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, 2000

                                       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,   totaled
$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.  During 2000, the  Partnership  reinvested the majority of
these net sales proceeds in, TGIF Pittsburgh  Joint Venture,  with affiliates of
the General Partners, to purchase and hold one restaurant Property. In addition,
during 2000, the Partnership sold its Property in Columbia Heights, Minnesota.

         As a result of the above  transactions,  as of December 31,  2000,  the
Partnership  owned 43  Properties.  The 43  Properties  include  six  Properties
consisting  of land  only,  interests  in two  Properties  owned  through  joint
ventures 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  "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 Partners,  ability to
unequivocally  recommend  voting for the  transaction,  in the exercise of their
fiduciary duties, had become  questionable.  The General Partners are continuing
to evaluate strategic  alternatives for the Partnership,  including alternatives
to provide liquidity to the Limited Partners.

Leases

         Although there are variations in the specific terms of the leases,  the
following  is  a  summarized   description  of  the  general  structure  of  the
Partnership's leases. The leases of the Properties owned by the Partnership, the
Properties owned by joint ventures in which the Partnership is a co-venturer and
Properties  owned as  tenants-in-common  with affiliates of the General Partners
provide for  initial  terms  ranging  from 2 to 20 years (the  average  being 18
years)  and  expire  between  2003 and  2018.  The  leases  are  generally  on a
triple-net basis, with the lessees  responsible for all repairs and maintenance,
property taxes,  insurance and utilities.  The leases of the Properties  provide
for  minimum  base annual  rental  payments  (payable  in monthly  installments)
ranging  from  approximately  $19,200 to  $259,900.  The  majority of the leases
provide for percentage rent, based on sales in excess of a specified  amount. In
addition, the majority of the leases provide that, commencing in specified lease
years  (generally the sixth lease year), the annual base rent required under the
terms of the lease will increase.

         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 33 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.

         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 five 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 five vacant
Properties and sold two of the five vacant  Properties,  one in each of 1999 and
2000.  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. and Boston  Chicken,  Inc.  each assumed and affirmed
their one remaining lease,  and, the Partnership has continued  receiving rental
payments  relating to these leases.  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.

         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  2000,   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 and earned
income. As of December 31, 2000, 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 and earned income in 2001. 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 and earned income during 2000.  In 2001, 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, 2000,  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.

         In addition, in June 2000, the Partnership entered into a joint venture
arrangement,  TGIF Pittsburgh Joint Venture, with CNL Income Fund VII, Ltd., CNL
Income Fund XV, Ltd., and CNL Income Fund XVIII, Ltd., affiliates of the General
Partners,  to purchase  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
19.72%  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 ventures 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  ventures  and tenancy in common  arrangements  also  provides  the
Partnership  with  increased  diversification  of its portfolio  among a greater
number of properties. In addition,  tenancy in common arrangements may allow the
Partnership  to defer the gain for federal  income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional property.

Certain Management Services

         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.

Competition

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

Employees

         The  Partnership   has  no  employees.   The  officers  of  CNL  Realty
Corporation  and the  officers and  employees of 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., a diversified real estate
company,  and its  affiliates,  who may also  perform  certain  services for the
Partnership.


Item 2.  Properties

         As of December 31, 2000, the Partnership owned 43 Properties. Of the 43
Properties, 39 are owned by the Partnership in fee simple, two are owned through
joint  venture  arrangements  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.


<PAGE>


         The following table lists the Properties owned by the Partnership as of
December 31, 2000 by state. More detailed information  regarding the location of
the  Properties  is  contained  in the  Schedule of Real Estate and  Accumulated
Depreciation.

                                                     Number of Properties
                     State

                     Arizona                                  1
                     California                               2
                     Colorado                                 1
                     Washington, D.C.                         1
                     Florida                                  5
                     Georgia                                  1
                     Idaho                                    1
                     Indiana                                  2
                     Kansas                                   1
                     Minnesota                                1
                     Missouri                                 4
                     New Mexico                               3
                     Nevada                                   1
                     North Carolina                           3
                     Ohio                                     4
                     Pennsylvania                             1
                     Tennessee                                1
                     Texas                                    9
                     Utah                                     1
                                                       -----------------

                     TOTAL PROPERTIES                         43
                                                       =================


         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, 2000, 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, 2000, 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  $36,276,118  and
$5,908,838, respectively.


<PAGE>


         The following table lists the Properties owned by the Partnership as of
December 31, 2000 by Restaurant Chain.

                      Restaurant Chain                     Number of Properties

                      Arby's                                        2
                      Big Boy                                       1
                      Boston Market                                 3
                      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                                         2
                                                           ---------------------

                      TOTAL PROPERTIES                              43
                                                           =====================

         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, 2000,  1999,  1998,  1997 and 1996, the properties were
98%,  95%,  89%,  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>
<S> <C>
                                       2000              1999              1998             1997              1996
                                   --------------    -------------     -------------    -------------     -------------

Rental Revenues (1)                  $ 3,730,031      $ 4,033,287       $ 4,244,356      $ 4,392,092       $ 4,357,033
Properties (2)                                42               43                44               42                43
Average Rent per Property              $  88,810        $  93,797         $  96,463        $ 104,574         $ 101,326
</TABLE>


(1)      Rental income  includes the  Partnership's  share of rental income from
         the  Properties  owned  through  joint  venture  arrangements  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.

(2)      Excludes  Properties  that were  vacant  at  December  31,  and did not
         generate  rental  revenues  during  the year  ended  December  31.  The
         following is a schedule of lease  expirations for leases in place as of
         December 31, 2000 for the next ten years and thereafter.
<TABLE>
<CAPTION>
<S> <C>
                                                                                     Percentage of
             Expiration Year          Number             Annual Rental               Gross Annual
                                     of Leases              Revenues                 Rental Income
             -----------------    ----------------    ---------------------    --------------------------

              2001                             --                   $   --                      --
              2002                             --                       --                      --
              2003                              1                   43,795                    1.1%
              2004                             --                       --                      --
              2005                             --                       --                      --
              2006                             --                       --                      --
              2007                             --                       --                      --
              2008                             --                       --                      --
              2009                              3                  447,584                   11.3%
              2010                              4                  493,659                   12.5%
              Thereafter                       34                2,974,764                   75.1%
                                        ----------            -------------           -------------
              Total (1)                        42              $ 3,959,802                 100.00%
                                        ==========            =============           =============
</TABLE>

(1)      Excludes one Property that was vacant at December 31, 2000.

         Leases  with Major  Tenants.  The terms of each of the leases  with the
Partnership's  major  tenants as of December  31,  2000 (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  $96,700  (ranging  from
approximately $87,800 to $115,600).

         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  $111,300  (ranging  from
approximately $64,800 to $220,600).


Item 3.  Legal Proceedings

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


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

         Not applicable.




<PAGE>


                                     PART II


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

(a) As of March 15, 2001, there were 3,020 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 2000,  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, 2000,  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 2000 and 1999 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
<S> <C>
                                                2000                                     1999
                                 ------------------------------------    -------------------------------------
                                   High         Low        Average         High          Low        Average
                                 ---------    --------    -----------    ---------     --------    -----------

         First Quarter                (2)         (2)            (2)       $10.00       $ 8.77         $ 8.92
         Second Quarter             $9.30      $ 6.47         $ 8.12         6.99         6.99           6.99
         Third Quarter               7.51        5.55           7.22        10.00         7.91           8.64
         Fourth Quarter              7.16        5.55           6.84         8.40         7.00           7.60
</TABLE>


(1)      A total of 41,725 and 23,210 Units were transferred other than pursuant
         to the Plan for the years ended December 31, 2000 and 1999.

(2)      No transfer of Units took place during the quarter  other than pursuant
         to 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 each of the years ended December 31, 2000 and 1999, the Partnership
declared cash  distributions of $3,600,000 to the Limited  Partners.  No amounts
distributed  to the Limited  Partners for the years ended  December 31, 2000 and
1999, are required to be or have been treated by the  Partnership as a return of
capital  for  purposes of  calculating  the  Limited  Partners'  return on their
adjusted capital  contributions.  No distributions have been made to the General
Partners to date.  Distributions  of $900,000 were declared at the close of each
of  the   Partnership's   calendar   quarters.   This  amount  includes  monthly
distributions  made in arrears for the Limited Partners electing to receive such
distributions on this basis.

