquire a Boston Market Property located in Fayetteville, North
Carolina, with an affiliate of the General Partners as tenants-in-common.
During the year ended December 31, 1997, the Partnership sold a Property in
Oviedo, Florida, and during 1998 the Partnership reinvested the net sales
proceeds from the sale of this Property in a Property in Memphis, Tennessee, as
tenants-in-common, with affiliates of the General Partners.  In addition, during
1998, the Partnership received a reimbursement from the developer of the
Property in Farmington, New Mexico upon final reconciliation of total
construction costs.  In August 1998, the Partnership used these proceeds to
enter into a joint venture arrangement, Columbus Joint Venture, with affiliates
of the General Partners, to construct and hold one restaurant Property.  During
1999, the Partnership sold a Property in Lawrence, Kansas.  As a result of the
above transactions, as of December 31, 1999, the Partnership owned 43
Properties.  The 43 Properties include six Properties consisting of land only,
interests in one Property owned through a joint venture in which the Partnership
is a co-venturer and two Properties owned with affiliates of the General
Partners as tenants-in-common.  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 will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives.  In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations.  Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed.  The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.

     On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Termination
of Merger").  APF is a real estate investment trust whose primary business is
the ownership of restaurant properties leased on a long-term, "triple-net" basis
to operators of national and regional restaurant chains.  Under the Agreement
and Plan of Merger, APF was to issue shares of its common stock as consideration
for the Merger.  On March 1, 2000, the General Partners and APF announced that
they had mutually agreed to terminate the Agreement and Plan of Merger.  the
agreement to terminate the Agreement and Plan of Merger was based, in large
part, on the General Partners' concern that, in light of market conditions
relating to publicly traded real estate investment trusts, the value of the
transaction had diminished.  As a result of such diminishment, the General

                                       1
<PAGE>

partners; ability to unequivocally recommend voting for the transaction, in the
exercise of their fiduciary duties, had become questionable.

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 Property owned by a joint venture 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 2 to 20 years (the average being
18 years) and expire between 2001 and 2018.  All leases are generally on a
triple-net basis, with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities.  The leases of the Properties provide
for minimum base annual rental payments (payable in monthly installments)
ranging from approximately $19,200 to $220,600.  All of the leases provide for
percentage rent, based on sales in excess of a specified amount.  In addition,
the majority of the leases provide that, commencing in specified lease years
(generally the sixth lease year), the annual base rent required under the terms
of the lease will increase.

     Generally, the leases 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 35 of the Partnership's 43 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 also 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 July 1998, the tenant of the Shoney's Property in Las Vegas, Nevada,
ceased restaurant operations and vacated the Property.  In February 1999, the
Partnership entered into a lease with a new operator for this Property.  The
lease terms of the new lease are substantially the same as the Partnership's
other leases, as described above.

     During 1998, three tenants, Long John Silver's, Inc., Finest Foodservice,
L.L.C., and Boston Chicken, Inc., filed for bankruptcy and rejected the leases
relating to four of their seven leases and ceased making rental payments to the
Partnership on the rejected leases.  During 1999, the Partnership entered into
new leases, each with a new operator, for two of the four vacant Properties and
sold one of the four vacant Properties.  The terms of the new leases are
substantially the same as the Partnership's other leases, as described above.
The Partnership will not recognize rental and earned income from the one
remaining vacant Property until a new tenant for the Property is located or
until the Property is sold and the proceeds from the sale are reinvested in an
additional Property.  In August 1999, Long John Silver's, Inc. assumed and
affirmed its one remaining lease, and, the Partnership has continued receiving
rental payments relating to this lease.  While Finest Foodservices L.L.C. and
Boston Chicken, Inc. have not rejected or affirmed the remaining two leases,
there can be no assurance that one or both of these leases will not be rejected
in the future.  The lost revenues resulting from the one remaining, vacant
Property that was rejected, as described above, and the possible rejection of
the two remaining leases could have an adverse effect on the results of
operations of the Partnership if the Partnership is unable to re-lease the
Properties in a timely manner.  The General Partners are currently seeking
either new tenants or purchasers for the one remaining vacant 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 of 15 percent, ten percent, and 30 percent, respectively,
of the annual rental payments required by the lease. The rent deferrals are
payable by the tenant beginning in August 2001 through August 2008.

                                       2
<PAGE>

     In October 1999, the lease relating to the Long John Silver's Property in
Kansas City, Missouri was amended to provide to reduce the May 2000 scheduled
rent increase from 12 percent to 5 percent. The remaining scheduled rent
increases remain unchanged.


Major Tenants

     During 1999, three lessees of the Partnership, Golden Corral Corporation,
Jack in the Box, Inc., and Phoenix Restaurant Group, Inc., each contributed more
than ten percent of the Partnership's total rental income.  As of December 31,
1999, Golden Corral Corporation was the lessee under leases relating to six
restaurants, Jack in the Box, Inc. was the lessee under leases relating to five
restaurants, and Phoenix Restaurant Group, Inc. was the lessee under leases
relating to nine restaurants.  It is anticipated that based on the minimum
rental payments required by the leases that these three lessees each will
continue to contribute more than ten percent of the Partnership's total rental
income in 2000.  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 total rental income
during 1999.  In 2000, it is anticipated that each of these Restaurant Chains
will continue to contribute more than ten percent of the Partnership's rental
income 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, 1999, Golden Corral Corporation and
Phoenix Restaurant Group, Inc. each leased Properties with an aggregate carrying
value in excess of 20 percent of the total assets of the Partnership.

Joint Venture and Tenancy in Common Arrangements

     In October 1996, the Partnership entered into an agreement to hold a Boston
Market Property as tenants-in-common, with CNL Income Fund XVII, Ltd., an
affiliate of the General Partners.  The agreement provides for the Partnership
and the affiliate to share in the profits and losses of the Property and net
cash flow from the Property, in proportion to each co-tenant's percentage
interest.  The Partnership owns an 80.44% interest in this Property.

     In addition, in January 1998, the Partnership entered into an agreement to
hold an IHOP Property in Memphis, Tennessee, as tenants-in-common, with CNL
Income Fund II, Ltd. and CNL Income Fund VI, Ltd., affiliates of the General
Partners.  The agreement provides for the Partnership and the affiliates to
share in the profits and losses of the Property and net cash flow from the
Property, in proportion to each co-tenant's percentage interest.  The
Partnership owns a 40.42% interest in this Property.

     Each of the affiliates is a limited partnership organized pursuant to the
laws of the State of Florida.  The tenancy in common agreement restricts each
co-tenant's ability to sell, transfer, or assign its interest in the tenancy in
common's Property without first offering it for sale to the remaining co-tenant.

     In addition, in August 1998, the Partnership entered into a joint venture
arrangement, Columbus Joint Venture, with CNL Income Fund XII, Ltd. and CNL
Income Fund XVIII, Ltd., affiliates of the General Partners, to construct and
hold one Property.  The joint venture arrangement provides for the Partnership
and its joint venture partners to share in all costs and benefits associated in
the joint venture in proportion to each partner's percentage interest in the
joint venture.  The Partnership and its joint venture partners are also jointly
and severally liable for all debts, obligations and other liabilities of the
joint venture. The Partnership has a 32.35% interest in the profits and losses
of this joint venture.  Each of the affiliates is a limited partnership
organized pursuant to the laws of the State of Florida.

     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.

                                       3
<PAGE>

Certain Management Services

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

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

Employees

     The Partnership has no employees.  The officers of CNL Realty Corporation
and the officers and employees of CNL American Properties Fund, Inc. ("APF") the
parent company of CNL Fund Advisors, Inc., perform certain services for the
Partnership.  In addition, the General Partners have available to them the
resources and expertise of the officers and employees of CNL Financial Group,
Inc., (formerly CNL 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, 1999, the Partnership owned 43 Properties.  Of the 43
Properties, 40 are owned by the Partnership in fee simple, one is owned through
joint venture arrangement and two 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.

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.

                                       4
<PAGE>

     The following table lists the Properties owned by the Partnership as of
December 31, 1999 by state.  More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation.

<TABLE>
<CAPTION>

                                                                 Number of
                                                                ----------
                   State                                        Properties
                   -----                                        ----------
                   <S>                                          <C>
                   Arizona                                           1
                   California                                        2
                   Colorado                                          1
                   Washington, D.C.                                  1
                   Florida                                           5
                   Georgia                                           1
                   Idaho                                             1
                   Indiana                                           2
                   Kansas                                            1
                   Minnesota                                         2
                   Missouri                                          4
                   North Carolina                                    3
                   New Mexico                                        3
                   Nevada                                            1
                   Ohio                                              4
                   Tennessee                                         1
                   Texas                                             9
                   Utah                                              1
                                                                ----------

                   TOTAL PROPERTIES                                 43
                                                                ==========
</TABLE>

     Buildings.  Each of the Properties owned by the Partnership 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, 1999, 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, 1999, 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 $22,282,667 and $1,574,069,
respectively.

                                       5
<PAGE>

     The following table lists the Properties owned by the Partnership as of
December 31, 1999 by Restaurant Chain.

<TABLE>
<CAPTION>
            Restaurant Chain                                   Number of Properties
            ----------------                                   --------------------
            <S>                                                <C>
            Arby's                                                     2
            Big Boys                                                   1
            Boston Market                                              4
            Checkers                                                   6
            Denny's                                                    9
            Golden Corral                                              6
            IHOP                                                       2
            Jack in the Box                                            5
            Japan Express                                              1
            KFC                                                        1
            Long John Silver's                                         4
            Wendy's                                                    1
            Other                                                      1
                                                               --------------------

            TOTAL PROPERTIES                                          43
                                                               ====================
</TABLE>

     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.  Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish buildings, premises,
signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain.  These capital expenditures are required to be
paid by the lessee during the term of the lease.  The terms of the leases of the
Properties owned by the Partnership are described in Item 1.  Business - Leases.

     At December 31, 1999, 1998, 1997, 1996 and 1995, the properties were 95%,
89%, 100%, 100% and 100% occupied, respectively.  The following is a schedule of
the average rent per property for each of the years ended December 31:

<TABLE>
<CAPTION>
                                         1999               1998                1997                 1996                1995
                                   ---------------    ---------------    -----------------    -----------------   -----------------
<S>                                <C>                <C>                <C>                  <C>                 <C>
Rental Revenues (1)                     $4,054,317         $4,059,988           $4,392,092           $4,357,033          $2,698,956
Properties                                      43                 44                   42                   43                  41
Average Rent per Property               $   94,286         $   92,272           $  104,574           $  101,326          $   65,828
</TABLE>

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

                                       6
<PAGE>

     The following is a schedule of lease expirations for leases in place as of
December 31, 1999 for the next ten years and thereafter.

<TABLE>
<CAPTION>
                                                               Percentage of
      Expiration          Number          Annual Rental         Gross Annual
         Year            of Leases          Revenues           Rental Income
    -------------     --------------    ----------------     -----------------
    <S>               <C>               <C>                  <C>
     2000                        --           $       --                  --
     2001                         1               28,562                0.71%
     2002                        --                   --                  --
     2003                        --                   --                  --
     2004                        --                   --                  --
     2005                        --                   --                  --
     2006                        --                   --                  --
     2007                        --                   --                  --
     2008                        --                   --                  --
     2009                         2              368,667                9.19%
     Thereafter                  38            3,657,088                90.1%
                         -----------        -------------      --------------
     Total (1)                   41           $4,054,317              100.00%
                         ===========        =============      ==============
</TABLE>

(1)  Excludes two Properties which were vacant at December 31, 1999.

     Leases with Major Tenants.  The terms of each of the leases with the
Partnership's major tenants as of December 31, 1999 (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 2011) and the
average minimum base annual rent is approximately $155,400 (ranging from
approximately $113,300 to $192,900).

     Jack in the Box Inc. leases five Jack in the Box restaurants.  The initial
term of each lease is 18 years (expiring between 2011 and 2012) and the average
minimum base annual rent is approximately $102,800 (ranging from approximately
$96,300 to $117,500).

     Phoenix Restaurant Group, Inc. leases nine Denny's restaurants.  The
initial term of each lease is 20 years (expiring between 2014 and 2015) and the
average minimum base annual rent is approximately $112,500 (ranging from
approximately $64,800 to $220,600).

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.


Item 3.  Legal Proceedings

     On May 11, 1999, four limited partners in several CNL Income Funds served a
derivative and purported class action lawsuit filed April 22, 1999 against the
general partners and APF in the Circuit Court of the Ninth Judicial Circuit of
Orange County, Florida, alleging that the general partners breached their
fiduciary duties and violated provisions of certain of the CNL Income Fund
partnership agreements in connection with the proposed Merger.  The plaintiffs
are seeking unspecified damages and equitable relief.  On July 8, 1999, the
plaintiffs filed an amended complaint which, in addition to naming three
additional plaintiffs, includes allegations of aiding and

                                       7
<PAGE>

abetting and conspiring to breach fiduciary duties, negligence and breach of
duty of good faith against certain of the defendants and seeks additional
equitable relief. As amended, the caption of the case is Jon Hale, Mary J.
                                                         ----------------
Hewitt, Charles A. Hewitt, Gretchen M. Hewitt, Bernard J. Schulte, Edward M. and
--------------------------------------------------------------------------------
Margaret Berol Trust, and Vicky Berol v. James M. Seneff, Jr., Robert A. Bourne,
--------------------------------------------------------------------------------
CNL Realty Corporation, and CNL American Properties Fund, Inc., Case No. CIO-99-
---------------------------------------------------------------
0003561.

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

     On September 23, 1999, Judge Lawrence Kirkwood entered an order
consolidating the two cases under the caption In re: CNL Income Funds
                                              -----------------------
Litigation, Case No. 99-3561.  Pursuant to this order, the plaintiffs in these
----------------------------
cases filed a consolidated and amended complaint on November 8, 1999.  On
December 22, 1999, the General Partners and CNL Group, inc. filed motions to
dismiss and motions to strike.  On December 28, 1999, APF and CNL Fund Advisors,
Inc. filed motions to dismiss.  On March 6, 2000, all of the defendants filed a
Joint Notice of Filing Form 8-K Reports and Suggestion of Mootness.


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

     Not applicable.


                                    PART II

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

(a)  As of March 15, 2000, there were 3,014 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 1999, Limited Partners who
wished to sell their Units may have offered the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their distributions used to acquire additional Units (to the
extent Units were available for purchase) may have done so pursuant to such
Plan. The General Partners had the right to prohibit transfers of Units. From
inception through December 31, 1999, the price paid for any Unit transferred
pursuant to the Plan range 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 1999 and 1998 other than
pursuant to the Plan, net of commissions.

<TABLE>
<CAPTION>
                                                    1999                                            1998
                                --------------------------------------------    --------------------------------------------
                                   High            Low            Average           High            Low           Average
                                -----------    -----------     -------------    -----------      ---------     -------------
     <S>                        <C>            <C>             <C>              <C>              <C>           <C>
     First Quarter                 $10.00          $8.77             $8.92             (2)            (2)               (2)
     Second Quarter                  6.99           6.99              6.99         $10.00          $8.00             $9.01
     Third Quarter                  10.00           7.91              8.64          10.00           8.00              8.68
     Fourth Quarter                  8.40           7.00              7.60           9.50           8.12              8.75
</TABLE>

                                       8
<PAGE>

(1)  A total of 23,210 and 11,350 Units were transferred other than pursuant to
     the Plan for the years ended December 31, 1999 and 1998.

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

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

     For the years ended December 31, 1999 and 1998, the Partnership declared
cash distributions of $3,600,000 and $3,690,000, respectively, to the Limited
Partners.  During the quarter ended March 31, 1998, the Partnership declared a
special distribution of $90,000 which represented cumulative excess operating
reserves.  No amounts distributed to partners for the years ended December 31,
1999 and 1998, are required to be or have been treated by the Partnership as a
return of capital for purposes of calculating the Limited Partners' return on
their adjusted capital contributions.  No distributions have been made to the
General Partners to date.  As indicated in the chart below, these distributions
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.

<TABLE>
<CAPTION>
           Quarter Ended                    1999                      1998
         -----------------           -------------------      ---------------------
          <S>                        <C>                      <C>
          March 31                             $900,000                   $990,000
          June 30                               900,000                    900,000
          September 30                          900,000                    900,000
          December 31                           900,000                    900,000
</TABLE>

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

(b)  Not Applicable

Item 6.  Selected Financial Data

<TABLE>
<CAPTION>
                                      1999                  1998                 1997                 1996                1995
                                 ---------------      ----------------      --------------       --------------      --------------
<S>                              <C>                  <C>                   <C>                  <C>                 <C>
Year ended December 31:
 Revenues (1)                       $ 4,059,810           $ 4,093,756         $ 4,455,994          $ 4,438,218         $ 3,023,641
 Net income (2)                       2,815,008             2,976,998           3,660,327            3,748,198           2,430,841
 Cash distributions
   declared (3)                       3,600,000             3,690,000           3,600,000            3,543,751           2,437,832
 Net income per Unit
   (2)(4)                                  0.62                  0.65                0.81                 0.82                0.60
 Cash distributions
   declared per Unit
   (3)(4)                                  0.80                  0.82                0.80                 0.79                0.61

At December 31:
 Total assets                       $39,710,973           $40,188,641         $40,938,320          $40,955,642         $41,240,500
 Partners' capital                   38,406,932            39,191,924          39,904,926           39,844,599          39,640,152
</TABLE>

(1)  Revenues include equity in earnings of joint ventures and adjustments to
     accrued rental income due to the tenants of certain Properties filing for
     bankruptcy.

(2)  Net income for the year ended December 31, 1999, includes $84,478 from loss
     on sale of land and building.  Net income for the year ended December 31,
     1998 includes $266,257 for a provision for loss on building.  Net income
     for the year ended December 31, 1996, includes $41,148 from gain on sale of
     land and building.

                                       9
<PAGE>

(3)  Distributions for the year ended December 31, 1998 include a special
     distribution to the Limited Partners of $90,000, which represented
     cumulative excess operating reserves.

(4)  Based on the weighted average number of Limited Partner Units outstanding
     during the years ended December 31, 1999, 1998, 1997, 1996, and 1995.

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


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, which are 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.  As of December 31, 1999, the Partnership owned 43 Properties, either
directly or indirectly through joint venture or tenancy in common arrangements.

Capital Resources

     Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, distributions from the
joint venture and interest received, less cash paid for expenses).  Cash from
operations was $3,151,231, $3,623,694, and $3,780,424 for the years ended
December 31, 1999, 1998, and 1997, respectively.  The decrease in cash from
operations during 1999 and 1998, each as compared to the previous year, is
primarily a result of changes in income and expenses as described in "Results of
Operations" below and changes in the Partnership's working capital.

     Other sources and uses of capital included the following during the years
ended December 31, 1999, 1998, and 1997.

     In March 1997, the Partnership sold its Property in Oviedo, Florida, for
$620,000 and received net sales proceeds of $610,384, resulting in a gain of
$41,148 for financial reporting purposes.  This Property was originally acquired
by the Partnership in November 1994 and had a cost of approximately $509,700,
excluding acquisition fees and miscellaneous acquisition expenses; therefore,
the Partnership sold the Property for approximately $100,700 in excess of its
original purchase price.  In January 1998, the Partnership reinvested the net
sales proceeds in an IHOP Property in Memphis, Tennessee, as tenants-in-common
with affiliates of the General Partners.  In connection therewith, the
Partnership and its affiliates entered into an agreement whereby each co-tenant
will share in the profits and losses of the Property in proportion to each co-
venturer's interest.  The Partnership owns a 40.42% interest in the Property.

     In April 1998, the Partnership received approximately $162,000 from the
developer of the Property in Farmington, New Mexico.  This represents a
reimbursement from the developer upon final reconciliation of total construction
costs to the total construction costs funded by the Partnership in accordance
with the development agreement.  In August 1998, the Partnership entered into a
joint venture arrangement, Columbus Joint Venture, with affiliates of the
General Partners, to construct, own and lease one restaurant Property.  As of
December 31, 1999, the Partnership had contributed approximately $293,000, of
which approximately $158,500 was contributed during 1999, to purchase land and
pay for construction costs relating to the joint venture.  As of December 31,
1999, the Partnership had a 32.35% interest in the profits and losses of the
joint venture.

     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 represents receivables for which the Partnership had
established an allowance for doubtful accounts, and real estate taxes previously
recorded as an expense by the Partnership. Payments are due in 60

                                       10
<PAGE>

monthly installments of $1,220 including interest at a rate of ten percent per
annum, commencing on March 1, 2000, at which time any accrued and unpaid
interest amounts will be capitalized into the principal balance of the note. Due
to the uncertainty of the collectibility of the note, the Partnership
established an allowance for doubtful accounts and is recognizing income as
collected. As of December 31, 1999, the balance in the allowance for doubtful
accounts relating to this promissory note was $56,540, including accrued
interest of $4,349. The Partnership has ceased collection efforts on the
remaining past due receivables not converted into the promissory note.

     In November 1999, the Partnership sold its Property in Lawrence, Kansas, to
a third party for $690,000 and received net sales proceeds of $667,311. As a
result of this transaction, the Partnership recognized a loss of $84,478 for
financial reporting purposes. The Partnership intends to reinvest these net
sales 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, pending reinvestment in additional
Properties, are invested in money market accounts or other short-term, highly
liquid investments such as demand deposit accounts at commercial banks,
certificates of deposit and money market accounts with less than a 30-day
maturity date, pending the Partnership's use of such funds to reinvest in
additional Properties, to pay Partnership expenses, or to make distributions to
partners.  At December 31, 1999, the Partnership had $1,637,753 invested in such
short-term investments as compared to $1,603,589 at December 31, 1998.  As of
December 31, 1999, the average interest rate earned on the rental income
deposited in demand deposit accounts at commercial banks was approximately 2
percent annually.  The funds remaining at December 31, 1999, after payment of
distributions and other liabilities, will be used to invest in additional
Property and meet the Partnership's working capital, commitment, and other
needs.

Short-Term Liquidity

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

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

     Due to low ongoing operating expenses and ongoing 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 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.

                                       11
<PAGE>

     The Partnership generally distributes cash from operations remaining after
the payment of the operating expenses of the Partnership, to the extent that the
General Partners determine that such funds are available for distribution.
Based on cash from operations, and for the year ended December 31, 1998,
cumulative excess operating reserves, the Partnership declared distributions to
the Limited Partners of $3,600,000, $3,690,000 and $3,600,000, for the years
ended December 31, 1999, 1998, and 1997, respectively.  This represents
distributions of $0.80, $0.82, and $0.80 per Unit for the years ended December
31, 1999, 1998, and 1997, respectively.  No amounts distributed to the Limited
Partners for the years ended December 31, 1999, 1998, and 1997, 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.

     In addition, during the years ended December 31, 1999, 1998, and 1997,
affiliates incurred on behalf of the Partnership $174,461, $125,080, and
$84,319, respectively, for certain operating expenses.  As of December 31, 1999,
1998 and 1997, the Partnership owed $73,853, $26,476 and $3,351, respectively,
to related parties for such amounts, accounting and administrative services and
management fees.  As of March 15, 2000, the Partnership had reimbursed the
affiliates all such amounts.  Other liabilities, including distributions
payable, increased to $1,230,188 at December 31, 1999, from $970,241 at December
31, 1998, partially as a result of the Partnership accruing construction costs
payable of $150,000 at December 31, 1999, as described in "Result of
Operations".  In addition, the increase in liabilities at December 31, 1999, was
partially a result of the Partnership accruing transaction costs relating to the
proposed Merger with APF, as described in "Termination of Merger".  The General
Partners believe that the Partnership has sufficient cash on hand to meet its
current working capital needs

Long-Term Liquidity

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

Results of Operations

     The Partnership owned and leased 42 wholly owned Properties (including one
Property in Oviedo, Florida, which was sold in March 1997) during 1997, 43
wholly owned Properties (including two Properties in Madison and Chattanooga,
Tennessee exchanged for two Properties in Lawrence, Kansas and Indianapolis,
Indiana), during 1998, and 41 wholly owned Properties (including one Property in
Lawrence, Kansas, which was sold in November 1999) during 1999.  In addition,
during 1997, the Partnership owned and leased one Property with an affiliate, as
tenants-in-common, and during 1999 and 1998, the Partnership was a co-venturer
in a joint venture arrangement that owned and leased one Property, and the
Partnership owned and leased two Properties with affiliates, as tenants-in-
common.  As of December 31, 1999, the Partnership owned, either directly, as
tenants-in-common or through a joint venture arrangement, 43 Properties which
are generally subject to long-term, triple-net leases that provide for minimum
base annual rental amounts (payable in monthly installments) ranging from
approximately $19,200 to $220,600.  All of the leases provide for percentage
rent based on sales in excess of a specified amount.  In addition, the majority
of the leases provide that, commencing in specified lease years (generally the
sixth lease year), the annual base rent required under the terms of the lease
will increase.  For a further description of the Partnership's leases and
Properties, see Item 1.  Business - Leases and Item 2.  Properties,
respectively.