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

(b)      Not applicable



<PAGE>


Item 6.  Selected Financial Data
<TABLE>
<CAPTION>
<S> <C>

                                       2000               1999              1998              1997               1996
                                   --------------    ---------------   ---------------    --------------    ---------------
Year ended December 31:
    Revenues (1)                      $3,780,584         $4,059,810        $4,093,756        $4,455,994         $4,438,218
    Net income (2)                     1,945,812          2,815,008         2,976,998         3,660,327          3,748,198
    Cash distributions
      declared (3)                     3,600,000          3,600,000         3,690,000         3,600,000          3,543,751
    Net income per Unit
      (2)(4)                                0.43               0.62              0.65              0.81               0.82
    Cash distributions
      declared per Unit
      (3)(4)                                0.80               0.80              0.82              0.80               0.79

At December 31:
    Total assets                     $37,936,084        $39,710,973       $40,188,641       $40,938,320        $40,955,642
    Partners' capital                 36,752,744         38,406,932        39,191,924        39,904,926         39,844,599
</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 and experiencing financial difficulties.

(2)      Net income for the year ended December 31, 2000,  includes $88,661 from
         gain on sale of assets. Net income for the year ended December 31, 2000
         and 1998  includes  $857,316  and $266,257  for  provision  for loss on
         assets.  Net income  for the year ended  December  31,  1999,  includes
         $84,478  from loss on sale of  assets.  Net  income  for the year ended
         December 31, 1996, includes $41,148 from gain on sale of assets.

(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, 2000, 1999, 1998, 1997,
         and 1996.

         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,  to  be  leased  primarily  to
operators  of  selected   national  and  regional   fast-food  and  family-style
Restaurant Chains. The leases are generally  triple-net leases, with the lessees
generally responsible for all repairs and maintenance, property taxes, insurance
and  utilities.  As of December 31, 2000, 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  $3,165,697,  $3,151,231,  and  $3,623,694  for the years  ended
December  31,  2000,  1999,  and 1998,  respectively.  The increase in cash from
operations  during 2000, as compared to 1999,  was primarily a result of changes
in the  Partnership's  working  capital  and  changes in income and  expenses as
described  in  "Results  of  Operations,"  below.  The  decrease  in  cash  from
operations  during 1999, as compared to 1998,  was primarily a result of changes
in income and expenses as described in "Results of Operations" below.

         Other  sources and uses of capital  included the  following  during the
years ended December 31, 2000, 1999 and 1998.

         In January 1998, the Partnership reinvested the net sales proceeds from
its 1997 sale of a Property in Oviedo,  Florida, 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,
2000,  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  monthly
installments  of $1,220  including  interest at a rate of ten percent per annum,
which were scheduled to commence on March 1, 2000, at which time the accrued and
unpaid  interest of $5,219 was  capitalized  into the  principal  balance of the
note. Due to the uncertainty of the  collectibility of the note, the Partnership
established  an allowance  for doubtful  accounts and is  recognizing  income as
collected.  As of December 31, 2000,  the balance in the  allowance for doubtful
accounts  relating  to this  promissory  note  was  $62,751,  including  accrued
interest  of  $4,914.  The  Partnership  has  ceased  collection  efforts on the
remaining past due receivables not converted into the promissory note.

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

         In 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. In June 2000, the Partnership used the
majority of these net sales  proceeds to invest in a joint venture  arrangement,
TGIF Pittsburgh  Joint Venture,  with CNL Income Fund VII, Ltd., CNL Income Fund
XV, Ltd., and CNL Income Fund XVIII,  Ltd., each a Florida  limited  partnership
and an affiliate of the General  Partners,  to purchase and hold one  restaurant
Property.  The Partnership  accounts for its investment  using the equity method
since the Partnership  shares control with affiliates.  As of December 31, 2000,
the  Partnership  owned a 19.72% interest in the profits and losses of the joint
venture.

         In  September  2000,  the  Partnership  sold its  Property  in Columbia
Heights,  Minnesota,  to a third  party  for  $584,000  and  received  net sales
proceeds of approximately $575,800, resulting in a gain of approximately $88,700
for the financial  reporting  purposes.  The Partnership intends to reinvest the
majority of these net sales proceeds in an additional Property.  The Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state  income  taxes,  if any  (at a level  reasonably  assumed  by the  General
Partners), resulting from the sale.

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

         Currently,  rental  income from the  Partnership's  Properties  and net
sales proceeds from the sale of Properties are invested in money market accounts
or other short-term,  highly liquid  investments such as demand deposit accounts
at commercial banks, money market accounts and certificates of deposit with less
than a 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, 2000, the Partnership had $1,081,650
invested in such  short-term  investments  as compared to $1,637,753 at December
31,  1999.  As of December  31, 2000,  the average  interest  rate earned on the
rental  income  deposited in demand  deposit  accounts at  commercial  banks was
approximately  two percent  annually.  The funds remaining at December 31, 2000,
will be used toward the payment of distributions and other liabilities.

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 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.

         The Partnership  generally  distributes cash from operations  remaining
after the payment of the operating  expenses of the  Partnership,  to the extent
that  the  General  Partners   determine  that  such  funds  are  available  for
distribution.  Based on current and anticipated future cash from operations, and
for the year ended December 31, 1998, cumulative excess operating reserves,  the
Partnership  declared  distributions  to the Limited  Partners of $3,600,000 and
$3,600,000,  and  $3,690,000,  for the years ended December 31, 2000,  1999, and
1998, respectively. This represents distributions of $0.80, $0.80, and $0.82 per
Unit for the years ended  December 31, 2000,  1999, and 1998,  respectively.  No
distributions  were made to the General Partners during the years ended December
31, 2000, 1999, and 1998,  respectively.  No amounts  distributed to the Limited
Partners for the years ended December 31, 2000,  1999, and 1998, are required to
be or have been treated by the  Partnership  as a return of capital for purposes
of  calculating  the  Limited   Partners'   return  on  their  adjusted  capital
contributions. The Partnership intends to continue to make distributions of cash
available for distribution to Limited Partners on a quarterly basis.

         During 2000, the general  partners waived their right to receive future
distributions  from the Partnership,  including both  distributions of operating
cash flow and  distributions  of  liquidation  proceeds,  to the extent that the
cumulative amount of such distributions  would exceed the balance in the general
partners'  capital  account as of December  31, 1999.  Accordingly,  the general
partners were not allocated any net income and did not receive any distributions
during the year ended December 31, 2000.
         As of December 31, 2000 and 1999,  the  Partnership  owed  $152,957 and
$73,853,  respectively,  to related  parties for such amounts as accounting  and
administrative  services  and  management  fees.  As  of  March  15,  2001,  the
Partnership  had reimbursed the  affiliates  $23,870 of all such amounts.  Other
liabilities,   including  distributions  payable,  decreased  to  $1,030,383  at
December 31, 2000, from  $1,230,188 at December 31, 1999,  partially as a result
of the fact that during 2000, the Partnership  paid amounts that were accrued at
December 31, 1999 for construction  costs relating to the Property in Las Vegas,
Nevada and  transaction  costs  relating  to the  proposed  Merger  with APF, as
described in "Termination  of Merger."  Liabilities at December 31, 2000, to the
extent they exceed cash and cash  equivalents at December 31, 2000, will be paid
from anticipated future cash from operations.

Long-Term Liquidity

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

Results of Operations

         During  1998,  the  Partnership   owned  and  leased  43  wholly  owned
Properties  (including  two  Properties  in Madison and  Chattanooga,  Tennessee
exchanged for two  Properties in Lawrence,  Kansas and  Indianapolis,  Indiana),
during  1999,  the  Partnership  owned and  leased 41  wholly  owned  Properties
(including  one Property  which was sold in November  1999) and during 2000, the
Partnership owned and leased 40 wholly owned Properties  (including one Property
which was sold in  September  2000).  In  addition,  during  1999 and 1998,  the
Partnership  was a  co-venturer  in a joint venture  arrangement  that owned and
leased one Property,  and during 2000, the  Partnership  was a co-venturer in an
additional  joint venture  arrangement  that owned and leased one  Property.  In
addition  during 2000,  1999,  and 1998,  the  Partnership  owned and leased two
Properties with affiliates,  as tenants-in-common.  As of December 31, 2000, 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 $259,900.  The
majority of the leases provide for percentage rent based on sales in excess of a
specified  amount.  In  addition,  the  majority  of the  leases  provide  that,
commencing in specified lease years (generally the sixth lease year), the annual
base rent  required  under the terms of the lease will  increase.  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,  2000,  1999,  and  1998,  the
Partnership  earned $3,548,605,  $3,839,624,  and $3,899,981,  respectively,  in
rental  income from  operating  leases  (net of  adjustments  to accrued  rental
income), earned income from direct financing leases and contingent rental income
from Properties wholly owned by the Partnership. The decrease in rental, earned,
and contingent rental income in 2000, and 1999, each as compared to the previous
year, is partially  attributable by approximately  $133,700 due to the fact that
in 1998 three tenants filed for bankruptcy and rejected the leases relating to a
total of five of the  seven  Properties  leased by these  tenants.  As a result,
these  tenants  ceased making rental  payments on the five rejected  leases.  In
conjunction with the five rejected leases, during 2000 and 1998, the Partnership
reversed  approximately  $57,100 and $107,000,  respectively,  of accrued rental
income.  The  accrued  rental  income  was the  accumulated  amount of  non-cash
accounting   adjustments  previously  recorded  in  order  to  recognize  future
scheduled  rent  increases  as income  evenly  over the term of the  lease.  The
Partnership has continued  receiving rental payments  relating to the two leases
not rejected by the tenants.  In March 1999, the Partnership  entered into a new
lease  with a new  tenant  for  another  one of the  vacant  Properties;  rental
payments commenced in April 1999,  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;  rental  payments
commenced in the first quarter of 2000. In addition,  between  November 1999 and
September 2000, the Partnership sold two of the vacant Properties. In June 2000,
the Partnership  reinvested the majority of the net sales proceeds from the 1999
sale in TGIF Pittsburgh Joint Venture,  as described in "Capital  Resources" and
intends to reinvest the majority of the net sales proceeds from the 2000 sale of
the Property in an additional Property. The decrease in rental and earned income
during 2000 was  partially  offset by an increase in rental and earned income of
approximately  $34,100  due  to the  fact  that  during  2000,  the  Partnership
collected and  recognized as income past due rental  amounts  received from Long
John Silver's,  Inc.,  which filed for  bankruptcy  during 1998 and rejected the
leases  relating to two of the three  Properties  it leased.  In August 1999 and
June 2000,  Long John  Silver's,  Inc.  and Boston  Chicken,  Inc.  assumed  and
affirmed their one remaining lease, and the Partnership has continued  receiving
rental  payments  relating to these leases.  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. 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 1999 as compared to
1998, was also partially  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  reversed  approximately  $77,300 of accrued
rental  income  relating to this  Property.  The accrued  rental  income was the
accumulated amount of non-cash  accounting  adjustments  previously  recorded in
order to recognize  future  scheduled  rent  increases as income evenly over the
term of the lease.  The reversal of accrued rental income was 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.  The decrease during 2000
and 1999 was partially offset by the fact that 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  paid $183,500 of the  construction  costs necessary to convert this
Property into a new concept.