     During the years ended December 31, 1999, 1998, and 1997, the Partnership
earned $3,751,479, $3,864,121, and $4,266,069, respectively, in rental income
from operating leases (net of adjustments to accrued rental income) and earned
income from direct financing leases from Properties wholly owned by the
Partnership.  Rental and earned income decreased approximately $133,700 and
$110,500 during the years ended December 31, 1999 and 1998, respectively, each
as compared the previous year, as a result of the fact that in 1998 three
tenants filed for bankruptcy and rejected the leases relating to four of the
seven Properties leased by these tenants.  As a result, these tenants ceased
making rental payments on the four rejected leases.  In conjunction with the
four rejected leases, during 1998, the Partnership wrote off approximately
$107,000 of accrued rental income (non-cash accounting adjustment relating to
the straight-lining of future scheduled rent increases over the lease term in
accordance with generally accepted accounting principles).  The Partnership has
continued receiving rental payments relating to the three leases not rejected by
the tenants.  In March 1999, the Partnership entered into a new lease with a new
tenant for one of the vacant Properties for which rental payments commenced in
April 1999,

                                       12
<PAGE>

thereby partially offsetting the decrease in rental and earned income. In
November 1999, the Partnership entered into a new lease with a new tenant for
one of the vacant Properties for which rental payments are expected to commence
in the first quarter of 2000. In addition, in November 1999, the Partnership
sold one of the vacant Properties and intends to reinvest the net sales proceeds
from the sale of this Property in an additional Property, as described in
"Capital Resources". The General Partners are currently seeking either a new
tenant or purchaser for the one remaining rejected and vacant Property. The
Partnership will not recognize any rental and earned income from this vacant
Property until a new tenant for this Property is located or until the Property
is sold and the proceeds from such sale are reinvested in an additional
Property. In August 1999, Long John Silver's, Inc. assumed and affirmed its one
remaining lease, and the Partnership has continued receiving rental payments
relating to this lease. While Finest Foodservices L.L.C. and Boston Chicken,
Inc. have not rejected or affirmed the remaining two leases, there can be no
assurance that one or both of these leases will not be rejected in the future.
The lost revenues resulting from the remaining rejected and vacant Property
could have an adverse effect on the results of operations of the Partnership if
the Partnership is not able to re-lease the Property in a timely manner.

     The decrease in rental and earned income during the years ended December 31
1999 and 1998, each as compared to the previous year, is also attributable to
the fact that in July 1998, the tenant of the Shoney's Property in Las Vegas,
Nevada vacated the Property and ceased making rental payments on this Property.
As a result, during the year ended December 31, 1998, the Partnership wrote off
approximately $77,300 of accrued rental income (non-cash accounting adjustments
relating to the straight-lining of future scheduled rent increases over the
lease term in accordance with generally accepted accounting principles) relating
to this Property.  The write-off of accrued rental income was partially offset
by the fact that the Partnership recorded approximately $140,100 in rental and
earned income during the year ended December 31, 1998 prior to the tenant
vacating the Property.  No rental and earned income was recognized during the
year ended December 31, 1999, relating to this tenant.  During 1998, the
Partnership established an allowance for doubtful accounts of approximately
$82,500 for rental and earned income amounts due from this tenant.  In February
1999, the Partnership entered into a new lease with a new tenant for this
Property for which rental payments commenced in August 1999.  In connection with
the new lease, the Partnership has agreed to fund up to $150,000 of the
construction costs necessary to convert this Property into a new concept.

     During the years ended December 31, 1999, 1998, and 1997, the Partnership
also earned $88,145, $35,860, and $35,604, respectively, in contingent rental
income. The increase in contingent rental income during 1999, as compared to
1998, was primarily attributable to the Partnership entering into a new lease
which required the payment of contingent rental income.

     In addition, for the years ended December 31, 1999, 1998, and 1997, the
Partnership earned $158,580, $132,002, and $73,507, respectively, attributable
to net income earned by joint ventures.  The increase in net income earned by
joint ventures during 1999, as compared to 1998, was primarily attributable to
the fact that in August 1998, the Partnership invested in Columbus Joint Venture
with affiliates of the General Partners, as described in "Capital Resources."
The increase in net income earned by joint ventures during 1998, as compared to
1997, was primarily attributable to the fact that in January 1998, the
Partnership reinvested the net sales proceeds it received from the 1997 sale of
the Property in Oviedo, Florida, in an IHOP Property in Memphis, Tennessee, with
affiliates of the General Partners as tenants-in-common.

     During the year ended December 31, 1999, three lessees of the Partnership,
Golden Corral Corporation, Jack in the Box, Inc., and Phoenix Restaurant Group,
Inc., each contributed more than ten percent of the Partnership's total rental
income (including the Partnership's share of rental income from the Property
owned by a joint venture and the two Properties owned with affiliates of the
General Partners as tenants-in-common).  As of December 31, 1999, Golden Corral
Corporation was the lessee under leases relating to six restaurants, Jack in the
Box, Inc. was the lessee under leases relating to five restaurants, and Phoenix
Restaurant Group, Inc. was the lessee under leases relating to nine restaurants.
It is anticipated that, based on the minimum rental payments required by the
leases, each of these lessees will continue to contribute more than ten percent
of the Partnership's total rental income in 2000.  In addition, during the year
ended December 31, 1999, three Restaurant Chains, Golden Corral, Jack in the
Box, and Denny's, each accounted for more than ten percent of the Partnership's
total rental income (including the Partnership's share of rental income from the
Property owned by a joint venture and the two Properties owned with affiliates
of the General Partners as tenants-in-common).  In 2000, it is anticipated that
each of these Restaurant Chains will continue to account for more than ten
percent of the total rental income to which the

                                       13
<PAGE>

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.

     Operating expenses, including depreciation and amortization expense, were
$1,160,324, $850,501, and $836,815 for the years ended December 31, 1999, 1998,
and 1997, respectively.  The increases  in operating expenses during 1999 and
1998, each as compared to the previous year, were primarily due to the fact that
the Partnership incurred $212,093 and $24,652, respectively, in transaction
costs relating to the General Partners retaining financial and legal advisors to
assist them in evaluating and negotiating the proposed Merger with APF, as
described in "Termination of Merger".

     In addition, the increases in operating expenses during 1999 and 1998, were
partially due to the fact that the Partnership incurred certain expenses, such
as real estate taxes, insurance, and maintenance relating to a Shoney's
Property, two Boston Market Properties and two Long John Silver's Properties
which became vacant during 1998, due to financial difficulties or bankruptcies,
as described above.  The Partnership entered into new leases with new tenants
for the Shoney's Property in Las Vegas, Nevada and the Long John Silver's
Properties in Celina, Ohio and Charlotte, North Carolina in February, March and
November 1999, respectively.  The new tenants are responsible for real estate
taxes, insurance, and maintenance relating to these three Properties.  In
addition, in November 1999, the Partnership sold the Boston Market Property in
Lawrence, Kansas.  The General Partners do not anticipate that the Partnership
will incur these expenses for these four Properties in the future.  However, the
Partnership will continue to incur such expenses, related to the one remaining
vacant Property until a new tenant for this Property is located or until the
Property is sold.  In addition, the increase in operating expenses during 1999
was partially attributable to an increase in depreciation expense due to the
fact that during 1998, the Partnership reclassified these leases from net
investment in direct financing leases to land and buildings on operating leases
as a result of lease terminations.

     Due to the fact that Long John Silver's, Inc. assumed and affirmed its one
remaining lease, as described above, Long John Silver's , Inc. will continue to
be responsible for real estate taxes, insurance, and maintenance relating to the
one Property it currently leases.  However, the Partnership will incur such
expenses, relating to one or both of the Properties still leased by Finest
Foodservice, L.L.C. and Boston Chicken, Inc., if one or both of the leases are
rejected.

     The increase in operating expenses during 1998, as compared to 1997, was
partially offset by a decrease in depreciation expense as a result of the
reimbursement of construction costs from the developer relating to the Property
in Farmington, New Mexico, which reduced the depreciable basis of land and
building on operating leases during 1998, as described above in "Capital
Resources."

     As a result of the sale of the Property in Lawrence, Kansas, as described
above in "Capital Resources," the Partnership recognized a loss of $84,478 for
financial reporting purposes during the year ended December 31, 1999.  As a
result of the sale of the Property in Oviedo, Florida, as described above in
"Capital Resources," the Partnership recognized a gain of $41,148 for financial
reporting purposes during the year ended December 31, 1997.  No Properties were
sold during 1998.

     During the year ended December 31, 1998, the Partnership recorded a
provision for loss on building of $266,257 for financial reporting purposes
relating to a Long John Silver's Property in Celina, Ohio.  The tenant of this
Property filed for bankruptcy and ceased payment of rents under the terms of its
lease agreement, as described above.  The allowance represents the difference
between the Property's carrying value at December 31, 1998 and the estimated net
realizable value for this Property.  No such allowance was established during
the years ended December 31, 1999 and 1997.

     The Partnership's leases as of December 31, 1999, 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.  Management expects that increases in restaurant sales volumes due
to inflation and real sales growth should result in an increase in rental income
over time.  Continued inflation also may cause capital appreciation of the
Partnership's Properties.  Inflation and changing prices, however,

                                       14
<PAGE>

also may have an adverse impact on the sales of the restaurants and on potential
capital appreciation of the Properties.

Termination of Merger

     On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with APF, pursuant to which the Partnership would be merged with and into
a subsidiary of APF.  Under the Agreement and Plan of Merger, APF was to issue
shares of its common stock as consideration for the Merger.  On March 1, 2000,
the General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger.  The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General Partners'
concern that, in light of market conditions relating to publicly traded real
estate investment trusts, the value of the transaction had diminished.  As a
result of such diminishment, the General Partners' ability to unequivocally
recommend voting for the transaction, in the exercise of their fiduciary duties,
had become questionable.

Overview of Year 2000 Problem

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

Status

     The Partnership generally does not directly own information technology
systems.  The General Partners and their affiliates generally provide all
services requiring the use of information and some non-information technology
systems.  In early 1998, affiliates of the General Partners formed a year 2000
committee ("the Y2K Team") that assessed the readiness of any systems that are
date sensitive and completed upgrades for the hardware equipment and software
that was not year 2000 compliant, as necessary.  The cost for these upgrades and
other remedial measures is the responsibility of the General Partners and their
affiliates.  The General Partners and their affiliates do not expect that the
Partnership will incur any costs in connection with the year 2000 remedial
measures.  In addition, the Y2K Team requested and received certifications of
compliance from other companies with which the General Partners, their
affiliates, and the Partnership have material third party relationships.

     In assessing the risks presented by the year 2000 problem, the Y2K Team
identified potential worst case scenarios involving the future of the
information and non-information technology systems used by the Partnership's
transfer agent, financial institutions and tenants.  As of January 14, 2000, the
General Partners and their affiliates have tested the information and non-
information technology systems used by the Partnership and have not experienced
material disruption or other significant problems.  In addition, as of the same
date, the General Partners are not aware of any material year 2000 problems
relating to information and non-information technology systems of third parties
with which the Partnership maintains material relationships, including those of
the Partnership's transfer agent, financial institutions and tenants.  In
addition, in the Partnership's interactions with its transfer agent, financial
institutions and tenants, the systems of these third parties have functioned
normally.  Until the Partnership's first distribution in 2000 and the delivery
of the information by the transfer agent to stockholders in early 2000, the
General Partners will continue to monitor the year 2000 compliance of the
transfer agent.  In addition, the General Partners will continue to monitor the
systems used by the Partnership and to maintain contact with third parties with
which the Partnership has material relationships with respect to year 2000
compliance and any year 2000 issues that may arise at a later date.  The General
Partners will develop contingency plans relating to ongoing year 2000 issues at
the time that such issues are identified and such plans are deemed necessary.

     Based on the information provided to the Y2K Team, the upgrades and
remedial measures by the General Partners and their affiliates, and the normal
functioning to date of information and non-information technology systems used
by the Partnership and those third parties, the General Partners do not foresee
significant risks associated with its year 2000 compliance at this time. In
addition, the General Partners and their affiliates do not expect to incur any
additional costs in connection with the year 2000 remedial efforts. However,
there can be no assurance that the General Partners and their affiliates or any
third parties will not have ongoing year 2000 issues that may have adverse
effects on

                                       15
<PAGE>

the Partnership.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

     Not applicable.


Item 8.  Financial Statements and Supplementary Data

                                      16
<PAGE>

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

                                   CONTENTS
                                   --------




<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                      <C>
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

  Notes to Financial Statements                                            25
</TABLE>

                                      17
<PAGE>


              Report of Independent Certified Public Accountants
              --------------------------------------------------


To the Partners
CNL Income Fund XVI, Ltd.



In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XVI, Ltd. (a Florida limited partnership) at December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States.  In addition, in
our opinion, the financial statement schedules listed in the index appearing
under item 14(a)(2) present fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements.  These financial statements and financial statement schedules are
the responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.  We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States 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 the opinion expressed above.



/s/ PricewaterhouseCoopers LLP

Orlando, Florida
February 4, 2000, except for Note 11 for which the date is March 1, 2000

                                      18
<PAGE>

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

                                BALANCE SHEETS
                                --------------

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

Land and buildings on operating leases, less
  accumulated depreciation and allowance
  for loss on building                                         $29,804,331             $30,215,549

Net investment in direct financing leases                        4,540,067               5,361,848
Investment in joint ventures                                     1,650,860               1,504,465
Cash and cash equivalents                                        1,637,753               1,603,589
Lease costs, less accumulated amortization
  $1,348 in 1999                                                    24,518                      --
Receivables, less allowance for doubtful
  accounts of $90,894 and $89,822,
  respectively                                                     287,757                  63,214

Prepaid expenses                                                    13,121                  13,745
Organization costs, less accumulated
  amortization of $10,000 and $8,550,
  respectively                                                          --                   1,450
Accrued rental income                                            1,752,566               1,424,781
                                                         -----------------     -------------------

                                                               $39,710,973             $40,188,641
                                                         =================     ===================

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

Acquisition and construction costs payable                     $   150,000             $        --
Accounts payable                                                   131,113                   1,816
Accrued and escrowed real estate taxes
  payable                                                            5,860                   7,163
Distributions payable                                              900,000                 900,000
Due to related parties                                              73,853                  26,476
Rents paid in advance and deposits                                  43,215                  61,262
                                                         -----------------     -------------------

     Total liabilities                                           1,304,041                 996,717


Partners' capital                                               38,406,932              39,191,924
                                                         -----------------     -------------------

                                                               $39,710,973             $40,188,641
                                                         =================     ===================
</TABLE>

                See accompanying notes to financial statements.

                                      19
<PAGE>

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

                             STATEMENTS OF INCOME
                             --------------------

<TABLE>
<CAPTION>
                                                                                   Year Ended December 31,
                                                                        1999                  1998                1997
                                                                   --------------        -------------       --------------
<S>                                                                <C>                   <C>                 <C>
Revenues:
  Rental income from operating leases                                  $3,193,136           $3,446,902           $3,562,920
  Adjustments to accrued rental income                                         --             (184,368)                  --
  Earned income from direct financing leases                              558,343              601,587              703,149
  Contingent rental income                                                 88,145               35,860               35,604
  Interest income                                                          49,008               60,199               73,634
  Other income                                                             12,598                1,574                7,180
                                                                   --------------        -------------       --------------
                                                                        3,901,230            3,961,754            4,382,487
                                                                   --------------        -------------       --------------
Expenses:
  General operating and administrative                                    183,150              158,519              186,934
  Professional services                                                    53,282               40,471               25,352
  Management fees to related parties                                       37,385               38,570               40,087
  Real estate taxes                                                        59,895                9,060                   --
  State and other taxes                                                    25,599               19,398               20,559
  Loss on termination of direct financing lease                                --                4,471                   --
  Depreciation and amortization                                           588,920              555,360              563,883
  Transaction costs                                                       212,093               24,652                   --
                                                                   --------------        -------------       --------------
                                                                        1,160,324              850,501              836,815
                                                                   --------------        -------------       --------------
Income Before Equity in Earnings of Joint
  Ventures, Gain (Loss) on Sale of Land and
  Buildings, and Provision for Loss on Building                         2,740,906            3,111,253            3,545,672

Equity in Earnings of Joint Ventures                                      158,580              132,002               73,507

Gain (Loss) on Sale of Land and Buildings                                 (84,478)                  --               41,148

Provision for Loss on Building                                                 --             (266,257)                  --
                                                                   --------------        -------------       --------------
Net Income                                                             $2,815,008           $2,976,998           $3,660,327
                                                                   ==============        =============       ==============

Allocation of Net Income
  General partners                                                     $   28,717           $   31,685           $   36,192
  Limited partners                                                      2,786,291            2,945,313            3,624,135
                                                                   --------------        -------------       --------------
                                                                       $2,815,008           $2,976,998           $3,660,327
                                                                   ==============        =============       ==============

Net Income Per Limited Partner Unit                                    $     0.62           $     0.65           $     0.81
                                                                   ==============        =============       ==============

Weighted Average Number of
  Limited Partner Units Outstanding                                     4,500,000            4,500,000            4,500,000
                                                                   ==============        =============       ==============
</TABLE>

                See accompanying notes to financial statements.

                                      20
<PAGE>

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

                        STATEMENTS OF PARTNERS' CAPITAL
                        -------------------------------

                 Years Ended December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
                                       General Partners                                 Limited Partners
                                ------------------------------  ----------------------------------------------------------------
                                                  Accumulated                                      Accumulated    Syndication
                                 Contributions     Earnings      Contributions    Distributions      Earnings        Costs
                                ---------------  -------------  ---------------  ---------------  --------------  --------------
<S>                             <C>              <C>            <C>              <C>              <C>            <C>
Balance, December 31, 1996       $       1,000    $    62,423    $  45,000,000    $  (6,133,017)   $   6,304,193  $  (5,390,000)

 Distributions to limited
   partners ($0.80 per
   limited partner unit)                    --             --               --       (3,600,000)              --             --
 Net Income                                 --         36,192               --               --        3,624,135             --
                                 -------------    -----------    -------------    -------------    -------------  -------------

Balance, December 31, 1997               1,000         98,615       45,000,000       (9,733,017)       9,928,328     (5,390,000)

 Distributions to limited
   partners ($0.82 per
   limited partner unit)                    --             --               --       (3,690,000)              --             --
 Net income                                 --         31,685               --               --        2,945,313             --
                                 -------------    -----------    -------------    -------------    -------------  -------------

Balance, December 31, 1998               1,000        130,300       45,000,000      (13,423,017)      12,873,641     (5,390,000)

 Distributions to limited
   partners ($0.80 per
   limited partner unit)                    --             --               --       (3,600,000)              --             --
 Net income                                 --         28,717               --               --        2,786,291             --
                                 -------------    -----------    -------------    -------------    -------------  -------------

Balance, December 31, 1999       $       1,000    $   159,017    $  45,000,000    $ (17,023,017)   $  15,659,932  $  (5,390,000)
                                 =============    ===========    =============    =============    =============  =============

<CAPTION>
                                 --------------
                                      Total
                                 --------------
<S>                              <C>
Balance, December 31, 1996       $  39,844,599

 Distributions to limited
   partners ($0.80 per
   limited partner unit)            (3,600,000)
 Net Income                          3,660,327
                                 -------------

Balance, December 31, 1997          39,904,926

 Distributions to limited
   partners ($0.82 per
   limited partner unit)            (3,690,000)
 Net income                          2,976,998
                                 -------------

Balance, December 31, 1998          39,191,924

 Distributions to limited
   partners ($0.80 per
   limited partner unit)            (3,600,000)
 Net income                          2,815,008
                                 -------------

Balance, December 31, 1999       $  38,406,932
                                 =============

</TABLE>

                See accompanying notes to financial statements.

                                       21
<PAGE>

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

                           STATEMENTS OF CASH FLOWS
                           ------------------------

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                               1999                 1998                 1997
                                                          ---------------      ---------------      ---------------
<S>                                                       <C>               <C>                     <C>
Increase (Decrease) in Cash and Cash
 Equivalents:

Cash Flows from Operating Activities:
     Cash received from tenants                           $     3,341,862      $     3,675,430      $     3,881,005
     Distributions from joint venture                             170,697              143,279               76,212
     Cash paid for expenses                                      (410,336)            (273,929)            (231,712)
     Interest received                                             49,008               78,914               54,919
                                                          ---------------      ---------------      ---------------
       Net cash provided by operating
         activities                                             3,151,231            3,623,694            3,780,424
                                                          ---------------      ---------------      ---------------

   Cash Flows from Investing Activities:
     Proceeds from sale of land and buildings                     667,311                   --              610,384
     Reimbursement of construction costs
       from developer                                                  --              161,648                   --
      Additions to land and buildings on
       operating leases                                                --               (3,545)             (23,501)
     Investment in direct financing leases                             --              (28,403)             (29,257)
     Investment in joint ventures                                (158,512)            (744,058)                  --
     Decrease (increase) in restricted cash                            --              610,384             (610,384)
     Payment of lease costs                                       (25,866)                  --                   --
                                                          ---------------      ---------------      ---------------
       Net cash used in investing activities                      482,933               (3,974)             (52,758)
                                                          ---------------      ---------------      ---------------

   Cash Flows from Financing Activities:
     Distributions to limited partners                         (3,600,000)          (3,690,000)          (3,600,000)
                                                          ---------------      ---------------      ---------------
       Net cash used in financing activities                   (3,600,000)          (3,690,000)          (3,600,000)
                                                          ---------------      ---------------      ---------------

Net Increase (Decrease) in Cash and Cash
Equivalents                                                        34,164              (70,280)             127,666

Cash and Cash Equivalents at Beginning of Year                  1,603,589            1,673,869            1,546,203
                                                          ---------------      ---------------      ---------------

Cash and Cash Equivalents at End of Year                  $     1,637,753      $     1,603,589      $     1,673,869
                                                          ===============      ===============      ===============
</TABLE>

                See accompanying notes to financial statements.

                                       22
<PAGE>

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

                     STATEMENTS OF CASH FLOWS - CONTINUED
                     ------------------------------------



<TABLE>
<CAPTION>
                                                                                    Year Ended December 31,
                                                                       1999                  1998                  1997
                                                                   ------------          ------------          ------------
<S>                                                                <C>                   <C>                   <C>
Reconciliation of Net Income to Net Cash Provided
  by Operating Activities:

   Net Income                                                      $  2,815,008          $  2,976,998          $  3,660,327
                                                                   ------------          ------------          ------------
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Loss on termination of direct financing
         lease                                                               --                 4,471                    --
       Depreciation                                                     586,122               553,360               561,883
       Amortization                                                       2,798                 2,000                 2,000
       Equity in earnings of joint ventures, net
         of distributions                                                12,117                11,277                 2,705
       Loss (gain) on sale of land and buildings                         84,478                    --               (41,148)
       Provision for loss on building                                        --               266,257                    --
       Decrease (increase) in receivables                              (220,782)              (13,753)               26,633
       Decrease in net investment in direct
         financing leases                                                41,327                43,343                37,684
       Decrease (increase) in prepaid expenses                              624                (4,452)                 (119)
       Increase in accrued rental income                               (327,785)             (232,408)             (444,650)
       Increase in accounts payable and
         accrued expenses                                               127,994                 1,919                 1,455
       Increase in due to related parties                                47,377                23,125                 1,059
       Decrease in rents paid in
         advance and deposits                                           (18,047)               (8,443)              (27,405)
                                                                   ------------          ------------          ------------
         Total adjustments                                              336,223               646,696               120,097
                                                                   ------------          ------------          ------------

Net Cash Provided by Operating Activities                          $  3,151,231          $  3,623,694          $  3,780,424
                                                                   ============          ============          ============
</TABLE>

                See accompanying notes to financial statements

                                       23
<PAGE>

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

                     STATEMENTS OF CASH FLOWS - CONTINUED
                     ------------------------------------


<TABLE>
<CAPTION>
                                                                                   Years Ended December 31,
                                                                        1999                 1998                  1997
                                                                    ------------         ------------         ------------
<S>                                                                 <C>                  <C>                  <C>
Supplemental Schedule of Non-Cash Investing and
  Financing Activities:

   Land and building under operating lease
     exchanged for land and building under
     operating lease                                                $         --         $    779,181         $         --
                                                                    ============         ============         ------------

   Land and building under direct financing lease
     exchanged for land and building under direct
     financing lease                                                $         --         $    761,334         $         --
                                                                    ============         ============         ============

   Distributions declared and unpaid at December   31               $    900,000         $    900,000         $    900,000
                                                                    ============         ============         ============
</TABLE>

                See accompanying notes to financial statements

                                       24
<PAGE>

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

                         NOTES TO FINANCIAL STATEMENTS
                         -----------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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, 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 percent shareholders of the Corporate
     General Partner.  The general partners have responsibility for managing the
     day-to-day operations of the Partnership.

     Real Estate and Lease Accounting - The Partnership records the acquisition
     --------------------------------
     of land and buildings at cost, including acquisition and closing costs.
     Land and buildings are leased to unrelated third parties on a triple-net
     basis, whereby the tenant is generally responsible for all operating
     expenses relating to the property, including property taxes, insurance,
     maintenance and repairs.  The leases are accounted for using either the
     direct financing or the operating methods.  Such methods are described
     below:

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

          Operating method - Land and building leases accounted for
          using the operating method are recorded at cost, revenue is
          recognized as rentals are earned and depreciation is charged
          to operations as incurred. Buildings are depreciated on the
          straight-line method over their estimated useful lives of 30
          years. When scheduled rentals 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.

                                       25
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

          Accrued rental income represents the aggregate amount of
          income recognized on a straight-line basis in excess of
          scheduled rental payments to date. Whenever a tenant
          defaults under the terms of its lease, or events or changes
          in circumstance indicate that the tenant will not lease the property
          through the end of the lease term, the Partnership either reserves or
          reverses the cumulative accrued rental income balance.