         Rental and earned income also  decreased  during 2000,  due to the fact
that  during  2000,   the   Partnership   reversed   accrued  rental  income  of
approximately $36,200 relating to the Property in Mesquite, Texas, to adjust the
carrying  value of the Property to the  estimated  net  realizable  value of the
Property.  Additionally,  the decrease in rental and earned  income during 2000,
was also partially  attributable  to the fact that during 2000, the  Partnership
established  an  allowance  for doubtful  accounts  for past due rental  amounts
relating to several  Denny's  Properties  in accordance  with the  Partnership's
policy.  During 2000, the tenant of the Property in Bucyrus, Ohio terminated its
lease due to financial  difficulties the tenant was  experiencing.  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.  The Partnership
will not recognize  any rental and earned  income from this  Property  until the
Property is re-leased or the Property is sold and the proceeds are reinvested in
an additional Property. The General Partners are currently seeking a replacement
tenant or purchaser  for this  Property.  The General  Partners will continue to
pursue  collection of past due rental amounts  relating to these  Properties and
will recognize such amounts as income if collected.

         In addition, for the years ended December 31, 2000, 1999, and 1998, the
Partnership earned $180,084, $158,580, and $132,002, respectively,  attributable
to net income  earned by joint  ventures.  The increase in net income  earned by
joint ventures  during 2000, as compared to 1999, was primarily  attributable to
the fact that in June 2000, the Partnership reinvested the net sales proceeds it
received  from  the  1999  sale of the  Property  in  Lawrence,  Kansas  in TGIF
Pittsburgh Joint Venture with affiliates of the General Partners as described in
"Capital  Resources." 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."

         During  the  year  ended  December  31,  2000,  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 and earned income (including the Partnership's share
of  rental  income  from the  Properties  owned by  joint  ventures  and the two
Properties owned with affiliates of the General Partners as  tenants-in-common).
As of December 31, 2000,  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 2001.  In addition,  during the year ended  December  31, 2000,  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 and earned  income
(including the Partnership's share of rental income from the Properties owned by
joint  ventures  and the two  Properties  owned with  affiliates  of the General
Partners as  tenants-in-common).  In 2001, 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  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 $1,066,117, $1,160,324, and $850,501 for the years ended December 31, 2000,
1999, and 1998,  respectively.  The decrease in operating  expenses during 2000,
and the increase  during 1999,  was primarily  due to the amount of  transaction
costs that the Partnership  incurred relating to the General Partners  retaining
financial and legal  advisors to assist them in evaluating and  negotiating  the
proposed  and  terminated  Merger  with APF, as  described  in  "Termination  of
Merger."

         The decrease in operating  expenses  during 2000, was partially  offset
by, and the increase in operating expenses during 1999, was partially due to the
fact that the Partnership  incurred certain  expenses,  such as legal fees, 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.  During 2000,  the  Partnership  recorded bad debt expense of $33,532 for
past due amounts relating to the Property in Las Vegas,  Nevada. 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 and September
2000, the Partnership sold the Boston Market Properties in Lawrence,  Kansas and
Columbia  Heights,  Minnesota,   respectively.   The  General  Partners  do  not
anticipate  that the  Partnership  will  incur  these  expenses  for these  five
Properties in the future. 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  some of these leases
from  net  investment  in  direct  financing  leases  to land and  buildings  on
operating leases as a result of lease terminations.

         As a result of the sale of the Property in Columbia Heights, Minnesota,
as described above in "Capital Resources," the Partnership  recognized a gain of
$88,661 for  financial  reporting  purposes  during the year ended  December 31,
2000. 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.  No
Properties were sold during 1998.

         During the year ended  December  31,  2000,  the  Partnership  recorded
provisions for loss on assets of $400,492 and $456,824,  respectively,  relating
to  Boston  Market  Properties  located  in  Columbia  Heights  and  St.  Cloud,
Minnesota. The tenant for these Properties filed for bankruptcy and discontinued
the payment of rents. The allowances  represented the difference between the net
carrying value of the Properties and the estimated net realizable  value for the
Properties.  During the year ended December 31, 1998, the Partnership recorded a
provision  for loss on assets  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  represented 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.

         The  Partnership's  leases  as of  December  31,  2000,  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,  also may have an adverse impact on the sales of the restaurants and on
potential capital appreciation of the Properties.

         In December 1999, the Securities and Exchange  Commission  released SAB
101, which provides the staff's view in applying generally  accepted  accounting
principles  to  selected  revenue  recognition  issues.  SAB  101  requires  the
Partnership  to defer  recognition  of certain  percentage  rental  income until
certain defined  thresholds are met. The  Partnership  adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material impact on the
Partnership's results of operations.

         In June 1998, the Financial Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments and Hedging  Activities." The Statement  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments,   embedded  in  other  contracts   (collectively   referred  to  as
derivatives),  and for hedging activities. The Statement requires that an entity
recognize all  derivatives  as either assets or liabilities in the balance sheet
and  measure  those  instruments  at fair  value.  In June 1999,  the  Financial
Accounting  Standards Board issued Statement of Financial  Accounting  Standards
No.  137,  "Accounting  for  Derivative  Instruments  and Hedging  Activities  -
Deferral of the Effective  Date of FASB  Statement No. 133, an Amendment of FASB
Statement No. 133." FAS 137 deferred the effective date of FAS 133 for one year.
FAS 133,  as amended,  is now  effective  for all fiscal  quarters of all fiscal
years  beginning  after  June  15,  2000.  The  Partnership  has  reviewed  both
statements and has determined  that both FAS 133 and FAS 137 do not apply to the
Partnership as of December 31, 2000.

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.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.


Item 8.  Financial Statements and Supplementary Data




<PAGE>


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

                                    CONTENTS








                                                                   Page

Report of Independent Certified Public Accountants                  17

Financial Statements:

     Balance Sheets                                                 18

     Statements of Income                                           19

     Statements of Partners' Capital                                20

     Statements of Cash Flows                                    21-23

     Notes to Financial Statements                               24-39










<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 of America.  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 of America,  which  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.




/s/ PricewaterhouseCoopers LLP

Orlando, Florida
February 2, 2001



<PAGE>


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

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>`

                                                                                      December 31,
                                                                              2000                    1999
                                                                       -------------------     -------------------

                         ASSETS

Land and buildings on operating leases, less
     accumulated depreciation and allowance for loss on
assets                                                                        $28,488,803            $ 29,804,331
Net investment in direct financing leases                                       3,887,824               4,540,067
Investment in joint ventures                                                    2,143,328               1,650,860
Cash and cash equivalents                                                       1,081,650               1,637,753
Receivables, less allowance for doubtful    accounts of
$429,262 and $90,894,
     respectively                                                                 440,739                 287,757
Prepaid expenses                                                                    8,827                  13,121
Lease costs, less accumulated amortization of
     $14,357 and $1,348 in 2000 and1999,
     respectively                                                                  25,566                  24,518
Accrued rental income, less allowance for
     doubtful accounts of $18,466 and $6,098,
     respectively                                                               1,859,347               1,752,566
                                                                       -------------------     -------------------

                                                                              $37,936,084             $39,710,973
                                                                       ===================     ===================

            LIABILITIES AND PARTNERS' CAPITAL

Acquisition and construction costs payable                                        $    --              $  150,000
Accounts payable                                                                   30,429                 131,113
Accrued and escrowed real estate taxes
     payable                                                                       13,359                   5,860
Distributions payable                                                             900,000                 900,000
Due to related parties                                                            152,957                  73,853
Rents paid in advance and deposits                                                 86,595                  43,215
                                                                       -------------------     -------------------
         Total liabilities                                                      1,183,340               1,304,041

Partners' capital                                                              36,752,744              38,406,932
                                                                       -------------------     -------------------

                                                                              $37,936,084             $39,710,973
                                                                       ===================     ===================


                See accompanying notes to financial statements.
</TABLE>

<PAGE>


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

                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
<S> <C>
                                                                                 Year Ended December 31,
                                                                        2000               1999               1998
                                                                   ----------------   ----------------   ---------------

Revenues:
     Rental income from operating leases                               $ 3,171,534        $ 3,281,281       $ 3,482,762
     Adjustments to accrued rental income                                 (105,655  )              --          (184,368 )
     Earned income from direct financing leases                            482,726            558,343           601,587
     Interest income                                                        45,310             49,008            60,199
     Other income                                                            6,585             12,598             1,574
                                                                   ----------------   ----------------   ---------------
                                                                         3,600,500          3,901,230         3,961,754
                                                                   ----------------   ----------------   ---------------
Expenses:
     General operating and administrative                                  187,861            183,150           158,519
     Bad debt expense                                                       33,532                 --                --
     Professional services                                                  80,343             53,282            40,471
     Management fees to related parties                                     36,605             37,385            38,570
     Real estate taxes                                                      50,966             59,895             9,060
     State and other taxes                                                  27,356             25,599            19,398
     Loss on termination of direct financing lease                          31,215                 --             4,471
     Depreciation and amortization                                         585,659            588,920           555,360
     Transaction costs                                                      32,580            212,093            24,652
                                                                   ----------------   ----------------   ---------------
                                                                         1,066,117          1,160,324           850,501
                                                                   ----------------   ----------------   ---------------
Income Before Equity in Earnings of Joint
     Ventures, Gain (Loss) on Sale of Assets, and
     Provision for Loss on Assets                                        2,534,383          2,740,906         3,111,253

Equity in Earnings of Joint Ventures                                       180,084            158,580           132,002

Gain (Loss) on Sale of Assets                                               88,661            (84,478  )             --

Provision for Loss on Assets                                              (857,316  )              --          (266,257 )
                                                                   ----------------   ----------------   ---------------

Net Income                                                               1,945,812        $ 2,815,008       $ 2,976,998
                                                                   ================   ================   ===============

Allocation of Net Income
     General partners                                                      $    --         $   28,717        $   31,685
     Limited partners                                                    1,945,812          2,786,291         2,945,313
                                                                   ----------------   ----------------   ---------------
                                                                       $ 1,945,812        $ 2,815,008       $ 2,976,998
                                                                   ================   ================   ===============

Net Income Per Limited Partner Unit                                      $    0.43          $    0.62         $    0.65
                                                                   ================   ================   ===============

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

                See accompanying notes to financial statements.

</TABLE>

<PAGE>


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

                         STATEMENTS OF PARTNERS' CAPITAL

                  Years Ended December 31, 2000, 1999, and 1998
<TABLE>
<CAPTION>
<S> <C>
                                   General Partners                          Limited Partners
                          ------------------------------- ------------------------------------------------------------------------
                                            Accumulated                                    Accumulated  Syndication
                           Contributions      Earnings    Contributions    Distributions    Earnings        Costs        Total
                          ---------------  -------------- -------------   --------------   ------------ -------------  -----------

Balance, December 31, 1997       $1,000       $98,615     $45,000,000     $ (9,733,017)     $9,928,328   $5,390,000)   $39,904,926

    Distributions to limited
       partners ($0.82 per
       limited partner unit)        --            --            --          (3,690,000)             --           --     (3,690,000)
    Net income                      --        $31,685           --                --         2,945,313           --      2,976,998
                            ---------------  ----------   -------------   --------------   ------------ -------------  ------------

Balance, December 31, 1998       $1,000      $ 30,300      $45,000,000      (13,423,017)    12,873,641   (5,390,000)    9,191,924

    Distributions to limited
       partners ($0.80 per
       limited partner unit)        --            --            --           (3,600,000)             --           --    (3,600,000)
    Net income                      --       $ 28,717           --                --         2,786,291           --      2,815,008
                            ---------------  ----------   -------------  ---------------  -------------  ------------  ------------

Balance, December 31, 1999       $1,000      $159,017      $45,000,000      (17,023,017)    15,659,932   (5,390,000)   38,406,932

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

Balance, December 31, 2000       $1,000       $159,017     $45,000,000    $ (20,623,017)  $ 17,605,744   $(5,390,000)  $36,752,744
                            ===============  ==========   ============  ================ ============== =============  ============

                See accompanying notes to financial statements.

</TABLE>


<PAGE>



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

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
<S> <C>
                                                                               Year Ended December 31,
                                                                      2000                1999              1998
                                                                 ----------------    ---------------    --------------

Increase (Decrease) in Cash and Cash Equivalents:

      Cash Flows from Operating Activities:
         Cash received from tenants                                  $ 3,366,743         $3,341,862        $3,675,430
         Distributions from joint venture                                187,637            170,697           143,279
         Cash paid for expenses                                         (428,209 )         (410,336 )        (273,929 )
         Interest received                                                39,526             49,008            78,914
                                                                 ----------------    ---------------    --------------
             Net cash provided by operating activities
                                                                       3,165,697          3,151,231         3,623,694
                                                                 ----------------    ---------------    --------------

      Cash Flows from Investing Activities:
         Proceeds from sale of land and buildings                        575,778            667,311                --
         Reimbursement of construction costs from
           developer                                                          --                 --           161,648
         Additions to land and buildings on operating
           leases                                                       (183,500 )               --            (3,545 )
         Investment in direct financing leases                                --                 --           (28,403 )
         Investment in joint ventures                                   (500,021 )         (158,512 )        (744,058 )
         Decrease in restricted cash                                          --                 --           610,384
         Payment of lease costs                                          (14,057 )          (25,866 )              --
                                                                 ----------------    ---------------    --------------
             Net cash (used in) investing activities                    (121,800 )          482,933            (3,974 )
                                                                 ----------------    ---------------    --------------

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

Net Increase (Decrease) in Cash and Cash    Equivalents
                                                                        (556,103 )           34,164           (70,280 )

Cash and Cash Equivalents at Beginning of Year                         1,637,753          1,603,589         1,673,869
                                                                 ----------------    ---------------    --------------

Cash and Cash Equivalents at End of Year                             $ 1,081,650         $1,637,753        $1,603,589
                                                                 ================    ===============    ==============


</TABLE>

                See accompanying notes to financial statements.
<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>
<S> <C>
                                                                               Year Ended December 31,
                                                                      2000               1999              1998
                                                                 ---------------    ---------------    --------------

Reconciliation of Net Income to Net Cash
    Provided by Operating Activities:

      Net Income                                                     $1,945,812         $2,815,008        $2,976,998
                                                                 ---------------    ---------------    --------------
      Adjustments to  reconcile  net income to net cash
         provided  by  operating activities:

             Depreciation                                               572,650            586,122           553,360
             Amortization                                                13,009              2,798             2,000
             Bad debt expense                                            33,532                 --                --
             Loss on termination of direct
                financing lease                                          31,215                 --             4,471
             Equity in earnings of joint ventures,
                net of distributions                                      7,553             12,117            11,277
             Loss (gain) on sale of assets                              (88,661 )           84,478                --
             Provision for loss on assets                               857,316                 --           266,257
             (Increase) in receivables                                 (186,514 )         (220,782 )         (13,753 )
             Decrease in net investment in direct
                financing leases                                         52,973             41,327            43,343
             Decrease (increase) in prepaid
                expenses                                                  4,294                624            (4,452 )
             Increase in accrued rental income                         (106,781 )         (327,785 )        (232,408 )
             Increase (decrease) in accounts
                payable and accrued expenses                            (93,185 )          127,994             1,919
             Increase in due to related parties                          79,104             47,377            23,125
             Increase (decrease) in rents paid in
                advance and deposits                                     43,380            (18,047 )          (8,443 )
                                                                 ---------------    ---------------    --------------
                  Total adjustments                                   1,219,885            336,223           646,696
                                                                 ---------------    ---------------    --------------

Net Cash Provided by Operating Activities                            $3,165,697         $3,151,231        $3,623,694
                                                                 ===============    ===============    ==============

</TABLE>


                See accompanying notes to financial statements.