     When the properties are sold, the related cost and accumulated depreciation
     for operating leases and the net investment for direct financing leases,
     plus any accrued rental income, are removed from the accounts and gains or
     losses from sales are reflected in income.  The general partners of the
     partnership review properties for impairment whenever events or changes in
     circumstances indicate that the carrying amount of the assets may not be
     recoverable through operations.  The general partners determine whether an
     impairment in value has occurred by comparing the estimated future
     undiscounted cash flows, including the residual value of the property, with
     the carrying cost of the individual property.  If an impairment is
     indicated, the assets are adjusted to their fair value.  Although the
     general partners have made their best estimate of these factors based on
     current conditions, it is reasonably possible that changes could occur in
     the near term which could adversely affect the general partners' best
     estimate of net cash flows expected to be generated from its properties and
     the need for asset impairment write downs.

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

     Investment in Joint Ventures - The Partnership's investments in Columbus
     ----------------------------
     Joint Venture and the properties in Corpus Christi, Texas and Memphis,
     Tennessee, each of which is held as tenants-in-common with affiliates, are
     accounted for using the equity method since the Partnership shares control
     with affiliates which have the same general partners.

                                       26
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

     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.  The Partnership limits investment of temporary cash investments
     to financial institutions with high credit standing; therefore, the
     Partnership believes it is not exposed to any significant credit risk on
     cash and cash equivalents.

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

     Lease Costs - Brokerage fees associated with negotiating a new lease 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.

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

                                       27
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

     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.

2.   Leases:
     ------

     The Partnership leases its land or land and buildings primarily to
     operators of national and regional fast-food and family-style restaurants.
     The leases are accounted for under the provisions of Statement of Financial
     Accounting Standards No. 13, "Accounting for Leases."  Some of the leases
     are classified as operating leases and some of the leases have been
     classified as direct financing leases.  For the leases classified as direct
     financing leases, the building portions of the property leases are
     accounted for as direct financing leases while the land portion of some of
     the leases are operating leases.  The majority of the leases are for 15 to
     20 years and provide for minimum and contingent rentals.  In addition, the
     tenant pays all property taxes and assessments, fully maintains the
     interior and exterior of the building and carries insurance coverage for
     public liability, property damage, fire and extended coverage.  The lease
     options generally allow 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.

                                       28
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

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

<TABLE>
<CAPTION>
                                                                1999                  1998
                                                            ------------           ------------
          <S>                                               <C>                    <C>
          Land                                              $ 15,034,850           $ 15,378,217
          Buildings                                           17,540,422             17,045,781
                                                            ------------           ------------
                                                              32,575,272             32,423,998

          Less accumulated depreciation                       (2,504,684)            (1,942,192)
                                                            ------------           ------------
                                                              30,070,588             30,481,806
          Less allowance for loss on
           building                                             (266,257)              (266,257)
                                                            ------------           ------------

                                                            $ 29,804,331           $ 30,215,549
                                                            ============           ============
</TABLE>

     In March 1997, the Partnership sold its property in Oviedo, Florida, for
     $620,000 and received net sales proceeds of $610,384, resulting in a gain
     of $41,148 for financial reporting purposes.  This property was originally
     acquired by the Partnership in November 1994 and had a cost of
     approximately $509,700, excluding acquisition fees and miscellaneous
     acquisition expenses; therefore, the Partnership sold the property for
     approximately $100,700 in excess of its original purchase price.

     In May 1998, the tenant of the property in Madison, Tennessee exercised its
     option under the terms of its lease agreement, to exchange one existing
     property with a replacement property.  In conjunction therewith, the
     Partnership exchanged the Boston Market property in Madison, Tennessee for
     a Boston Market property in Lawrence, Kansas.  The lease for the property
     in Madison, Tennessee was amended to allow the property in Lawrence, Kansas
     to continue under the terms of the original lease.  All closing costs were
     paid by the tenant.  The Partnership accounted for this as a nonmonetary
     exchange of similar assets and recorded the acquisition of the property in
     Lawrence, Kansas at the net book value of the property in Madison,
     Tennessee.  No gain or loss was recognized due to this being accounted for
     as a monetary exchange of similar assets.

                                       29
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

     During the year ended December 31, 1998, the Partnership recorded a
     provision for loss on building of $266,257 relating to the Long John
     Silver's property located in Celina, Ohio.  The tenant of this Property
     filed for bankruptcy and ceased payment of rents under the terms of its
     lease agreement.  The allowance represents the difference between the
     carrying value of the property at December 31, 1998, and the current
     estimate of net realizable value for this property.

     In November 1999, the Partnership sold its property in Lawrence, Kansas to
     a third party for $690,000, and received net sales proceeds of $667,311,
     resulting in a loss of $84,478 for financial reporting purposes.

     Generally, the leases provide for escalating guaranteed minimum rents
     throughout the lease term.  Income from these scheduled rent increases is
     recognized on a straight-line basis over the terms of the leases.  For the
     years ended December 31, 1999, 1998, and 1997, the Partnership recognized
     $327,785 (net of $6,098 in reserves), $232,408 (net of $184,368 in
     reversals), and $444,650, respectively, of such rental income.

     The following is a schedule of the future minimum lease payments to be
     received on noncancellable operating leases at December 31, 1999:

               2000                          $ 3,113,211
               2001                            3,146,762
               2002                            3,155,130
               2003                            3,163,212
               2004                            3,213,456
               Thereafter                     29,202,829
                                             -----------

                                             $44,994,600
                                             ===========

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

                                       30
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

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

<TABLE>
<CAPTION>
                                                           1999                1998
                                                        -----------         -----------
          <S>                                           <C>                 <C>
          Minimum lease payments
            receivable                                  $ 9,316,791         $11,674,487
          Estimated residual values                       1,507,809           1,710,925
          Less unearned income                           (6,284,533)         (8,023,564)
                                                        -----------         -----------
          Net investment in direct
            financing leases                            $ 4,540,067         $ 5,361,848
                                                        ===========         ===========
</TABLE>

     The following is a schedule of future minimum lease payments to be received
     on direct financing leases at December 31, 1999:

          2000                                                    $  584,158
          2001                                                       587,224
          2002                                                       593,235
          2003                                                       597,718
          2004                                                       598,373
          Thereafter                                               6,356,083
                                                                  ----------

                                                                  $9,316,791
                                                                  ==========

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

     In June 1998, the tenant of the property in Chattanooga, Tennessee
     exercised its option under the terms of its lease agreement, to exchange
     one existing property with a replacement  property.  In conjunction
     therewith, the Partnership exchanged the Boston Market property in
     Chattanooga, Tennessee for a Boston Market property in Indianapolis,
     Indiana.  The lease for the property in Chattanooga, Tennessee was amended
     to allow the property in Indianapolis, Indiana to continue under the terms
     of the original lease.  All closing costs were paid by the tenant.  The
     Partnership accounted for this as a nonmonetary exchange of similar assets
     and recorded the acquisition of the property in Indianapolis, Indiana at
     the net book value of the property in Chattanooga, Tennessee.

                                       31
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

     No gain or loss was recognized due to this being accounted for as a
     nonmonetary exchange of similar assets.

     During the year ended December 31, 1998, one of the Partnership's leases
     with Long John Silver's, Inc. was rejected in connection with the tenant
     filing for bankruptcy.  As a result, the Partnership reclassified the asset
     from net investment in direct financing leases to land and buildings on
     operating leases.  In accordance with Statement of Financial Accounting
     Standards No. 13, "Accounting for Leases," the Partnership recorded the
     reclassified asset at the lower of original cost, present fair value, or
     present carrying amount, which resulted in a loss on the termination of a
     direct financing lease of $4,471 for financial reporting purposes.

     During the year ended December 31, 1999, the tenant of the Shoney's
     property in Las Vegas, Nevada terminated its lease due to financial
     difficulties. As a result, the Partnership reclassified the asset from net
     investment in direct financing leases to land and buildings on operating
     leases. In accordance with Statement of Financial Accounting Standards No.
     13, "Accounting for Leases," the Partnership recorded the reclassified
     asset at the lower of original cost, present fair value, or present
     carrying amount. No loss on termination of direct financing lease was
     recorded for financial reporting purposes.

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

     The Partnership owns a property in Fayetteville, North Carolina, as
     tenants-in-common with an affiliate of the general partners. As of December
     31, 1999, the Partnership owned an 80.44% interest in this property.

     In January 1998, the Partnership acquired a 40.42% interest in an IHOP
     property in Memphis, Tennessee, as tenants-in-common with affiliates of the
     general partners. Amounts relating to its investment are included in
     investment in joint ventures.

                                       32
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

     In August 1998, the Partnership entered into a joint venture arrangement,
     Columbus Joint Venture, with affiliates of the general partners, to
     construct and hold one restaurant property.  As of December 31, 1999, the
     Partnership had contributed approximately $293,000, of which approximately
     $158,500 was contributed during 1999, to purchase land and pay construction
     costs relating to the joint venture.  As of December 31, 1999, the
     Partnership owned a 32.35% interest in this joint venture.

     Columbus Joint Venture and the Partnership and affiliates, as tenants-in-
     common in two separate tenancy-in-common arrangements, each own and lease
     one property to operators of national fast-food and family-style
     restaurants.  The following presents the combined, condensed financial
     information for the joint venture and the properties held as tenants-in-
     common with affiliates at December 31:

<TABLE>
<CAPTION>
                                                               1999                  1998
                                                             ----------           ----------
               <S>                                           <C>                  <C>
               Land and buildings on operating
                 leases, less accumulated
                 depreciation                                $3,240,248           $3,274,577
               Cash                                               7,963                4,825
               Prepaid expenses                                     581                  197
               Accrued rental income                            100,220               56,105
               Liabilities                                       20,919              477,951
               Partners' capital                              3,328,093            2,857,753
               Revenues                                         386,985              284,333
               Net income                                       317,252              235,485
</TABLE>

     The Partnership recognized income totalling $158,580, $132,002, and $73,507
     for the years ended December 31, 1999, 1998, and 1997, respectively, from
     the joint ventures and the properties held as tenants-in-common with
     affiliates of the general partners.

                                       33
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


6.   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 representing real estate taxes
     previously recorded as an expense by the Partnership and past due rental
     and other amounts, which had been included in receivables for financial
     statement purposes and for which the Partnership had established an
     allowance for doubtful accounts.  Payments are 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, any accrued and unpaid
     interest amounts will be capitalized into the principal balance of the
     note.  Due to the uncertainty of collection of the note, the Partnership
     established an allowance for doubtful accounts.  As of December 31, 1999,
     the balance in the allowance for doubtful accounts relating to this
     promissory note was $56,540, including accrued interest of $4,349.

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

     Generally, net income and losses of the Partnership, excluding gains and
     losses from the sale of properties, are allocated 99 percent to the limited
     partners and one percent to the general partners.  Distributions of net
     cash flow are made 99 percent to the limited partners and one percent to
     the general partners; provided, however, that the one percent of net cash
     flow to be distributed to the general partners shall be 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").

     Generally, net sales proceeds the sale of properties not in liquidation of
     the Partnership, to the extent distributed, will be 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 will then receive, 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 will be distributed 95 percent 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 is, in general,
     allocated in the same manner as net sales proceeds are distributable. Any
     loss from the sale of a property is, in general, allocated first, on a pro
     rata basis, to partners with positive balances in their capital accounts;
     and thereafter, 95 percent to the limited partners and five percent to the
     general partners.

                                       34
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

     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 percent to the limited partners and five percent to
     the general partners.

     During the years ended December 31, 1999, 1998, and 1997, the Partnership
     declared distributions to the limited partners of $3,600,000, $3,690,000,
     and $3,600,000, respectively.  No distributions have been made to the
     general partners to date.

                                       35
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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>
                                                                            1999                 1998                 1997
                                                                         ----------           ----------           ----------
       <S>                                                               <C>                  <C>                  <C>
       Net income for financial reporting purposes                       $2,815,008           $2,976,998           $3,660,327

       Depreciation for tax reporting purposes less
         than  depreciation for financial reporting
         purposes                                                            38,885                  809                3,576

       Allowance for loss on building                                            --              266,257                   --

       Direct financing leases recorded as operating
         leases for tax reporting purposes                                   41,327               43,343               37,684

       Loss on termination of direct financing leases                            --                4,471                   --

       Equity in earnings of joint ventures for
         financial reporting purposes in excess of
         equity in earnings of joint ventures for tax
         reporting purposes                                                  (9,081)             (11,217)                (477)

       Gain on sale of land and buildings for
         financial reporting purposes less than (in
         excess of) gain for tax reporting purposes                         (17,919)                  --               23,764

       Allowance for doubtful accounts                                        1,072               88,943               (8,996)

       Accrued rental income                                               (327,785)            (232,408)            (444,650)

       Rents paid in advance                                                (20,042)              (8,443)             (27,405)

       Capitalization of transaction costs for tax
         reporting purposes                                                 212,093               24,652                   --

       Other                                                                     --                  212                   --

                                                                         ----------           ----------           ----------
       Net income for federal income tax purposes                        $2,733,558           $3,153,617           $3,243,823
                                                                         ==========           ==========           ==========
</TABLE>

                                       36
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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
     Fund Advisors, Inc. (the "Advisor") was a majority owned subsidiary of CNL
     Financial Group, Inc. until it merged with CNL American Properties Fund,
     Inc. ("APF"), effective September 1, 1999.  The individual general partners
     are stockholders and directors of APF.