<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>
<S> <C>
                                                                              Years Ended December 31,
                                                                      2000               1999              1998
                                                                 ---------------    ---------------    --------------

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.


<PAGE>



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

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 2000, 1999, and 1998


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

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

         The general partners of the Partnership are CNL Realty Corporation (the
         "Corporate  General  Partner"),  James M.  Seneff,  Jr.  and  Robert A.
         Bourne.  Mr. Seneff and Mr. Bourne are also 50 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) (see 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.





<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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 amounts  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 TGIF
         Pittsburgh  Joint Venture and Columbus Joint Venture and the properties
         in Fayetteville,  North Carolina 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.



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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.

         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.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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.

         Reclassifications  -  Certain  items  in  the  prior  year's  financial
         statements  have been  reclassified  to conform  to 2000  presentation.
         These  reclassifications  had no effect  on  partners'  capital  or net
         income.

         Staff  Accounting  Bulletin No. 101 ("SAB 101") - In December 1999, the
         Securities and Exchange Commission released SAB 101, which provides the
         staff's view in applying  generally accepted  accounting  principles to
         selected revenue  recognition  issues. SAB 101 requires the Partnership
         to defer recognition of certain  percentage rental income until certain
         defined  thresholds are met. The Partnership  adopted SAB 101 beginning
         January  1,  2000.  Implementation  of SAB 101 did not have a  material
         impact on the Partnership's results of operations.

         Statement of  Financial  Accounting  Standards  No. 133 ("FAS 133") and
         Statement of Financial  Accounting  Standards  No. 137 ("FAS 137") - In
         June 1998, the Financial Accounting Standards Board issued Statement of
         Financial  Accounting  Standards No. 133,  "Accounting  for  Derivative
         Instruments  and  Hedging   Activities."   The  Statement   establishes
         accounting  and  reporting   standards  for   derivative   instruments,
         including certain derivative  instruments,  embedded in other contracts
         (collectively referred to as derivatives),  and for hedging activities.
         The Statement  requires that an entity  recognize  all  derivatives  as
         either  assets or  liabilities  in the balance  sheet and measure those
         instruments  at fair  value.  In June 1999,  the  Financial  Accounting
         Standards Board issued Statement of Financial  Accounting Standards No.
         137,  "Accounting for Derivative  Instruments and Hedging  Activities -
         Deferral of the Effective  Date of FASB Statement No. 133, an Amendment
         of FASB  Statement No. 133." FAS 137 deferred the effective date of FAS
         133 for one year. FAS 133, as amended,  is now effective for all fiscal
         quarters  of all  fiscal  years  beginning  after  June 15,  2000.  The
         Partnership  has reviewed both  statements and has determined that both
         FAS 133 and FAS 137 do not apply to the  Partnership as of December 31,
         2000.

<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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,  generally  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.

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

         Land and  buildings on operating  leases  consisted of the following at
         December 31:
<TABLE>
<CAPTION>
<S> <C>
                                                                    2000                   1999
                                                             --------------------   --------------------

                 Land                                               $ 14,896,276           $ 15,034,850
                 Buildings                                            17,277,021             17,540,422
                                                             --------------------   --------------------
                                                                      32,173,297             32,575,272
                 Less accumulated depreciation                        (2,961,413 )           (2,504,684 )
                                                             --------------------   --------------------
                                                                      29,211,884             30,070,588
                 Less allowance for loss on
                    assets                                              (723,081 )             (266,257 )
                                                             --------------------   --------------------

                                                                    $ 28,488,803           $ 29,804,331
                                                             ====================   ====================
</TABLE>


         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.
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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

         At December 31, 1999, the Partnership established an allowance for loss
         on assets 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  represented  the  difference  between  the
         carrying  value of the property at December  31, 1999,  and the current
         estimate of net realizable value for this property.

         At December 31, 2000, the Partnership established an allowance for loss
         on assets of $456,824  relating to a Boston Market property  located in
         St. Cloud, Minnesota. The tenant for this property filed for bankruptcy
         and discontinued  the payment of rents.  The allowance  represented the
         difference  between the net carrying  value of the property at December
         31, 2000 and the estimated net realizable value for the property.

         During 2000,  the  Partnership  established  an  allowance  for loss on
         assets of $400,492  relating to its Boston Market  property in Columbia
         Heights,  Minnesota.  The tenant of this property  filed for bankruptcy
         and   discontinued  the  payment  of  rents.  In  September  2000,  the
         Partnership  sold its  property in Columbia  Heights,  Minnesota,  to a
         third  party  for  $584,000   and   received  net  sales   proceeds  of
         approximately  $575,800,  resulting in a gain of approximately  $88,700
         for the 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, 2000, 1999, and 1998, the Partnership
         recognized  $106,781  (net  of  $12,368  in  reserves  and  $93,287  in
         reversals),  $327,785 (net of $6,098 in reserves), and $232,408 (net of
         $184,368 in reversals), respectively, of such rental income.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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

         The following is a schedule of the future  minimum lease payments to be
         received on noncancellable operating leases at December 31, 2000:

                 2001                                  $ 3,079,133
                 2002                                    3,087,500
                 2003                                    3,095,582
                 2004                                    3,146,322
                 2005                                    3,304,208
                 Thereafter                             25,427,227
                                                 ------------------

                                                      $ 41,139,972
                                                 ==================

         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.

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>
<S> <C>
                                                             2000                  1999
                                                       -----------------     -----------------

                   Minimum lease payments
                        receivable                          $ 7,496,712           $ 9,316,791
                   Estimated residual values                  1,261,543             1,507,809
                   Less unearned income                      (4,870,431 )          (6,284,533 )
                                                       -----------------     -----------------
                   Net investment in direct
                        financing leases                    $ 3,887,824           $ 4,540,067
                                                       =================     =================

</TABLE>


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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

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

                     2001                               $ 512,704
                     2002                                 518,715
                     2003                                 523,198
                     2004                                 523,853
                     2005                                 524,515
                     Thereafter                         4,893,727
                                                  ----------------

                                                       $7,496,712
                                                  ================

         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).

         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.

         During the year ended  December  31,  2000,  the tenant of the  Denny's
         property  in  Bucyrus,  Ohio  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. A loss on termination of direct financing
         lease of $31,215 was recorded for financial reporting purposes.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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

         The  Partnership  owns  a  property  in  each  of  Fayetteville,  North
         Carolina, and Memphis,  Tennessee, as tenants-in-common with affiliates
         of the general partners. As of December 31, 2000, the Partnership owned
         an 80.44% and 40.42% interest in each property,  respectively.  Amounts
         relating  to these  investments  are  included in  investment  in joint
         ventures.

         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, 2000, the owned a 32.35% interest in this joint venture.

         In June  2000,  the  Partnership  used the  majority  of the net  sales
         proceeds  received  from the 1999  sale of the  property  in  Lawrence,
         Kansas, to invest in a joint venture arrangement, TGIF Pittsburgh Joint
         Venture,  with CNL Income Fund VII, Ltd., CNL Income Fund XV, Ltd., and
         CNL Income Fund XVIII, Ltd., each a Florida limited  partnership and an
         affiliate of the general partners,  to purchase and hold one restaurant
         property.  The Partnership accounts for its investment using the equity
         method since the  Partnership  shares control with  affiliates.  As for
         December  31,  2000,  the  Partnership  owned a 19.72%  interest in the
         profits and losses of the joint venture.

         Columbus  Joint  Venture,   TGIF  Pittsburgh   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 ventures and the properties  held as  tenants-in-common  with
         affiliates at December 31:
<TABLE>
<CAPTION>
<S> <C>
                                                                2000                  1999
                                                           ----------------      ----------------
                Land and buildings on operating
                    leases, less accumulated
                    depreciation                               $ 5,682,834           $ 3,240,248
                Cash                                                50,478                 7,963
                Prepaid expenses                                       413                   581
                Accrued rental income                              160,331               100,220
                Liabilities                                         21,173                20,919
                Partners' capital                                5,872,883             3,328,093
                Revenues                                           530,177               386,985
                Net income                                         432,495               317,252
</TABLE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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

         The Partnership  recognized income totalling  $180,084,  $158,580,  and
         $132,002,  for the years  ended  December  31,  2000,  1999,  and 1998,
         respectively,  from  the  joint  ventures  and the  properties  held as
         tenants-in-common with affiliates of the general partners.

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,  all
         accrued and unpaid interest amounts were capitalized into the principal
         balance of the note. Due to the  uncertainty of collection of the note,
         the Partnership  established an allowance for doubtful accounts.  As of
         December 31, 2000,  the balance in the allowance for doubtful  accounts
         relating  to  this  promissory  note  was  $62,751,  including  accrued
         interest of $4,914.

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

         From inception  through  December 31, 1999,  generally,  net income and
         losses of the Partnership,  excluding gains and losses from the sale of
         properties,  were allocated 99 percent to the limited  partners and one
         percent to the general  partners.  From inception  through December 31,
         1999,  distributions  of net cash  flow  were  made 99  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").

         From inception through December 31, 1999, generally, net sales proceeds
         from the sale of properties not in liquidation of the  Partnership,  to
         the extent distributed,  were distributed first to the limited partners
         in an amount sufficient to provide them with their Limited Partners' 8%
         Return,  plus the return of their adjusted capital  contributions.  The
         general partners then received,  to the extent previously  subordinated
         and unpaid, a one

<PAGE>



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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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

         percent  interest  in all  prior  distributions  of net cash flow and a
         return of their capital  contributions.  Any remaining  sales  proceeds
         were 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  was, in general,  allocated in the same
         manner as net sales proceeds are distributable.  Any loss from the sale
         of a property was, in general, allocated first, on a pro rata basis, to
         partners  with  positive  balances  in  their  capital  accounts;   and
         thereafter,  95 percent to the limited partners and five percent to the
         general partners.

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

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

         During  the  years  ended  December  31,  2000,   1999,  and  1998  the
         Partnership   declared   distributions   to  the  limited  partners  of
         $3,600,000, $3,600,000, and $3,690,000,  respectively. No distributions
         have been made to the general partners to date.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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

             Net income for financial reporting purposes         $ 1,945,812      $ 2,815,008       $ 2,976,998

             Depreciation for tax reporting purposes in
                  excess of depreciation for financial
                  reporting purposes                                  38,747           38,885               809

             Allowance for loss on building                          857,316               --           266,257

               Direct financing leases recorded as operating
                  leases for tax reporting purposes                   52,973           41,327            43,343

             Loss on termination of direct financing leases           31,215               --             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                              (7,155 )         (9,081 )         (11,217 )

             Gain on sale of land and buildings for
                  financial reporting purposes in
                  excess of gain for tax reporting
                  purposes                                          (430,205 )        (17,919 )              --

             Allowance for doubtful accounts                         338,368            1,072            88,943

             Accrued rental income                                  (106,781 )       (327,785 )        (232,408 )

             Rents paid in advance                                    43,380          (20,042 )          (8,443 )

             Capitalization (deduction) of transaction costs
                  for tax reporting purposes                        (236,745 )        212,093            24,652

             Other                                                        --               --               212
                                                               --------------   --------------   ---------------

             Net income for federal income tax purposes          $ 2,526,925      $ 2,733,558       $ 3,153,617
                                                               ==============   ==============   ===============


</TABLE>


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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 $36,605,  $37,385, and $38,570,
         for the years ended December 31, 2000, 1999, and 1998, 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.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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

         During the years ended  December 31, 2000,  1999, and 1998, 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. The Partnership  incurred $109,898,
         $138,583, and $102,840 for the years ended December 31, 2000, 1999, and
         1998, respectively, for such services.

         The amount due to related parties at December 31, 2000 and 1999 totaled
         $152,957 and $73,853, 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 ventures and
         the properties held as  tenants-in-common  with affiliates) for each of
         the years ended December 31:
<TABLE>
<CAPTION>
<S> <C>
                                                              2000                  1999                 1998
                                                        -----------------     -----------------    -----------------

          Golden Corral Corporation                            $ 931,631             $ 968,456            $ 971,344
          Phoenix Restaurant Group, Inc.
                (formerly known as DenAmerica
                Corporation)                                     834,288             1,143,192            1,164,160
          Jack in the Box Inc.
                (formerly known as Foodmaker, Inc.)              556,365               556,610              558,466
</TABLE>



<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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  ventures  and  the  properties  held as  tenants-in-common  with
         affiliates) for each of the years ended December 31:
<TABLE>
<CAPTION>
<S> <C>
                                                          2000                 1999                1998
                                                     ----------------     ----------------    ---------------

              Golden Corral Family
                  Steakhouse Restaurants                   $ 931,631            $ 968,456          $ 971,344
              Denny's                                        946,399            1,143,192          1,164,160
              Jack in the Box                                556,365              556,610            558,466
              Boston Market                                      N/A                  N/A            467,043
</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 three properties.  In November 1999 and
         September 2000, the Partnership sold two 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.  In August  1999,  Boston
         Chicken, Inc. assumed and affirmed its one remaining lease.


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999, and 1998


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

         The following table presents  selected  unaudited  quarterly  financial
         data for each full quarter during the years ended December 31, 2000 and
         1999:
<TABLE>
<CAPTION>
<S> <C>
            2000 Quarter               First             Second              Third             Fourth             Year
       -----------------------     ---------------    --------------     --------------    ---------------    --------------

       Revenues (1)                     $ 947,390         $ 944,933          $ 842,921        $ 1,045,340       $ 3,780,584
       Net income                         236,047           169,575            671,811            868,379         1,945,812
       Net income per
           limited partner
           unit                              0.05              0.04               0.15               0.19              0.43

            1999 Quarter               First             Second              Third             Fourth             Year
       -----------------------     ---------------    --------------     --------------    ---------------    --------------

       Revenues (1)                     $ 989,673         $ 993,576        $ 1,004,434        $ 1,072,127       $ 4,059,810
       Net income                         705,396           606,072            710,602            792,938         2,815,008
       Net income per
           limited partner
           unit                              0.16              0.13               0.16               0.17              0.62
</TABLE>

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






<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 54. Since 1971, Mr. Seneff has been active in
the  acquisition,  development,  and  management  of real estate  projects  and,
directly or through an  affiliated  entity,  has served as a general  partner or
co-venturer in over 100 real estate  ventures.  These ventures have involved the
financing,  acquisition,   construction,  and  leasing  of  restaurants,  office
buildings,  apartment  complexes,  hotels, and other real estate. Mr. Seneff has
served as Director and Chairman of the Board of CNL  American  Properties  Fund,
Inc. ("APF"),  a public,  unlisted real estate investment trust, since 1994. Mr.
Seneff served as Chief  Executive  Officer of APF from 1994 through  August 1999
and has served as Co-Chief  Executive  Officer of APF since  December  2000. Mr.
Seneff served as Chairman of the Board and Chief  Executive  Officer of CNL Fund
Advisors (the "Advisor") until it merged with APF in September 1999, and in June
2000,  was  re-elected  to those  positions  of the  Advisor.  Mr.  Seneff  is a
principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial
Group, Inc. (formerly CNL Group,  Inc.), a diversified real estate company,  and
has served as a director,  Chairman of the Board and Chief Executive  Officer of
CNL Financial Group, Inc. since its formation in 1980. CNL Financial Group, Inc.
is the parent company,  either directly or indirectly through  subsidiaries,  of
CNL Real Estate  Services,  Inc.,  CNL Capital  Markets,  Inc.,  CNL  Investment
Company and CNL Securities Corp. Mr. Seneff also serves as a Director,  Chairman
of the Board and Chief Executive Officer of CNL Hospitality Properties,  Inc., a
public,  unlisted  real estate  investment  trust,  as well as, CNL  Hospitality
Corp., its advisor. In addition, he serves as a Director,  Chairman of the Board
and Chief  Executive  Officer  of CNL  Retirement  Properties,  Inc.,  a public,
unlisted real estate  investment  trust and its advisor,  CNL  Retirement  Corp.
Since 1992, Mr. Seneff has also served as a Director,  Chairman of the Board and
Chief  Executive  Officer of Commercial  Net Lease  Realty,  Inc., a public real
estate  investment  trust  that is listed on the New York  Stock  Exchange.  Mr.
Seneff has also served as a Director,  Chairman of the Board and Chief Executive
Officer of CNL Securities Corp.  since 1979; CNL Investment  Company since 1990;
and CNL  Institutional  Advisors,  Inc.,  a  registered  investment  advisor for
pension  plans,  since 1990. Mr. Seneff  formerly  served as a Director of First
Union National Bank of Florida,  N.A.,  and currently  serves as the Chairman of
the  Board of CNL Bank.  Mr.  Seneff  previously  served  on the  Florida  State
Commission  on Ethics and is a former  member and past  Chairman of the State of
Florida  Investment  Advisory Council,  which recommends to the Florida Board of
Administration  investments for various Florida employee  retirement  funds. The
Florida Board of Administration,  Florida's  principal  investment  advisory and
money  management  agency,  oversees the  investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration from
Florida State University in 1968.