     The Advisor provides certain services relating to management of the
     Partnership and its properties pursuant to a management agreement with the
     Partnership.  In connection therewith, the Partnership has agreed to pay
     the Advisors 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.  The
     management fee, which will not exceed fees which are competitive for
     similar 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 or 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.  The Partnership incurred
     management fees of $37,385, $38,570, and $40,087,for the years ended
     December 31, 1999, 1998, and 1997, 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.

                                       37
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

     During the years ended December 31, 1999, 1998, and 1997, the Advisor and
     its  affiliates provided accounting and administrative services to the
     Partnership on a day-to-day basis including services relating to the
     proposed and terminated merger as described in Note 11.  The Partnership
     incurred $138,583, $102,840, and $89,270 for the years ended December 31,
     1999, 1998, and 1997, respectively, for such services.

     The due to related parties at December 31, 1999 and 1998 totalled $73,853
     and $26,476, respectively.

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

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

<TABLE>
<CAPTION>
                                                     1999          1998           1997
                                                  ----------    ----------     ----------
       <S>                                        <C>           <C>            <C>
       Phoenix Restaurant Group, Inc.
           (formerly known as DenAmerica
           Corporation)                           $1,143,192    $1,164,160     $1,046,845

       Golden Corral Corporation                     968,456       971,344        979,009
       Jack in the Box, Inc.
           (formerly known as
           Foodmaker, Inc.)
                                                     556,610       558,466        556,610
</TABLE>

                                       38
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


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

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

<TABLE>
<CAPTION>
                                            1999            1998           1997
                                         ----------      ----------     ----------
       <S>                               <C>             <C>            <C>
       Denny's                           $1,143,192      $1,164,160     $1,164,928
       Golden Corral Family
        Steakhouse Restaurants              968,456         971,344        979,009
       Jack in the Box                      556,610         558,466        556,610
       Boston Market                            N/A         467,043        329,300
</TABLE>

     The information denoted by N/A indicates that for each period presented,
     the tenant or group of affiliated tenants and the chain did not represent
     more than ten percent of the Partnership's total rental and earned income.

     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.

     In October 1998, Finest Foodservice, L.L.C. and Boston Chicken, Inc., the
     tenants of four Boston Market properties filed for bankruptcy and rejected
     the leases relating to two properties.  In November 1999, the Partnership
     sold one of the vacant properties.  The Partnership will not recognize any
     rental and earned income from the one remaining, vacant property until a
     new tenant for the property is located, or until the property is sold and
     the proceeds from such sale are reinvested in an additional property.
     While the tenants have not rejected or affirmed the remaining two leases,
     there can be no assurance that some or all of the leases will not be
     rejected in the future.  The lost revenues resulting from the two leases
     that were rejected, as described above, and the possible rejection of the
     remaining two leases could have an adverse effect on the results of
     operations of the Partnership if the Partnership is not able to re-lease
     these properties in a timely manner.

                                       39
<PAGE>

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

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                   -----------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997


11.  Termination of Merger:
     ---------------------

     On March 11, 1999, the Partnership entered into an Agreement and Plan of
     Merger with APF, pursuant to which the Partnership would be merged with and
     into a subsidiary of APF.  Under the Agreement and Plan of Merger, APF was
     to issue shares of its common stock as consideration for the Merger.  On
     March 1, 2000, the General Partners and APF announced that they had
     mutually agreed to terminate the Agreement and Plan of Merger.  The
     agreement to terminate the Agreement and Plan of Merger was based, in large
     part, on the General Partners' concern that, in light of market conditions
     relating to publicly traded real estate investment trusts, the value of the
     transaction had diminished.  As a result of such diminishment, the General
     Partners' ability to unequivocally recommend voting for the transaction, in
     the exercise of their fiduciary duties, had become questionable.

                                       40
<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
Fund Advisors, Inc., CNL Financial Group, Inc. and their affiliates, all of
which are affiliates of the General Partners.

     James M. Seneff, Jr., age 53,  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 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.  Mr. Seneff has served as
a director and Chairman of the Board since inception in 1994, and served as
Chief Executive Officer from 1994 through August 1999, of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust.  He also
served as a director, Chairman of the Board and Chief Executive Officer of CNL
Fund Advisors, Inc., the advisor to CNL American Properties Fund, Inc. until it
merged with the company in September 1999.  In addition, he serves as a
director, Chairman of the Board and Chief Executive Officer of CNL Health Care
Properties, Inc., as well as CNL Health Care Corp., the advisor to the company.
He also serves as 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.  Since 1992, Mr. Seneff
has served as 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 the following affiliated companies
since formation: CNL Securities Corp., since 1979; CNL Investment Company, since
1990; and CNL Institutional Advisors, 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 CNLBank.  Mr. Seneff 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 is Florida's principal investment advisory and
money management agency and 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 52,  Since joining CNL Securities Corp. in 1979, 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 the President and Treasurer of CNL Financial Group,
Inc. (formerly CNL Group, Inc.).  Mr. Bourne has served as a director since
inception in 1994, President from 1994 through February 1999, Treasurer from
February 1999 through August 1999, and Vice Chairman of the Board since February
1999 of CNL American Properties Fund, Inc., a public, unlisted real estate
investment trust.  He also served in the following positions for CNL Fund
Advisors, Inc., the advisor to CNL American Properties Fund, Inc. prior to its
merger with CNL American Properties Fund, Inc.: director from 1994 through
August 1999, Treasurer from July 1998 through August 1999, President from 1994
through September 1997, and Vice Chairman of the Board from September 1997
through August 1999.  Mr. Bourne is a director and President of CNL Health Care
Properties, Inc., as well as a director and President of CNL Health

                                       41
<PAGE>

Care Corp., the advisor to the company. He is also a director, Vice Chairman of
the Board and President of CNL Hospitality Properties, Inc., a public, unlisted
real estate investment trust, as well as CNL Hospitality Corp., its advisor. Mr.
Bourne also serves as a director of CNLBank. 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 holds the following positions
for these affiliates of CNL Financial Group, Inc.: director, President and
Treasurer of CNL Investment Company; director, President, Treasurer, and
Registered Principal of CNL Securities Corp., a subsidiary of CNL Investment
Company and director, President, Treasurer, and Chief Investment Officer of 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.

     CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida.  Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners.  CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners.  CNL Realty Corporation currently
serves as the corporate general partner of the CNL Income Fund Partnerships.

     CNL Fund Advisors, Inc. provides certain management services in connection
with the Partnership and its Properties.  CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 450 South Orange Avenue, Orlando, Florida 32801.
CNL Fund Advisors, Inc. was a majority owned subsidiary of CNL Financial Group,
Inc., until its merger effective September 1, 1999.  On September 1, 1999, CNL
American Properties Fund, Inc. acquired CNL Fund Advisors, Inc. and was
organized to perform property acquisition, property management and other
services.

     CNL Financial Group, Inc., which was the parent company of CNL Fund
Advisors, Inc. through August 1999, was organized in 1980 under the laws of the
State of Florida.  CNL Financial Group, Inc. is a diversified real estate
company which provides a wide range of real estate, development and financial
services to companies in the United States through the activities of its
subsidiaries.  These activities are primarily focused on the franchised
restaurant and hospitality industries.  James M. Seneff, Jr., an individual
General Partner of the Partnership, is the Chairman of the Board, Chief
Executive Officer, and a director of CNL Financial Group, Inc.  Mr. Seneff and
his wife own all of the outstanding shares of CNL Holdings, Inc., the Parent
company of CNL Financial Group, Inc.

     The following persons serve as operating officers of CNL Financial Group,
Inc. or its affiliates or subsidiaries in the discretion of the Boards of
Directors of those companies, but, except as specifically indicated, do not
serve as members of the Boards of Directors of those entities.  The Boards of
Directors have the responsibility for creating and implementing the policies of
CNL Financial Group, Inc. and its affiliated companies.

     Curtis B. McWilliams, age 44, joined CNL Financial Group, Inc. in April
1997 and served as an Executive Vice President through August 1999.  He serves
as Chief Executive Officer of CNL American Properties Fund, Inc. and CNL Fund
Advisors, Inc.  In addition, Mr. McWilliams served as President of CNL Fund
Advisors, Inc. and as President of the Restaurant and Financial Services Groups
within CNL Financial Group, Inc. through August 1999.  Mr. McWilliams served as
President of CNL American Properties Fund, Inc. from February 1999 through
August 1999 and previously served as Executive Vice President from February 1998
through February 1999.  From September 1983 through March 1997, Mr. McWilliams
was employed by Merrill Lynch & Co., most recently as Chairman of Merrill
Lynch's Private Advisory Services until March 1997.  Mr. McWilliams received a
B.S.E. in Chemical Engineering from Princeton University in 1977 and a Masters
of Business Administration with a concentration in finance from the University
of Chicago in 1983.

     John T. Walker, age 41, serves as President and Chief Operating Officer of
CNL American Properties Fund, Inc. and CNL Fund Advisors, Inc.  He served as
Executive Vice President of CNL American Properties Fund, Inc. from January 1996
through August 1999, as Chief Operating Officer since March 1995 through August
1999, and previously served as Senior Vice President from December 1994 through
August 1999.  In addition, Mr. Walker has served as Executive Vice President of
CNL Fund Advisors, Inc. since January 1996 through August 1999, Chief Operating
Officer from April 1995 through August 1999, and previously served as Senior
Vice President from

                                       42
<PAGE>

November 1994 through January 1996. In addition, Mr. Walker previously served as
Executive Vice President of CNL Hospitality Properties, Inc. and CNL Hospitality
Advisors, Inc. As of September 1, 1999, Mr. Walker serves as President for CNL
American Properties Fund, Inc. From May 1992 to May 1994, Mr. Walker, a
certified public accountant, was Executive Vice President for Finance and
Administration and Chief Financial Officer of Z Music, Inc., a cable television
network (subsequently acquired by Gaylord Entertainment), where he was
responsible for overall financial and administrative management and planning.
From January 1990 through April 1992, Mr. Walker was Chief Financial Officer of
the First Baptist Church in Orlando, Florida. From April 1984 through December
1989, he was a partner in the accounting firm of Chastang, Ferrell & Walker,
P.A., where he was the partner in charge of audit and consulting services, and
from 1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior at Price
Waterhouse. Mr. Walker is a Cum Laude graduate of Wake Forest University with a
B.S. in Accountancy and is a certified public accountant.

     Lynn E. Rose, age 51,  Ms. Rose served as Secretary of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust, from
1994 through August 1999, and served as Treasurer from 1994 through February
1999.  She also served as Treasurer of CNL Fund Advisors, Inc., from 1994
through July 1998, and served as Secretary and a director from 1994 through
August 1999, at which point it merged with CNL American Properties Fund, Inc.
In addition, she is Secretary and Treasurer of CNL Health Care Properties, Inc.,
and serves as Secretary of its subsidiaries.  In addition, she serves as
Secretary, Treasurer and a director of CNL Health Care Corp., the advisor. to
the company.  Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality
Properties, Inc., a public, unlisted real estate investment trust, as Secretary,
Treasurer and a director of CNL Hospitality Corp., its Advisor, and as Secretary
of the subsidiaries of the company.  Ms. Rose served as Secretary and Treasurer
of Commercial Net Lease Realty, Inc., a public real estate investment trust
listed on the New York Stock Exchange, from 1992 to February 1996, and as
Secretary and a director of CNL Realty Advisors, Inc., its advisor, from its
inception in 1991 through 1997.  She also served as Treasurer of CNL Realty
Advisors, Inc. from 1991 through February 1996.  Ms. Rose, a certified public
accountant, has served as Secretary of CNL Financial Group, Inc. (formerly CNL
Group, Inc.) since 1987, served as Controller from 1987 to 1993 and has served
as Chief Financial Officer since 1993.  She also serves as Secretary of the
subsidiaries of CNL Financial Group, Inc. and holds various other offices in the
subsidiaries.  In addition, she serves as Secretary for approximately 50
additional corporations affiliated with CNL Financial Group, Inc. and its
subsidiaries.  Ms. Rose oversees the tax and legal compliance for over 375
corporations, partnerships and joint ventures, and the accounting and financial
reporting for over 200 entities.  Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants.  Ms. Rose holds a B.A. in Sociology from the University of
Central Florida.  She was licensed as a certified public accountant in 1979.

     Jeanne A. Wall, age 41,  Ms. Wall served as Executive Vice President of CNL
American Properties Fund, Inc., a public, unlisted real estate investment trust,
from 1994 through August 1999, and as Executive Vice President of CNL Fund
Advisors, Inc., its advisor, from 1994 through August 1999, at which point it
merged with CNL American Properties Fund, Inc.  Ms. Wall also serves as
Executive Vice President of CNL Health Care Properties, Inc. and CNL Health Care
Corp., the Advisor to the Company.  Ms. Wall also serves as Executive Vice
President of CNL Hospitality Properties, Inc., a public, unlisted real estate
investment trust, and serves as Executive Vice President and a director of CNL
Hospitality Corp., its advisor. She also serves as a director for CNLBank.  Ms.
Wall serves as Executive Vice President of CNL Financial Group, Inc. (formerly
CNL Group, Inc.).  Ms. Wall has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since 1994 and has served as
Executive Vice President of CNL Investment Company since January 1991.  In 1984,
Ms. Wall joined CNL Securities Corp. and in 1985, became Vice President.  In
1987, she became a Senior Vice President and in July 1997, became Executive Vice
President of CNL Securities Corp.  In this capacity, Ms. Wall serves as national
marketing and sales director and oversees the national marketing plan for the
CNL investment programs.  In addition, Ms. Wall oversees product development,
communications and investor services for programs offered through participating
brokers.  Ms. Wall also served as Senior Vice President of CNL Institutional
Advisors Inc., a registered investment advisor, from 1990 to 1993.  Ms. Wall
served as Vice President of Commercial Net Lease Realty, Inc., a public real
estate investment trust listed on the New York Stock Exchange, from 1992 through
1997, and served as Vice President of CNL Realty Advisors, Inc. from its
inception in 1991 through 1997. Ms. Wall currently serves as a trustee on the
Board of the Investment Program Association, is a member of the Corporate
Advisory Council for the International Association for Financial Planning and is
a member of IWF, International Women's Forum.  In addition, she previously
served on the Direct Participation Program committee for the National

                                       43
<PAGE>

Association of Securities Dealers, Inc.  Ms. Wall holds a B.A. in Business
Administration from Linfield College and is a registered principal of CNL
Securities Corp.

     Steven D. Shackelford, age 36, a certified public accountant, serves as
Senior Vice President, Chief Financial Officer, and Secretary of CNL American
Properties Fund, Inc. and CNL Fund Advisors, Inc.  He served as Chief Financial
Officer of CNL American Properties Fund, Inc. from January 1997 and as Chief
Financial Officer of CNL Fund Advisors, Inc. since September 1996 through August
1999.  From March 1995 to July 1996, Mr. Shackelford was a senior manager in the
national office of Price Waterhouse 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 served as a manager in the Price
Waterhouse, Paris, France office serving several multinational clients.  Mr.
Shackelford was an audit staff and audit senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse.  Mr. Shackelford received a B.A. in
Accounting, with honors, and a Masters of Business Administration from Florida
State University.


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 15, 2000, 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 15, 2000, the beneficial
ownership interests of the General Partners in the Registrant.

<TABLE>
<CAPTION>
             Title of Class                 Name of Partner           Percent of Class
             --------------                 ---------------           ----------------
       <S>                               <C>                          <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.

                                       44
<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, 1999, 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, 1999
-------------------------------      ----------------------------------------      ---------------------------------
<S>                                  <C>                                           <C>
  Reimbursement to affiliates          Operating expenses are reimbursed at          Operating expenses incurred on
  for operating expenses               the lower of cost or 90 percent of            behalf of the Partnership:
                                       the prevailing rate at which                  $174,461
                                       comparable services could have been
                                       obtained in the same geographic area.         Accounting
                                       Affiliates of the General Partners            and administrative services:
                                       from time to time incur certain               $138,583
                                       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               $37,385
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>

                                       45
<PAGE>

<TABLE>
<CAPTION>
                                                                                             Amount Incurred
     Type of Compensation                                                                     For the Year
         and Recipient                         Method of Computation                     Ended December 31, 1999
-------------------------------      ----------------------------------------      ---------------------------------
<S>                                  <C>                                           <C>
 Deferred, subordinated real           A deferred, subordinated real estate         $-0-
 estate disposition fee                disposition fee, payable upon sale of
 payable to affiliates                 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                 distributions of such net sales
 proceeds from a sale or sales         proceeds, subordinated to certain
 of Properties not in                  minimum returns to the Limited
 liquidation of Partnership            Partners
</TABLE>

                                       46
<PAGE>

<TABLE>
<CAPTION>
                                                                                             Amount Incurred
     Type of Compensation                                                                     For the Year
         and Recipient                         Method of Computation                     Ended December 31, 1999
-------------------------------      ----------------------------------------      ---------------------------------
<S>                                  <C>                                           <C>
 General Partners' share of            Distributions of net sales proceeds           $-0-
 Partnership net sales                 from a sale or sales of substantially
 proceeds from a sale or sales         all of the Partnership's assets will
 in liquidation of the                 be distributed in the following order
 Partnership                           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>

                                       47
<PAGE>

                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)  The following documents are filed as part of this report.

     1.  Financial Statements

          Report of Independent Certified Public Accountants

          Balance Sheets at December 31, 1999 and 1998

          Statements of Income for the years ended December 31, 1999, 1998, and
          1997

          Statements of Partners' Capital for the years ended December 31, 1999,
          1998, and 1997

          Statements of Cash Flows for the years ended December 31, 1999, 1998,
          and 1997

          Notes to Financial Statements

     2.  Financial Statement Schedules

          Schedule II - Valuation and Qualifying Accounts for the years ended
          December 31, 1999, 1998, and 1997

          Schedule III - Real Estate and Accumulated Depreciation at December
          31, 1999

          Notes to Schedule III - Real Estate and Accumulated Depreciation at
          December 31, 1999

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

     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.)

                                       48
<PAGE>

          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.)

          27    Financial Data Schedule (Filed herewith.)

     (b)  The Registrant filed no reports on Form 8-K during the period October
          1, 1999 through December 31, 1999.

     (c)  Not applicable.

     (d)  Other Financial Information.

          The Partnership is required to file audited financial information of
          two of its tenants (Phoenix Restaurant Group, Inc. and Golden Corral
          Corporation) as a result of these two tenants each leasing more than
          20 percent of the Partnership's total assets for the year ended
          December 31, 1999. Phoenix Restaurant Group, Inc. is a public company
          and as of the date hereof, had not filed its Form 10-K; therefore, the
          financial statements are not available to the Partnership to include
          in this filing. The Partnership will file this financial information
          under cover of a Form 10K/A as soon as it is available. 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.

                                       49
<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 23rd day of
March, 2000.


                                         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
           ---------                               ------                               ----
<S>                                    <C>                                          <C>
/s/ Robert A. Bourne                   President, Treasurer and Director            March 23, 2000
--------------------------------
Robert A. Bourne                       (Principal Financial and Accounting
                                       Officer)

/s/ James M. Seneff, Jr.               Chief Executive Officer and Director         March 23, 2000
--------------------------------
James M. Seneff, Jr.                   (Principal Executive Officer)
</TABLE>
<PAGE>

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

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                -----------------------------------------------

                 Years Ended December 31, 1999, 1998, and 1997

<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
-----   -----------------      ----------      ----------     ----------        ----------      ----------     ----------
<S>     <C>                    <C>             <C>            <C>               <C>             <C>            <C>
1997     Allowance for
           doubtful
           accounts (a)         $  9,875         $   --        $  7,918 (b)       $ 16,693 (c)     $    221       $     879
                                ========         ======        ========           ========         ========       =========
1998     Allowance for
           doubtful
           accounts (a)         $    879         $   --        $ 89,822 (b)       $    879 (c)     $     --       $  89,822
                                ========         ======        ========           ========         ========       =========
1999     Allowance for
           doubtful
           accounts (a)         $ 89,822         $   --        $ 60,801 (b)       $ 59,241 (c)     $    488       $  90,894
                                ========         ======        ========           ========         ========       =========
</TABLE>

  (a) Deducted from receivables on the balance sheet.

  (b) Reduction of rental and other income.

  (c) Amounts written off as uncollectible.

                                      F-1
<PAGE>

                           CNL INCOME FUND XVI, LTD.
                        (A Florida Limited Partnership)
            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
           ---------------------------------------------------------
                               December 31, 1999

<TABLE>
<CAPTION>
                                                                             Costs Capitalized
                                                                               Subsequent To           Gross Amount at Which
                                                       Initial Cost             Acquisition         Carried at Close of Period (g)
                                                 --------  --------------  ----------------------  -------------------------------
                                     Encum-                 Buildings and   Improve-    Carrying                    Buildings and
                                     brances       Land     Improvements     ments       Costs       Land           Improvements
                                   -----------   --------  --------------  ----------  ----------  ---------       --------------
<S>                                <C>           <C>       <C>             <C>         <C>         <C>             <C>
Properties the Partnership
  has Invested in Under
  Operating Leases:

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

    Big Boy's Restaurant:
     Las Vegas, Nevada (i)             -           426,238      780,454      150,000          -      426,238            930,454

    Boston Market Restaurants:
     St. Cloud, Minnesota              -           502,786      645,127            -          -      502,786            645,127
     Columbia Heights, Minnesota       -           277,576      725,953            -          -      277,576            725,953


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

    Denny's Restaurants:
     Tucson, Arizona                   -           218,353            -            -          -      218,353                 (d)
     Idaho Falls, Idaho                -           552,186            -      692,274          -      552,186            692,274
     Branson, Missouri                 -         1,160,979            -    1,010,688          -    1,160,979          1,010,688
     Dover, Ohio                       -           266,829            -            -          -      266,829                 (d)
     Salina, Kansas                    -           261,154            -            -          -      261,154                 (d)
     Moab, Utah                        -           435,927            -            -          -      435,927                 (d)
     Mesquite, Texas                   -           403,548      650,659            -          -      403,548            650,659
     Temple, Texas                     -           306,866      677,659            -          -      306,866            677,659

    Golden Corral Family
     Steakhouse Restaurants:
      Fort  Collins, Colorado          -           566,943            -    1,122,500          -      566,943          1,122,500
      Hickory, North Carolina (h)      -           761,108            -    1,001,893          -      761,108          1,001,893
      Independence, Missouri (h)       -           781,761            -    1,147,538          -      781,761          1,147,538
      Baytown, Texas                   -           446,240            -      971,766          -      446,240            971,766
      Rosenburg, Texas                 -           320,133            -      804,428          -      320,133            804,428
      Farmington, New Mexico (m)       -           523,584            -      870,136          -      523,584            870,136

    IHOP Restaurant:
     Ft. Worth, Texas                  -           364,634      554,302            -          -      364,634            554,302
<CAPTION>
                                                                                                        Life on Which
                                                                                                        Depreciation in
                                                                                 Date                   Latest Income
                                              ----------     Accumulated        of Con-       Date       Statement is
                                                 Total       Depreciation      Struction    Acquired       Computed
                                              ----------   ---------------    -----------  ----------  ----------------
<S>                                           <C>          <C>                <C>          <C>         <C>
Properties the Partnership
  has Invested in Under
  Operating Leases:

    Arby's Restaurant:
     Indianapolis, Indiana                       $ 907,269   $   86,244         1978         08/95          (c)

    Big Boy's Restaurant:
     Las Vegas, Nevada (i)                       1,356,692       27,173         1992         05/95          (i)

    Boston Market Restaurants:
     St. Cloud, Minnesota                        1,147,913       92,336         1995         09/95          (c)
     Columbia Heights, Minnesota                 1,003,529       97,788         1995         12/95          (c)


    Checkers Drive-In Restaurants:
     Conyers, Georgia                              363,553           (b)           -         12/94          (b)
     Lake Worth, Florida                           325,301           (b)           -         12/94          (b)
     Ocala, Florida                                289,578           (b)           -         12/94          (b)
     Pompano Beach, Florida                        373,491           (b)           -         12/94          (b)
     Tampa, Florida                                372,176           (b)           -         12/94          (b)
     Tampa, Florida                                221,715           (b)           -         12/94          (b)

    Denny's Restaurants:
     Tucson, Arizona                               218,353           (e)        1995         10/94          (e)
     Idaho Falls, Idaho                          1,244,460      104,286         1995         01/95          (c)
     Branson, Missouri                           2,171,667      136,481         1995         03/95          (c)
     Dover, Ohio                                   266,829           (e)        1971         03/95          (e)
     Salina, Kansas                                261,154           (e)        1995         04/95          (e)
     Moab, Utah                                    435,927           (e)        1995         06/95          (e)
     Mesquite, Texas                             1,054,207       94,019         1995         08/95          (c)
     Temple, Texas                                 984,525       97,920         1975         08/95          (c)