         Robert A.  Bourne,  age 53. 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
Director and Vice  Chairman of the Board of Directors of APF. Mr.  Bourne served
as President of APF from 1994 through February 1999. He also served as Treasurer
from February 1999 through August 1999 and from May 1994 through  December 1994.
He also served in various  executive  positions  with the  Advisor  prior to its
merger with APF  including,  President  from 1994 through  September  1997,  and
Director  from 1994 through  August 1999.  Mr.  Bourne  serves as President  and
Treasurer of CNL Financial Group,  Inc.  (formerly CNL Group,  Inc.);  Director,
Vice Chairman of the Board and President of CNL Hospitality Properties,  Inc., a
public,  unlisted  real  estate  investment  trust;  as well  as,  Director  and
President of CNL Hospitality Corp., its advisor. In addition,  Mr. Bourne serves
as Director and President of CNL Retirement Properties, Inc., a public, unlisted
real  estate  investment  trust;  as well as, a Director  and  President  of its
advisor,  CNL Retirement Corp. Mr. Bourne also serves as a Director of CNL Bank.
He has  served as a  Director  since  1992,  Vice  Chairman  of the Board  since
February  1996,  Secretary  and Treasurer  from February 1996 through 1997,  and
President from July 1992 through  February 1996, of Commercial Net Lease Realty,
Inc.,  a public  real  estate  investment  trust  listed  on the New York  Stock
Exchange.  Mr.  Bourne also serves as  Director,  President  and  Treasurer  for
various  affiliates of CNL  Financial  Group,  Inc.  including,  CNL  Investment
Company, CNL Securities Corp. and CNL Institutional Advisors, Inc., a registered
investment advisor for pension plans. Mr. Bourne began his career as a certified
public accountant  employed by Coopers & Lybrand,  Certified Public Accountants,
from 1971 through  1978,  where he attained the position of Tax Manager in 1975.
Mr. Bourne  graduated from Florida State  University in 1970 where he received a
B.A. in Accounting, with honors.

         Curtis B.  McWilliams,  age 45. Mr.  McWilliams  has served as Co-Chief
Executive  Officer of APF since  December  2000 and  previously  served as Chief
Executive  Officer from  September  1999  through  December  2000.  Prior to the
acquisition  of the  Advisor,  Mr.  McWilliams  served as  President of APF from
February 1999 until  September 1999. From April 1997 to February 1999, he served
as Executive Vice President of APF. Mr.  McWilliams  joined CNL Financial Group,
Inc.  (formerly CNL Group,  Inc.) in April 1997 and served as an Executive  Vice
President until September 1999. In addition,  Mr. McWilliams served as President
of the  Advisor  and CNL  Financial  Services,  Inc.  from  April 1997 until the
acquisition  of such  entities by APF in September  1999.  From  September  1983
through  March 1997,  Mr.  McWilliams  was  employed by Merrill  Lynch & Co. The
majority  of his career at Merrill  Lynch & Co.  was in the  Investment  Banking
division  where he served as a  Managing  Director.  Mr.  McWilliams  received a
B.S.E. in Chemical Engineering from Princeton University in 1977 and a Master of
Business  Administration  degree  with  a  concentration  in  finance  from  the
University of Chicago in 1983.

         John T. Walker, age 42. Mr. Walker has served as President of APF since
September 1999 and as Chief Operating  Officer since March 1995. Mr. Walker also
served as a board member of CNL Restaurant Property Services, Inc., a subsidiary
of APF from  December  1999  until  December  2000.  Previously,  he  served  as
Executive Vice President of APF from January 1996 to September  1999. Mr. Walker
joined the Advisor in September  1994, as Senior Vice President  responsible for
Research  and  Development.  He  served as the Chief  Operating  Officer  of the
Advisor from April 1995 until  September  1999 and as Executive  Vice  President
from January 1996 until  September  1999,  at which time it merged with APF. Mr.
Walker also served as Executive  Vice President of CNL  Hospitality  Properties,
Inc. and CNL Hospitality Corp.  (formerly CNL Hospitality  Advisors,  Inc.) from
1997 to October 1998. From May 1992 to May 1994, he was Executive Vice President
for Finance and  Administration  and Chief Financial Officer of Z Music, Inc., a
cable   television   network   which  was   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 Bachelor of Science degree in Accountancy and
is a certified public accountant.

         Steven  D.  Shackelford,  age  37.  Mr.  Shackelford  was  promoted  to
Executive  Vice  President and Chief  Financial  Officer of APF in July 2000. He
served as Senior Vice President and Chief Financial Officer of APF since January
1997.  Mr.  Shackelford  also served as  Secretary  and  Treasurer  of APF since
September  1999. He also served as Chief  Financial  Officer of the Advisor from
September 1996 to September 1999. From March 1995 to July 1996, Mr.  Shackelford
was a senior manager in the national office of Price Waterhouse LLP where he was
responsible  for advising  foreign clients seeking to raise capital and a public
listing in the United  States.  From August 1992 to March 1995, he was a manager
in the Paris, France office of Price Waterhouse,  serving several multi-national
clients.  Mr. Shackelford was an audit staff and senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse. Mr. Shackelford received a Bachelor
of  Arts  degree  in  Accounting,   with  honors,   and  a  Master  of  Business
Administration  degree from Florida State  University and is a certified  public
accountant.


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,  2001,  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, 2001,  the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
<S> <C>
           Title of Class                           Name of Partner                 Percent of Class
           --------------                           ---------------                 ----------------

       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.







<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, 2000,  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>
<S> <C>
                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2000
---------------------------------      --------------------------------------      ------------------------------

Reimbursement  to affiliates for       Operating  expenses are reimbursed at       Accounting                and
operating expenses                     the  lower of cost or 90  percent  of       admini-strative     services:
                                       the   prevailing    rate   at   which       $109,898
                                       comparable  services  could have been
                                       obtained   in  the  same   geographic
                                       area.   Affiliates   of  the  General
                                       Partners  from  time  to  time  incur
                                       certain operating  expenses on behalf
                                       of  the  Partnership  for  which  the
                                       Partnership       reimburses      the
                                       affiliates without interest.

Annual    management    fee   to       One  percent  of  the  sum  of  gross       $36,605
affiliates                             revenues   from   Properties   wholly
                                       owned by the Partnership plus the
                                       Partnership's allocable share of
                                       gross revenues of joint ventures in
                                       which    the    Partnership    is   a
                                       co-venturer.   The  management   fee,
                                       which will not exceed competitive
                                       fees for comparable services in the
                                       same geographic area, may or may not
                                       be  taken,  in whole or in part as to
                                       any year, in the sole discretion of
                                       the  affiliates.  All of any  portion
                                       of the management fee not taken as
                                       to any fiscal year shall be deferred
                                       without interest and may be taken in
                                       such   other   fiscal   year  as  the
                                       affiliates shall determine.
</TABLE>


<PAGE>


<TABLE>
<CAPTION>
<S> <C>
                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2000
---------------------------------      --------------------------------------      ------------------------------

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

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

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

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S> <C>

                                                                                          Amount Incurred
      Type of Compensation                                                                 For the Year
         and Recipient                         Method of Computation                  Ended December 31, 2000
---------------------------------      --------------------------------------      ------------------------------

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



</TABLE>

<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, 2000 and 1999

                  Statements of Income for the years ended December 31, 2000,
                  1999, and 1998

                  Statements of Partners' Capital for the years ended December
                  31, 2000, 1999, and 1998

                  Statements of Cash Flows for the years ended December 31,
                  2000, 1999, and 1998

                  Notes to Financial Statements

         2.  Financial Statement Schedules

                  Schedule II - Valuation and Qualifying  Accounts for the years
                  ended December 31, 2000, 1999, and 1998

                  Schedule III - Real Estate and Accumulated Depreciation at
                  December 31, 2000

                  Notes to Schedule III - Real Estate and Accumulated
                  Depreciation at December 31, 2000

                  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.)

                  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.)

         (b)      The  Registrant  filed no  reports  on Form 8-K during the
                  period October 1, 2000 through December 31, 2000.

         (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,  2000.  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.

<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 28th day of
March, 2001.


                        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>
<S> <C>
               Signature                                  Title                                  Date



/s/ Robert A. Bourne                     President,   Treasurer   and   Director            March 28, 2001
------------------------------------
Robert A. Bourne                         (Principal   Financial  and  Accounting
                                         Officer)

/s/ James M. Seneff, Jr.                 Chief  Executive  Officer and  Director            March 28, 2001
------------------------------------
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, 2000, 1999, and 1998

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

  1998        Allowance for
                  doubtful
                  accounts (a)         $    879          $    --        $   89,822 (b)     $    879 (c)       $   --      $ 89,822
                                  ==============  ===============  ================    =============     ============  ============

  1999        Allowance for
                  doubtful
                  accounts (a)        $  89,822          $    --        $   66,899 (b)    $  59,241 (c)      $   488      $ 96,992
                                  ==============  ===============  ================    =============     ============  ============

  2000        Allowance for
                  doubtful
                  accounts (a)        $  96,992       $   42,688        $  459,522 (b)    $   3,171 (c)    $ 148,303     $ 447,728
                                  ==============  ===============  ================    =============     ============  ============
</TABLE>


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

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

     (c)      Amounts written off as uncollectible.




<PAGE>

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

            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                               DECEMBER 31, 2000

<TABLE>
<CAPTION>
<S> <C>


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

Properties the Partnership
  has Invested in Under
  Operating Leases:

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

    Big Boy's Restaurant:
      Las Vegas, Nevada (i)      -              426,238       780,454        183,500        -

    Boston Market Restaurants:
      St. Cloud, Minnesota       -              502,786       645,127              -        -

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

    Denny's Restaurants:
      Tucson, Arizona            -              218,353             -              -        -
      Idaho Falls, Idaho         -              552,186             -        692,274        -
      Branson, Missouri          -            1,160,979             -      1,010,688        -
      Bucyrus, Ohio              -              139,003       429,052              -        -
      Dover, Ohio                -              266,829             -              -        -
      Salina, Kansas             -              261,154             -              -        -
      Moab, Utah                 -              435,927             -              -        -
      Mesquite, Texas            -              403,548       650,659              -        -
      Temple, Texas              -              306,866       677,659              -        -

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

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

    Jack in the Box Restaurants:
      Brownsville, Texas         -              553,671             -        658,282        -
      Grand Prairie, Texas       -              439,950             -        636,524        -
      Rancho Cordova, California -h)            401,302       595,722              -        -
      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                -              393,962       567,626              -        -
                                             -----------  ------------  -------------  -------

                                             $14,896,276   $6,469,225    $10,807,796        -
                                             ===========  ============  =============  =======

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              -        -
                                             ===========  ============  =============  =======

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

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


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

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

Property of Joint Venture in
    Which the Partnership
    has a 19.72% Interest        -           $1,036,297    $1,499,295              -        -
                                             ===========  ============  =============  =======
                                                                                         -
Properties the Partnership has
    Invested in Under Direct
    Financing Leases:

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

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

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

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

                                               $450,624    $1,782,727     $2,446,014        -
                                             ===========  ============  =============  =======



                                                                                       Life on Which
                     Gross Amount at Which                                             Depreciation in
                 Carried at Close of Period (g)                Date                    Latest Income
-------------------------------------------
                 Buildings and                  Accumulated   of Con-       Date       Statement is
    Land         Improvements     Total         Depreciation  struction    Acquired      Computed
-------------    -----------    -----------     ----------    -------      -------     -------------






    $315,276       $591,993       $907,269       $105,997      1978        08/95           (c)


     426,238        963,954      1,390,192         62,890      1992        05/95           (i)


     502,786        645,127      1,147,913        109,139      1995        09/95           (c)


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


     218,353             (d)       218,353             (e)     1995        10/94           (e)
     552,186        692,274      1,244,460        127,361      1995        01/95           (c)
   1,160,979      1,010,688      2,171,667        170,600      1995        03/95           (c)
     139,003        429,052        568,055          1,932      1973        03/95           (n)
     266,829             (d)       266,829             (e)     1971        03/95           (e)
     261,154             (d)       261,154             (e)     1995        04/95           (e)
     435,927             (d)       435,927             (e)     1995        06/95           (e)
     403,548        650,659      1,054,207        115,707      1995        08/95           (c)
     306,866        677,659        984,525        120,508      1975        08/95           (c)



     566,943      1,122,500      1,689,443        217,093      1995        10/94           (c)
     761,108      1,001,893      1,763,001        200,470      1994        11/94           (c)
     781,761      1,147,538      1,929,299        229,612      1994        11/94           (c)
     446,240        971,766      1,418,006        185,940      1995        01/95           (c)
     320,133        804,428      1,124,561        145,537      1995        05/95           (c)
     523,584        870,136      1,393,720        139,127      1996        01/96           (c)


     364,634        554,302        918,936         89,131      1994        03/96           (c)


     553,671        658,282      1,211,953        130,980      1995        10/94           (c)
     439,950        636,524      1,076,474        122,640      1995        10/94           (c)
     401,302        595,722        997,024        122,518      1985        10/94           (c)
     744,493        225,404        969,897         46,357      1984        10/94           (c)
     403,476        568,053        971,529        116,827      1991        10/94           (c)


     188,759        434,369        623,128         74,418      1995        09/95           (c)


     109,130        425,145        534,275         18,981      1995        10/94           (k)
     313,200        415,695        728,895         78,868      1995        12/94           (c)
     162,000             (d)       162,000             (e)     1994        12/94           (e)
     370,204        433,058        803,262         83,477      1995        12/94           (c)
     116,767        183,174        299,941         30,947      1982        12/95           (c)




     393,963        567,625        961,588        114,356      1983        12/94           (c)
-------------    -----------    -----------     ----------

 $14,896,277     $17,277,020    $32,173,297     $2,961,413
=============    ===========    ===========     ==========








    $377,800       $587,700       $965,500        $83,128      1996        10/96           (c)
=============    ===========    ===========     ==========







    $678,890       $825,076     $1,503,966        $81,648      1997        01/98           (c)
=============    ===========    ===========     ==========







    $406,976       $498,804       $905,780        $33,938      1999        08/98           (c)
=============    ===========    ===========     ==========



  $1,036,297     $1,499,295     $2,535,592        $29,290      2000        06/00           (c)
=============    ===========    ===========     ==========






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


           -             (d)            (d)            (e)     1995        10/94           (e)
          (d)            (d)            (d)            (f)     1973        03/95           (f)
           -             (d)            (d)            (e)     1971        03/95           (e)
           -             (d)            (d)            (e)     1995        04/95           (e)
           -             (d)            (d)            (e)     1995        06/94           (e)


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

</TABLE>







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

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2000


(a)      Transactions in real estate and accumulated  depreciation  during 2000,
         1999, and 1998, are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
                                                                                              Accumulated
                                                                              Cost            Depreciation
                                                                         ----------------   -----------------
            Properties the Partnership has Invested
              in Under Operating Leases:

                 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
                 Reclassified from direct financing leases                       568,055                  --
                 Acquisitions                                                     33,500
                 Dispositions                                                 (1,003,530 )          (115,921 )
                 Depreciation expense                                                 --             572,650
                                                                         ----------------   -----------------

                 Balance, December 31, 2000                                 $ 32,173,297        $  2,961,413
                                                                         ================   =================


</TABLE>


<PAGE>


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

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

                                December 31, 2000
<TABLE>
<CAPTION>
<S> <C>
                                                                                                Accumulated
                                                                               Cost            Depreciation
                                                                          ----------------    ----------------

            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, 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
                 Depreciation expense                                                  --              19,590
                                                                          ----------------    ----------------

                 Balance, December 31, 2000                                   $   965,500         $    83,128
                                                                          ================    ================

            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
                 Depreciation expense                                                  --              27,503
                                                                          ----------------    ----------------

                 Balance, December 31, 2000                                  $  1,503,966         $    81,648
                                                                          ================    ================


</TABLE>


<PAGE>


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

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

                                December 31, 2000

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

            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
                 Acquisition                                                           --                  --
                 Depreciation                                                          --              16,623
                                                                          ----------------    ----------------

                 Balance, December 31, 2000                                   $   905,780         $    33,938
                                                                          ================    ================

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

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

                 Balance, December 31, 2000                                  $  2,535,592         $    29,290
                                                                          ================    ================

</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.


<PAGE>


                            CNL INCOME FUND XVI, LTD.
                         (A Florida Limited Partnership)
               NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
                            DEPRECIATION - CONTINUED

                                December 31, 2000


(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, 2000, the aggregate cost of the Properties  owned by
         the  Partnership  and the joint venture for federal income tax purposes
         was  $36,276,118 and  $5,908,838,  respectively.  All of the leases are
         treated as operating leases for federal income tax purposes.

(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
         Properties in Celina, Ohio, and St. Cloud,  Minnesota were written down
         to net realizable value due to an anticipated  impairment in value. The
         Partnership recognized an impairment by recording an allowance for loss
         on assets in the amount of $266,257 at December 31,  1998,  relating to
         the Property in Celina, Ohio. In addition,  the Partnership  recognized
         an  impairment  by  recording  an  allowance  for loss on assets in the
         amount of $456,824 at December  31,  2000,  relating to the Property in
         St.  Cloud,  Minnesota.  The  tenant  of these  Properties  experienced
         financial  difficulties and ceased payments of rents under the terms of
         its lease agreement. The impairments represented the difference between
         the Property's carrying value and the estimated net realizable value of
         the Properties.  The cost of the Properties  presented on this schedule
         is the gross  amount at which the  Properties  were carried at December
         31, 2000, excluding the allowance for loss on assets.

(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.

(n)      Effective  December 2000,  the lease for this Property was  terminated,
         resulting  in the  reclassification  of the  land  and  building  to an
         operating  lease. The building was recorded at the net book value as of
         December 31, 2000 and depreciated over its remaining  estimated life of
         approximately 25 years.



<PAGE>









                                    EXHIBITS





<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.)