    Golden Corral Family
     Steakhouse Restaurants:
      Fort  Collins, Colorado                    1,689,443      179,677         1995         10/94          (c)
      Hickory, North Carolina (h)                1,763,001      167,074         1994         11/94          (c)
      Independence, Missouri (h)                 1,929,299      191,361         1994         11/94          (c)
      Baytown, Texas                             1,418,006      153,548         1995         01/95          (c)
      Rosenburg, Texas                           1,124,561      118,724         1995         05/95          (c)
      Farmington, New Mexico (m)                 1,393,720      110,123         1996         01/96          (c)

    IHOP Restaurant:
     Ft. Worth, Texas                              918,936       70,654         1994         03/96          (c)
</TABLE>

                                      F-2
<PAGE>

                             CNL INCOME FUND XVI,
                                     LTD.
                              (A Florida Limited
                                 Partnership)
            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
           ---------------------------------------------------------
                               December 31, 1999

<TABLE>
<CAPTION>
                                                                                      Costs Capitalized
                                                                                        Subsequent To
                                                            Initial Cost                 Acquisition
                                                     ------------ --------------    ----------------------
                                        Encum-                     Buildings and      Improve-   Carrying
                                        brances        Land        Improvements        ments      Costs
                                      -----------    ------------ --------------    ----------- ----------
<S>                                   <C>            <C>          <C>               <C>         <C>
   Jack in the Box Restaurants:
     Brownsville, Texas                    -             553,671               -        658,282         -
     Grand Prairie, Texas                  -             439,950               -        636,524         -
     Rancho Cordova,                       -             401,302         595,722              -         -
     California (h)
     Temple City, California (h)           -             744,493         225,404              -         -
     Texas City, Texas (h)                 -             403,476         568,053              -         -

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

   Long John Silver's Restaurants:
     Celina, Ohio (l)                      -             109,130               -        425,145         -
     Charlotte, North Carolina             -             313,200               -        415,695         -
     Copperas Cove, Texas                  -             162,000               -              -         -
     Kansas City, Missouri                 -             370,204               -        433,058         -
     Silver City, New Mexico               -             116,767         183,174              -         -

   Wendy's Old Fashioned
     Hamburgers Restaurant:
      Washington, District of
      Columbia                             -             393,963         567,626              -         -
                                                     -----------   -------------   ------------ ---------

                                                     $15,034,850      $6,766,126    $10,774,296         -
                                                     ===========   =============   ============ =========

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 Carolina (h)       -         $   377,800      $  587,700              -         -
                                                     ===========   =============   ============ =========
<CAPTION>
                                            Gross Amount at Which                                                    Life on 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
                                       ------------ ----------------  ---------- ------------- ---------  ----------  -------------
<S>                                     <C>         <C>              <C>         <C>           <C>        <C>         <C>
   Jack in the Box Restaurants:
     Brownsville, Texas                     553,671       658,282      1,211,953    109,037      1995       10/94          (c)
     Grand Prairie, Texas                   439,950       636,524      1,076,474    101,422      1995       10/94          (c)
     Rancho Cordova,                        401,302       595,722        997,024    102,660      1985       10/94          (c)
     California (h)
     Temple City, California (h)            744,493       225,404        969,897     38,844      1984       10/94          (c)
     Texas City, Texas (h)                  403,476       568,053        971,529     97,892      1991       10/94          (c)

   KFC Restaurant:
     Concordia, Missouri                    188,759       434,369        623,128     59,939      1995       09/95          (c)

   Long John Silver's Restaurants:
     Celina, Ohio (l)                       109,130       425,145        534,275     13,153      1995       10/94          (k)
     Charlotte, North Carolina              313,200       415,695        728,895     65,011      1995       12/94          (c)
     Copperas Cove, Texas                   162,000            (d)       162,000         (e)     1994       12/94          (e)
     Kansas City, Missouri                  370,204       433,058        803,262     69,042      1995       12/94          (c)
     Silver City, New Mexico                116,767       183,174        299,941     24,841      1982       12/95          (c)

   Wendy's Old Fashioned
     Hamburgers Restaurant:
      Washington, District of
      Columbia                              393,963       567,626        961,589     95,435      1983       12/94          (c)
                                        ----------- -------------    ----------- ----------

                                        $15,034,850   $17,540,422    $32,575,272 $2,504,684
                                        =========== =============    =========== ==========

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 Carolina (h)    $   377,800   $   587,700    $   965,500 $   63,538      1996       10/96          (c)
                                        =========== =============    =========== ==========
</TABLE>

                                      F-3
<PAGE>

                           CNL INCOME FUND XVI, LTD.
                        (A Florida Limited Partnership)
            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
           ---------------------------------------------------------
                               December 31, 1999

<TABLE>
<CAPTION>
                                                                               Costs Capitalized
                                                                                 Subsequent To           Gross Amount at Which
                                                     Initial Cost                 Acquisition         Carried at Close of Period (g)
                                                ------------ --------------  ----------------------  -------------------------------
                                     Encum-                   Buildings and    Improve-    Carrying                   Buildings and
                                     brances        Land      Improvements      ments       Costs        Land         Improvements
                                   -----------  ------------ --------------  ----------- ----------  ------------    --------------
<S>                                <C>          <C>          <C>             <C>         <C>         <C>             <C>
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            -         -    $   678,890     $   825,076
                                                ===========   =============  =========== =========   ============    ============

Property of Joint Venture in
   Which the Partnership has a
   32.35% Interest

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

Properties the Partnership has
   Invested in Under Direct
   Financing Leases:

     Boston Market Restaurant:
       Indianapolis, Indiana (j)        -       $   184,014      $  577,320            -         -             (d)             (d)

     Denny's Restaurants:
       Tucson, Arizona                  -                 -               -      539,769         -              -              (d)
       Bucyrus, Ohio                    -           139,003         155,194      273,858         -             (d)             (d)
       Dover, Ohio                      -                 -         200,612      236,270         -              -              (d)
       Salina, Kansas                   -                 -               -      677,539         -              -              (d)
       Moab, Utah                       -                 -               -      718,578         -              -              (d)

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


                                                $   450,624      $1,782,727  $ 2,446,014         -
                                                ===========   =============  =========== =========
<CAPTION>
                                                                                                                 Life on Which
                                                                                                                Depreciation in
                                                                                       Date                     Latest Income
                                                -----------        Accumulated       of Con-        Date         Statement is
                                                   Total           Depreciation     stuction      Acquired         Computed
                                                -----------      ---------------  -----------   ------------    --------------
<S>                                             <C>              <C>              <C>           <C>             <C>
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                       $ 1,503,966          $   54,145        1997          01/98          (c)
                                                ===========          ==========

Property of Joint Venture in
   Which the Partnership has a
   32.35% Interest

     Arby's Restaurant:
       Columbus, Ohio                           $   905,780          $   17,315        1999          08/98          (c)
                                                ===========          ==========

Properties the Partnership has
   Invested in Under Direct
   Financing Leases:

     Boston Market Restaurant:
       Indianapolis, Indiana (j)                         (d)                 (f)       1995          05/95          (f)

     Denny's Restaurants:
       Tucson, Arizona                                   (d)                 (e)       1995          10/94          (e)
       Bucyrus, Ohio                                     (d)                 (f)       1973          03/95          (f)
       Dover, Ohio                                       (d)                 (e)       1971          03/95          (e)
       Salina, Kansas                                    (d)                 (e)       1995          04/95          (e)
       Moab, Utah                                        (d)                 (e)       1995          06/94          (e)

     Long John Silver's Restaurants:
       Clovis, New Mexico                                (d)                 (f)       1976          12/94          (f)
       Copperas Cove, Texas                              (d)                 (e)       1994          12/94          (e)
</TABLE>

                                      F-4
<PAGE>

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

       NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
       ----------------------------------------------------------------

                               December 31, 1999


(a)  Transactions in real estate and accumulated depreciation during 1999, 1998,
     and 1997, are summarized as follows:

<TABLE>
<CAPTION>
                                                                                                   Accumulated
                                                                              Cost                 Depreciation
                                                                       ------------------      --------------------
<S>                                                                    <C>                     <C>
Properties the Partnership has Invested
  in Under Operating Leases:

     Balance, December 31, 1996                                               $32,641,909                $  875,560
     Dispositions                                                                (545,472)                       --
     Depreciation expense                                                              --                   561,883
                                                                       ------------------      --------------------

     Balance, December 31, 1997                                                32,096,437                 1,437,443
     Reclassified from direct financing leases                                    534,275                        --
     Acquisitions                                                                   3,545                        --
     Reimbursement of construction costs (m)                                     (210,259)                  (48,611)
     Depreciation expense                                                              --                   553,360
                                                                       ------------------      --------------------

     Balance, December 31, 1998                                                32,423,998                 1,942,192
     Reclassified from direct financing leases                                    780,454                        --
     Acquisitions                                                                 150,000                        --
     Dispositions                                                                (779,180)                  (23,630)
     Depreciation expense                                                              --                   586,122
                                                                       ------------------      --------------------

     Balance, December 31, 1999                                               $32,575,272                $2,504,684
                                                                       ==================      ====================
</TABLE>

                                      F-5
<PAGE>

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

              NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
              ---------------------------------------------------
                           DEPRECIATION - CONTINUED
                           ------------------------

                               December 31, 1999

<TABLE>
<CAPTION>
                                                                                                            Accumulated
                                                                                 Cost                       Depreciation
                                                                        ------------------------     ------------------------
<S>                                                                     <C>                          <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, 1996                                                         $  965,500                      $ 4,768
   Depreciation expense                                                                       --                       19,590
                                                                        ------------------------     ------------------------

   Balance, December 31, 1997                                                            965,500                       24,358
   Depreciation expense                                                                       --                       19,590
                                                                        ------------------------     ------------------------

   Balance, December 31, 1998                                                            965,500                       43,948
   Depreciation expense                                                                       --                       19,590
                                                                        ------------------------     ------------------------

   Balance, December 31, 1999                                                         $  965,500                      $63,538
                                                                        ========================     ========================

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, 1997                                                         $       --                      $    --
   Acquisition                                                                         1,503,966                           --
   Depreciation expense                                                                       --                       26,642
                                                                        ------------------------     ------------------------

   Balance, December 31, 1998                                                          1,503,966                       26,642
   Depreciation expense                                                                       --                       27,503
                                                                        ------------------------     ------------------------

   Balance, December 31, 1999                                                         $1,503,966                      $54,145
                                                                        ========================     ========================
</TABLE>

                                      F-6
<PAGE>

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

              NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
              ---------------------------------------------------
                           DEPRECIATION - CONTINUED
                           ------------------------

                               December 31, 1999

<TABLE>
<CAPTION>
                                                                                                            Accumulated
                                                                                   Cost                     Depreciation
                                                                        ------------------------     ------------------------
<S>                                                                       <C>                          <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, 1997                                             $                   --       $                   --
   Acquisition                                                                           875,701                           --
   Depreciation (m)                                                                           --                           --
                                                                        ------------------------     ------------------------

   Balance, December 31, 1998                                                            875,701                           --
   Acquisition                                                                            30,079                           --
   Depreciation                                                                               --                       17,315
                                                                        ------------------------     ------------------------

   Balance, December 31, 1999                                                           $905,780                      $17,315
                                                                        ========================     ========================
</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)  For financial reporting purposes, 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)  For financial reporting purposes, 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)  For financial reporting purposes, 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, 1999, the aggregate cost of the Properties owned by the
     Partnership and the joint venture for federal income tax purposes was
     $37,246,148 and $3,374,245, respectively.  All of the leases are treated as
     operating leases for federal income tax purposes.

                                      F-7
<PAGE>

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

              NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
              ---------------------------------------------------
                           DEPRECIATION - CONTINUED
                           ------------------------

                               December 31, 1999



(h)  During the years ended December 31, 1996 and 1994, the Partnership, and an
     affiliate as tenants-in-common, purchased land and buildings from CNL BB
     Corp., an affiliate of the General Partners, for an aggregate cost of
     $775,000 and $4,094,922, respectively.

(i)  Effective February 23, 1999, 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
     February 23, 1999, and depreciated over its remaining estimated life of
     approximately 26 years.

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

(k)  Effective June 1998, the lease for this Property was terminated, resulting
     in the reclassification of the building portion of the lease as 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.

(l)  For financial reporting purposes 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 the impairment
     by recording an allowance for loss on building 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 impairment at December 31, 1998 represents the difference
     between the Property's carrying value at December 31, 1998, and the
     estimated net realizable value of the Property.  The cost of the Property
     presented on this schedule is the gross amount at which the Property was
     carried at December 31, 1998, excluding the allowance for loss on building.

(m)  During the year ended December 31, 1998, the Partnership received
     reimbursements from the developer upon final construction costs
     reconciliation.  In connection therewith, the land and building values were
     adjusted down accordingly.

                                      F-8
<PAGE>

                                 EXHIBIT INDEX


Exhibit Number
--------------

   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.)

   27     Financial Data Schedule (Filed herewith.)